Crypto Exchange Kraken Accused by SEC of Violating Securities Law.

The U.S. Securities and Exchange Commission (SEC) has taken legal action against Kraken, accusing the Crypto Exchange Kraken of operating without proper registration as a securities business in the United States. This move follows similar actions taken by the SEC against Coinbase and Binance.

In its lawsuit, the SEC alleges that Kraken violated federal securities laws by operating as an unregistered broker, clearing agency, and dealer. The regulator claims that Kraken commingled customer funds with its own corporate assets, creating a “significant risk.” According to the SEC, Kraken mixed up to $33 billion in customer cryptocurrencies with its own funds, citing Kraken’s independent auditor. The lawsuit also alleges that Kraken has sometimes held more than $5 billion worth of customer cash and has used customer funds to pay for operational expenses.

This lawsuit by the SEC mirrors its ongoing suits against other crypto trading platforms, including Coinbase and Binance. The regulator has identified several tokens traded by Kraken as unregistered securities, including Algorand (ALGO), Polygon’s MATIC, and NEAR. The SEC claims that Kraken actively promoted these tokens to the investing public.

In response to the SEC’s lawsuit, Kraken released a statement asserting its disagreement with the allegations. The Exchange stated that it does not list securities and intends to defend its position vigorously. Kraken criticized the SEC’s approach, arguing that the agency has challenged crypto exchanges to register without providing legal support or a clear path to registration. The Exchange believes that the need for more regulatory clarity in the U.S. can be resolved through Congressional action rather than enforcement actions that harm consumers, stifle innovation, and damage U.S. competitiveness in the global market.

The SEC’s lawsuit seeks to permanently prohibit Kraken from operating as an unregistered exchange and includes requests for fines and the return of any ill-gotten gains.

As the legal battle unfolds, the outcome of the SEC’s lawsuits against Kraken, Coinbase, and Binance could have significant implications for regulating crypto exchange Kraken in the United States. Many in the industry advocate for clearer regulations that address cryptocurrencies’ unique risks and benefits while fostering innovation and protecting investors.