The SEC Piles On

SEC Sues Kraken

Last week, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Kraken for allegedly operating as an unregistered securities exchange, broker, dealer, and clearing agency.

This marks the SEC's second direct complaint against Kraken, with the first targeting Kraken's staking program, which resulted in a settlement of $30 Million and a ban for U.S. investors from accessing these services.

In a blog post, Kraken rejected the SEC’s argument that it must register with the SEC because the SEC’s authority only extends to assets which are securities. The SEC’s assertion that assets listed on Kraken are securities is “incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.”

Coinbase’s Response to SEC’s recent filing

Coinbase continues its efforts in court to prompt the SEC to respond to its petition for cryptocurrency regulations. In a recent filing with the U.S. Court of Appeals for the Third Circuit, Coinbase responded to an SEC letter indicating that it would provide a status report on the rulemaking petition by December 15.

Coinbase’s letter emphasized that only an order from the court could compel the SEC to act. Coinbase argued that the SEC's recent actions against crypto exchange Kraken is evidence that the Commission has already de facto denied the petition for rulemaking but won’t publicly say so and rather would proceed with its impact litigation strategy to expand its jurisdictional perimeter: "the SEC’s asserted need for more time to make up its mind is a mirage."

What does this mean?

By referencing the SEC's recent enforcement action against Kraken, Coinbase aims to show the court the urgency and importance of forcing the SEC to disclose its policy decisions. The SEC’s actions and its delay tactics strengthen Coinbase’s assertion that only legal intervention will compel the SEC to address its rulemaking petition promptly.