Kraken petitions San Francisco court for IRS intervention

Coinbase is fighting the SEC over crypto-staking services. The SEC said Kraken's and Coinbase's staking violate securities legislation.

Kraken petitions San Francisco court for IRS intervention
Kraken petitions San Francisco court for IRS intervention

The cryptocurrency exchange Kraken is challenging the United States Internal Revenue Service (IRS)’s demand that crucial user information be presented in court.

The discussion characterized the IRS’s request for consumer information as an “unjustified treasure hunt.”

Bloomberg reported that the cryptocurrency exchange has asked a federal court in San Francisco to intervene and urge the IRS to back off.

Kraken’s response to the IRS is in response to the agency’s February summons demanding additional user information to identify Kraken accounts that engaged in at least $20,000 worth of cryptocurrency trading in a single calendar year between 2016 and 2020.

In its request, the exchange cited Coinbase’s case from 2017 and argued that the tax agency has significantly exceeded the rules established by U.S. District Judge Jacqueline Scott Corley.

In the case of Coinbase, the agency reduced its initial demand due to Coinbase’s persistent refusal.

However, Judge Corley determined that the summons sent to over 14,000 customers of the exchange was not overly intrusive because the IRS had a legitimate reason to investigate taxpayers who might not be disclosing their Bitcoin gains.

The attorneys for Kraken asserted that the IRS has gone “far beyond” its intrusive subpoenas and that its requests for customer information are unjustified.

Kraken joined Coinbase in its efforts to combat the increasing regulatory scrutiny by U.S. authorities.

Coinbase is presently engaged in a conflict with the U.S. Securities and Exchange Commission regarding the provision of crypto staking services.

The SEC alleged that services such as Kraken and Coinbase’s staking violate securities law.

While the San Francisco-based cryptocurrency exchange reached a $30 million settlement with the SEC for offering staking services, it has decided to litigate with the IRS.

The increasing regulatory scrutiny is a developing concern for crypto companies in the United States.

The likes of Coinbase CEO Brian Armstong and USD Coin issuer Circle CEO Jeramey Allaire have cautioned that the increasing opposition from regulatory bodies will force cryptocurrency startups to relocate offshore.