U.S. Senator Criticizes SEC’s Approach to Kraken Case, Cites Customer Impact

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The SEC sued Kraken for violating securities laws by commingling customer cash and failing to register. According to the SEC, Kraken’s policies and internal controls allowed the exchange to mix up to $33 billion in customer assets with its own, putting clients at risk. Kraken opposes the SEC’s claims and will fight it in court. Meanwhile, the US Senator also lashed SEC’s move to target Kraken without clear crypto rules. 

Senator Cynthia Lummis Took a Jab on SEC’s Action

US Senator Cynthia Lummis didn’t mince words when criticizing the SEC’s lawsuit against Kraken, accusing the crypto exchange of operating without proper registration. Lummis slammed the SEC’s enforcement approach, emphasizing the need for clear regulatory rules rather than enforcement actions causing unwarranted consumer harm. She’s pushing for Congress to define which assets classify as securities or commodities to guide the SEC’s actions.

The SEC cannot continue ruling by enforcement. My statement on the Kraken lawsuit below: pic.twitter.com/J3qhzU624N

— Senator Cynthia Lummis (@SenLummis) November 21, 2023

The SEC’s investigation into Kraken revolves around alleged unregistered securities offerings and illegal crypto trading, echoing prior scrutiny. Kraken’s past settlement with the SEC included a $30 million penalty and cessation of its retail crypto staking service, underscoring the exchange’s history with regulatory compliance.

The spat between the SEC and Kraken hints at broader industry challenges—crypto firms seeking guidance face enforcement, leaving consumers in a regulatory gray zone. Senator Lummis’s call for more explicit rules reflects the growing urgency for structured crypto regulations.

Kraken responds to SEC lawsuit

Kraken CEO Dave Ripley emphasized that the allegations did not involve missing customer funds or actual losses. In the blog post, the company clarified that the “commingling” referenced by the SEC was simply the spending of earned fees, not indicative of any imminent loss. Kraken also referenced previous SEC lawsuits against Ripple and Coinbase, arguing against the regulator’s stance on digital asset trading platforms registering with the agency. According to Kraken, there’s no legal basis for the SEC’s demands, labeling the allegations as hollow due to the absence of a legal framework supporting the agency’s position.

Is there any connection with the Ripple vs SEC case? How’s Crypto Reacting? 

The SEC’s action against Kraken coincided with the climax of the SEC v Ripple case, emphasizing the SEC’s stance on crypto assets as securities. The impending appeal on the Programmatic Sales of XRP ruling marks a significant moment expected after the SEC v Ripple case concludes.

Kraken joins a string of exchanges ensnared in the SEC’s securities scrutiny. With charges similar to Coinbase, Kraken’s fate hinges on the outcome of SEC v Coinbase; John E. Deaton anticipates a potential SEC settlement in the Ripple case, influencing Kraken’s situation. As of now, the list doesn’t include XRP and ETH. 

The list of crypto assets mentioned as securities in the SEC lawsuit against Kraken does not include $XRP and $ETH. pic.twitter.com/dQ9AthvaP3

— Tony Edward (Thinking Crypto Podcast) (@ThinkingCrypto1) November 21, 2023

Regarding XRP’s price action, despite XRP’s bullish signals above EMAs, breaching critical levels at $0.5835 and $0.5920 could test support if SEC news impacts its trajectory.

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