United States-based crypto exchange Kraken has replied to the U.S. Securities and Exchange Commission (SEC) charges that it offers crypto asset securities and investment contracts. The exchange stated that the SEC violated federal securities laws and that its securities classification is unclear. The agency has expressed regrets for misclassifying crypto assets as securities.
Kraken Denies SEC Claims
The SEC filed a case against Kraken, accusing it of violating securities regulations. The agency claims that the exchange offers its users unregistered securities in cryptocurrencies. It adds that Kraken raised billions from U.S. investors without registering to obtain the legal protections required for trading securities. After evaluating the case last month, a California judge ruled that the case would go to trial.
Kraken has not pleaded guilty to the laid charges. Instead, it has responded to the SEC, claiming it is entirely innocent of the charges brought against it. The exchange states that it was never required to register before operating in the United States. It also maintains that the asset in question does not meet the legal definition of securities according to U.S. laws.
The filing states, “Kraken admits that it has operated its trading platform since 2013 and that it has not registered with the SEC as a national securities exchange, a broker-dealer, or a clearing agency because it was never required to do so.” It added, “Kraken denies that the term “crypto asset securities” fairly or accurately describes the assets identified by that term and denies that crypto assets “that form the basis of transactions on Kraken are investment contracts, or are themselves securities.”
Additionally, Kraken claims that the SEC has no authority to regulate its platform. It also added that since the SEC did not clarify its obligations under the law, the exchange lacked fair notice that its conduct was prohibited.
SEC Admits to Misclassification of Crypto Assets
The SEC has accused and attacked crypto firms for offering securities to customers in many cases. Therefore, Many in the crypto ecosystem have criticized the agency for opposing crypto adoption in the U.S.
In an amended complaint, the SEC clarified that it does not classify cryptocurrencies as securities. Instead, it considers the agreements, contracts, and expectations related to crypto promotion as securities.
