Jesse Powell, the founder of Kraken, has taken a bold stance against the U.S. Securities and Exchange Commission (SEC). His reaction comes in response to the lawsuit filed by the SEC against Kraken, accusing the crypto exchange of operating without the necessary securities registrations in the United States.
Jesse Powell didn’t mince words in expressing his dissatisfaction with the SEC’s actions. He conveyed a sense of frustration, suggesting that the SEC is repeatedly targeting Kraken despite a previous settlement of $30 million.
Powell’s view is that the SEC’s approach is less about compliance and more akin to extortion, as legal defense costs can be prohibitively high. He vehemently disputes the SEC’s claim, emphasizing that Kraken’s operations do not involve any form of fraud, market manipulation, or mishandling of customer funds.
Central to Kraken’s defense is the argument that the digital assets it supports are not “investment contracts” and, thus, do not require special securities licenses. This stance is supported by a precedent where a Federal Court rejected a similar SEC theory. Powell asserts that the SEC’s current allegations are based on a flawed legal theory and lack substance.
The SEC’s lawsuit against Kraken is not an isolated case. It forms part of a broader enforcement strategy that has also seen Coinbase and Binance under scrutiny. SEC argues that Kraken and these other platforms have been operating as an unregistered exchange, broker, and clearinghouse. The lawsuit prohibits Kraken from functioning as an unregistered exchange and demands restitution for “ill-gotten gains.”
In its official statement, Kraken refutes the SEC’s claims, emphasizing its intention to defend its position vigorously in court. Central to the company’s defense is the assertion that all of the SEC’s allegations are baseless.
Kraken also challenges the SEC’s interpretation of digital assets as “investment contracts,” arguing that their business model does not warrant the need for special securities licenses.
Moreover, Kraken highlights the absence of clear regulatory guidelines from the SEC for digital asset transactions. They highlight the lack of specific laws or rules outlining how digital asset trades should be matched, cleared, or brokered. According to the company, this exemplifies the SEC’s approach of demanding compliance with non-existent regulatory frameworks.