On Monday, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kraken, one of the leading cryptocurrency exchanges, accusing it of failing to register with the regulator as a securities broker. The lawsuit against Kraken follows similar lawsuits against two other crypto exchanges, Coinbase (NASDAQ:COIN) and Binance (BNB-USD), in June 2023. As per the latest update on regulatory woes, Binance may settle the Department of Justice’s (DOJ) criminal charges in a $4 billion settlement.
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SEC vs. Kraken
In its lawsuit, the SEC alleged that Kraken commingled customer and corporate funds and operated as an unregistered broker, dealer, exchange, and clearing agency of crypto securities. It added that the crypto exchange’s business practices, inadequate recordkeeping, and deficient internal controls present additional risks.
Responding to the allegations, Kraken said that it disagrees with the regulatory authority’s complaint, saying that it stands “firm in our view that we do not list securities and plan to vigorously defend our position.”
The firm contended that the SEC continues to challenge crypto exchanges without a single law supporting its position and no clear path to registration. Earlier this year, Kraken reached a settlement with the SEC with regard to its staking services.
The latest lawsuit comes as SEC chief Gary Gensler is tightening the noose around crypto players to protect investors. He intends to bring the crypto market under the SEC’s regulation, as he believes that digital assets are investment contracts and must be subject to federal securities laws.
Despite regulatory pressures, Bitcoin (BTC-USD), the largest cryptocurrency by market cap, has rallied more than 126% year-to-date on optimism around the potential approval of a spot Bitcoin ETF.
