U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kraken, one of the world’s leading cryptocurrency exchanges. The regulatory body alleges that Kraken has been operating as an unregistered securities exchange, a violation that spans over the last five years, according to the complaint filed in San Francisco federal court.
The lawsuit is part of SEC Chair Gary Gensler’s broader initiative to assert regulatory control over the cryptocurrency market. Gensler contends that digital assets, including cryptocurrencies, should be considered investment contracts subject to federal securities laws.
The SEC’s complaint, dated November 20, 2023, accuses Kraken of unlawfully generating hundreds of millions of dollars in its cryptocurrency trading business. The Commission argues that Kraken has blended the traditional roles of an exchange, broker, dealer, and clearing agency without obtaining the required registration from the SEC.
One of the key grievances outlined by the SEC is Kraken’s alleged failure to provide investors with essential protections by operating as an unregistered entity. Investors were purportedly denied oversight by the SEC, along with safeguards against conflicts of interest and mandatory recordkeeping requirements.
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