Crypto Exchange Kraken in Hot Water with SEC Over Alleged Securities Violation – Here’s What You Need to Know

The US-based crypto exchange Kraken is in hot water with regulators over an alleged violation of securities rules related to the selling of “unregistered securities.”

The Securities and Exchange Commission’s (SEC) probe into whether Kraken did offer unregistered securities to US consumers is now at an “advanced stage,” Bloomberg reported on Wednesday, adding that the probe could lead to a settlement in “coming days.”

The report was based on information from an unnamed source “with knowledge of the matter.”

Kraken or its CEO Jesse Powell has so far not commented on the report.

Unclear ramifications

Despite the source saying a settlement could be imminent, it remains unclear which digital assets the probe relates to.

So far, US regulators, including the SEC and the CFTC, have only declared Bitcoin to be a commodity, making the regulatory status of other digital assets unclear.

According to Bloomberg, the outcome of the probe, and any potential actions taken against Kraken, could have significant ramifications for the crypto industry in the US. It is believed that any settlement in the case could put pressure on other companies to also make deals with the SEC.

The report noted that the SEC on several occasions, has said that most tokens offered by crypto exchanges are indeed securities and, therefore, should be subject to SEC regulations. Still, it also stressed that probes like this one don’t always lead to enforcement action against a company.

Kraken is headquartered in San Francisco and currently ranks as the world’s third-largest spot crypto exchange by trading volume, according to CoinMarketCap.

Crackdown on staking?

In recent days, rumors have circulated in the crypto industry that US regulators could be about to crack down on the staking of cryptocurrencies that are facilitated by US exchanges.

According to Coinbase CEO Brian Armstrong, the rumor is that the SEC wants to “get rid of crypto staking in the US,” which he called “a terrible path” for the country.

1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023