A giant Pacific octopus. Image by Karen via flickr.com. License: Creative Commons
The US Securities and Exchange Commission is taking the Kraken exchange to court again. The accusation is unlicensed trading in securities. This solidifies the list of cryptocurrencies that the influential supervisory authority wants to control.
Kraken is a US exchange, but is particularly popular on the European market. In her home country, however, she increasingly comes into conflict with the authorities.
The Securities and Exchange Commission (SEC) sued Kraken earlier this year for offering unregistered securities through Ethereum staking. Kraken settled the lawsuit by paying $30 million and shutting down staking programs for US customers (but not European customers).
Now the SEC is opening the second round: The authority is again accusing Kraken of operating as an exchange, broker, dealer and clearing house for securities without having registered with the SEC. Since at least September 2018, Kraken has made hundreds of millions of dollars by illegally helping to buy and sell “crypto asset securities,” more or less crypto securities.
The crucial question is whether Kraken has allowed trading in securities. If so, the SEC’s lawsuit would be purely legal. The process will once again decide which cryptocurrencies are to be viewed as security. For the affected cryptocurrencies, this would mean that they would more or less no longer be allowed to be traded on the US market.
According to the lawsuit, these are: ADA, AXS, ALGO, ATOM, CHZ, COTI, DASH, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, SAND and SOL. The following coins with a market capitalization of over one billion euros are noteworthy:
- Solana (SOL): 22.4 Mrd. Euro
- Cardano (ADA): 12.3 Mrd. Euro
- Polygon (MATIC): 6,6 Mrd. Euro
- Cosmos (ATOM): 3,1 Mrd. Euro
- Filecoin (FIL): 2 Mrd. Euro
- Internet Computer (ICP): 1,9 Mrd. Euro
- Near Protocol (NEAR): 1,7 Mrd. Euro
- Algorand (ALGO): 1 Mrd. Euro
This list largely corresponds to the cryptocurrencies that the SEC already considers as security in the lawsuits against Binance, Bittrex and Coinbase. This reinforces a picture of which cryptocurrencies the SEC claims supervision over – and which it does not.
It is striking that four of the most important Web3 platforms – competitors for Ethereum – are affected: Solana, Cardano, Polygon and Cosmos. But it is equally noticeable which coins of the same category are not in the list: such as Polkadot, Tron, Chainlink, Avalanche, Arbitrum or Optimism. Do these coins do something different that elevates them above security status? Or is the SEC saving it as ammunition for later lawsuits?
In any case, Kraken is outraged that the SEC is doing the same thing with it as it did with Coinbase and Bittrex. On the blog, the exchange promises to “fight for its mission and crypto innovations in the United States.” She objects to the lawsuit, announces that she will defend herself in court and promises customers that all services will continue to be offered in full.
Kraken is not only defending itself in court, but is also continuing trading in cryptocurrencies that the SEC considers to be security.
This is likely to be entirely in the spirit of the SEC, which, under its chairman Gary Gensler, “regulates through enforcement,” i.e. first sues and then negotiates. In addition to the trial against Kraken, trials are currently underway against Coinbase and Binance, in which the court will have to decide which cryptocurrencies are considered security.
In July of this year, a court handed down a groundbreaking verdict in the trial against Ripple (XRP). According to this, a token is a security if it is sold by the issuer directly to investors, but not a security if it is traded on exchanges unless the issuer significantly ensures liquidity. From this point of view, Kraken, Coinbase and Binance have good chances.
Source: https://bitcoinblog.de/2023/11/23/sec-klagt-kryptoboerse-kraken-an-zum-zweiten-mal/
