Kraken Issues Robust Rebuttal Against SEC’s Allegations, Vows Vigorous Defense

Bits Logics Team . 21st Nov 2023

• In response to the SEC filing of a complaint, Kraken asserts its disagreement with the allegations.
• Kraken declared, “This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.” 
• According to Kraken, the SEC’s claims lack substance in key areas.

In response to the Securities and Exchange Commission’s (SEC) filing of a complaint alleging that Kraken operates as an “unregistered securities exchange, broker, and clearing house,” the cryptocurrency exchange has issued a robust rebuttal. In a statement released today, Kraken asserts its disagreement with the allegations and expresses its intent to vigorously defend its position in court.

The SEC’s complaint contends that Kraken’s business requires special securities licenses due to the digital assets it supports being deemed “investment contracts.” Kraken vehemently disputes this characterization, declaring, “This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.” 

According to Kraken, the SEC’s claims lack substance in key areas. The complaint does not allege fraud, market manipulation, customer losses due to hacking, compromised security, breaches of fiduciary duty, or any misappropriation of funds. The exchange emphasizes that none of the significant dollar amounts mentioned in the complaint are missing or misused.

Kraken highlights a previous legal precedent where the SEC’s similar theory was rejected by a court. The Federal Court for the Southern District of New York ruled against the SEC, stating that its theory was contrary to the “economic reality” of digital asset transactions. Kraken asserts that the SEC’s case against them will fail for the same reasons.

The SEC’s accusation of “commingling” of funds by Kraken is dismissed by the exchange, noting that no customer funds are missing and the alleged commingling is simply Kraken spending fees it has earned.

Kraken challenges the SEC’s suggestion that crypto trading platforms can easily register with the agency, emphasizing that there are no existing laws or rules supporting this position. The exchange argues that the SEC is demanding compliance with a nonexistent regulatory framework.

Simultaneously, Kraken points to bipartisan legislation advancing in Congress that aims to establish clear registration and oversight frameworks for centralized trading platforms. The exchange supports congressional action, asserting that elected lawmakers, not agency enforcement, are best suited to create new laws for centralized crypto trading platforms in the United States.

Kraken refutes the notion that digital asset trading platforms resist regulation, emphasizing its decade-long operation with registrations, licenses, and approvals worldwide. The exchange reiterates its commitment to advocating for practical, effective rules for digital assets and stresses the importance of comprehensive congressional action to avoid the U.S. lagging behind in the rapidly advancing crypto and Web3 landscape.