Kraken sues SEC over allegations of unregistered exchange activity

Cryptocurrency exchange Kraken has taken legal action against the US Securities and Exchange Commission (SEC) by filing a motion to dismiss a lawsuit from the regulator. The SEC accuses Kraken of operating as an unregistered securities exchange, broker, dealer and clearing agency.

Dispute lawsuit

In a combative move, Kraken published a blog post on February 22 in which the company detailed its decision to contest the lawsuit, arguing that the SEC is overstepping its authority. This follows testimony from Kraken before both the House Financial Services Committee and the House Agricultural Committee, which argued that current law does not adequately regulate the digital asset industry and that Congress should do more to protect consumers and investors.

Kraken emphasized the need for Congress to limit the scope of the SEC’s authority over crypto exchanges in favor of other agencies. The day after their testimony, Kraken was contacted by the SEC and informed that a lawsuit would be filed.

Exchange defends itself

The exchange defends itself by arguing that the SEC does not have the right to regulate all speculative investments and points out that the SEC’s complaint does not allege fraud or consumer harm, but merely alleges that Kraken is operating without the required licenses.

Kraken joins other big names in the crypto sector, such as Binance, Binance US and Coinbase, who have filed similar legal challenges against the SEC.

According to the SEC, Kraken has unlawfully made hundreds of millions of dollars since September 2018 by facilitating the purchase and sale of crypto assets without registering with the SEC in any capacity. Additionally, the regulator accuses Kraken of mishandling customer information and lacking basic business practices and internal controls, potentially putting customer data at risk.

Kraken promises to vigorously defend itself against the allegations and emphasizes that it is up to Congress to decide on the regulation of crypto exchanges. The exchange argues that even if all of the SEC’s allegations were true, the regulator’s legal argument is flawed.