Today, the SEC filed a complaint alleging that Kraken operates as an unregistered securities exchange, broker-dealer and clearinghouse. We disagree and intend to vigorously defend our position in court. Today’s news has no impact on the products we offer and we will continue to provide services to our customers without interruption. We remain fully committed to our U.S. and global customers and partners.
The complaint against Kraken alleges no fraud, no market manipulation, no loss of customers due to hacking or compromised security, and no breach of fiduciary duties. It includes large sums of money, but does not allege that a single one of those dollars is missing or misused – no Ponzi scheme, no failure to maintain adequate reserves and no inability to preserve the identity of customer funds 1:1. In fact, none of these things would be true.
Instead, the complaint makes a technical argument: Kraken’s activities require special securities licenses to operate because the digital assets we support are actually “investment contracts.” This is incorrect in law, wrong in fact and disastrous in terms of policy.
We disagree with the SEC and the law is on our side
The second already tried this theory and a court I completely rejected it. The SEC argued in this case that digital assets bought and sold on trading platforms were actually securities transactions. The U.S. District Court for the Southern District of New York disagreed, finding that the SEC had not fully met the relevant legal standard. The court found that the SEC’s unprecedented legal theory was contrary to the “economic reality” of such transactions. The SEC’s case against Kraken will also fail and for the same reasons.
The SEC alleges that Kraken “commingled” its own funds with those of its clients. This is already a similar allegation composed of other crypto trading platforms. The SEC cannot and does not allege that customer funds are missing or that a loss has occurred. Nor does it allege that any loss will occur. The complaint itself concedes that this so-called “mix-up” is nothing more than the Kraken’s spending fees that it has already earned.
The SEC argues that digital asset trading platforms like Kraken can simply “walk in and register” with the agency. As most securities law experts know, no existing law supports this position. The SEC has not promulgated any rules describing how an order in a digital asset should be compared, no guidance on how a transaction should be cleared, and formulated no standards on how to negotiate a transaction in a digital asset. The allegation is hollow; there is no exchange, broker or clearing agency for investment contracts. The SEC requires compliance with a regime that does not exist.
Congress advances bipartisan legislation
Meanwhile, groups of lawmakers on both sides have questioned what they call the SEC’s “regulation through enforcement” approach. They asked why the agency’s actions against crypto companies seemed less focused on “compliance and customer protection” but were instead “calculated for maximum publicity and policy impact.” Others observed that the SEC’s strategy “does not protect the public.” Indeed, this lawsuit does nothing to protect the public. Like those in previous complaints, his allegations are factually incorrect, contrary to the law, and constitute poor policymaking in the United States.
Congress is proposing bipartisan bills in the House and Senate that would establish clear registration and monitoring frameworks for centralized trading platforms. Congressional action by elected lawmakers, not law enforcement, is the right path to creating new law for centralized crypto trading platforms in the United States. As our global presence and diverse product offering continues to expand, Kraken remains firmly committed to the United States. We will continue to defend our operations in the US spot market, our customers and our community of innovators.
While some critics may argue that digital asset trading platforms simply do not want to be regulated, that is not our position. In fact, Kraken has been operating for over a decade and holds registrations, licenses, authorizations and approvals worldwide, including the United States, United Kingdom, European Union and Canada, among other developed and emerging markets. We have always advocated for practical and effective rules for digital assets. Our testimony before Congress in May of this year highlighted Kraken’s commitment to strong, harmonized consumer protections and anti-money laundering practices in the United States.
Since our company’s founding in 2011, we have worked tirelessly to ensure that U.S. consumers can securely access evolving digital asset technology designed to create a fairer and more inclusive financial system. Comprehensive congressional action is the right path forward and can prevent the United States from falling to the back of the pack as Crypto and Web3 advance around the world.
We remain committed to our customers and our community
Kraken was founded in the United States in 2011. Since then, we have gradually grown into a diversified global digital assets company serving more than 10 million customers worldwide.
We consistently rank among the best places to buy and sell digital assets thanks to our industry-leading customer support, intuitive customer experience, fast and reliable performance, and rigorous information security standards. We also rank among the best workplaces in the world: we were recently certified by Newsweek as a “Top Place to Work” due to our positive vision of the future, alignment of our values and our collaborative environment.
Our mission is to accelerate the adoption of cryptocurrencies so that everyone can achieve financial freedom and inclusion. Today’s news will not distract us from this mission. This has no impact on the products we offer and we will continue to provide our services to our customers without interruption. We remain committed to doing what we believe is right for our customers and the community of cryptocurrency innovators.
These materials are intended for general information purposes only and do not constitute investment advice or a recommendation or solicitation to buy, sell, stake or hold any crypto-asset or to engage in any trading strategy. specific trading. Kraken will not make any effort to increase the value of the cryptoassets you purchase. Crypto products and markets are not regulated and you may not be protected by government compensation and/or regulatory protection programs. The unpredictable nature of crypto-asset markets can result in losses of funds. Tax may be payable on any returns and/or increases in the value of your cryptoassets and you should seek independent advice on your tax situation. Geographic restrictions may apply.
