In a recent development, Kraken Exchange has been hit with a legal complaint from the U.S. Securities and Exchange Commission (SEC). The SEC alleges that Kraken has been operating as an unregistered national securities exchange, broker, and clearing house, setting the stage for a legal showdown.
Kraken’s response to the SEC’s complaint has garnered significant attention from prominent figures within the cryptocurrency industry. Their reactions shed light on crypto companies’ challenges and uncertainties in the regulatory landscape.
Today, the SEC filed a complaint alleging that Kraken operates as an unregistered national securities exchange, broker, and clearing house. We disagree with their claims and plan to vigorously defend our position. https://t.co/a0C4wzBo3f— Kraken Exchange (@krakenfx) November 21, 2023
Jesse Powell, co-founder of Kraken, expressed his frustration with the SEC’s actions in tweets. He characterized the regulatory body as relentless and questioned the effectiveness of a $30 million settlement reached in February. Powell raised concerns about the daunting costs and time associated with fighting the SEC, suggesting that crypto companies may have no choice but to exit the U.S. market.
Message is clear: $30m buys you about 10 months before the SEC comes around to extort you again. Lawyers can do a lot with $30m but the SEC knows that a real fight will likely cost $100m+, and valuable time. If you can't afford it, get your crypto company out of the US warzone.— Jesse Powell (@jespow) November 21, 2023
Deaton criticizes Gensler
Pro-XRP lawyer John Deaton joined the conversation, directing criticism at Gary Gensler, the head of the SEC. Deaton accused Gensler of pressuring Kraken into settling for $30 million despite believing it would secure peace. He cited the ongoing legal battles of Ripple and Brad Garlinghouse as examples of the immense financial toll such disputes can take. Deaton argued that Gensler’s actions disregarded the welfare of employees and investors, calling for accountability.
Dave Weisberg, CEO at CoinRoutes, contributed to the discussion by proposing a significant reform. He called for a ban on all enforcement actions by regulatory agencies unless they could prove harm. Weisberg argued that allowing agencies like the SEC to impose heavy financial penalties on firms without demonstrating harm was unjust. He also emphasized that this practice favoured established entities over innovators, stifling economic growth and investor returns.
The answer is a ban on all enforcement actions without provable HARM. Allowing any agency to bleed firms for $millions even when no harm is proven is unjust. In the case of the SEC, it also favors incumbents over innovators, suppressing economic growth & investor returns.— Dave Weisberger (@daveweisberger1) November 21, 2023
Kraken’s legal battle with the SEC is a focal point for broader discussions about regulatory overreach and the need for more explicit guidelines in cryptocurrency. As the crypto market continues to evolve, there is a mounting call for nonpartisan congressional action to address these unique challenges, ensuring a fair and inclusive financial system for all individuals.