SEC Harms Customers in Kraken Lawsuit, Says US Senator

Wyoming Senator Cynthia Lummis, an advocate for cryptocurrencies, criticized the US Securities and Exchange Commission (SEC) for the lawsuit against Kraken.

The lawsuit charged the crypto exchange with operating as an unregistered broker, dealer, and clearing agency.

Meanwhile, the lawsuit results from an extensive investigation that commenced after reports on February 9, 2023, which indicated that the SEC scrutinized the exchange for possible breaches.

Ruling By Enforcement

In response to the news of the Kraken litigation, Senator Lummis stated that the SEC cannot continue ruling by enforcement.

She stated that the enforcement follows numerous endeavors by crypto asset companies to obtain guidance from the SEC.

The endeavors failed to prevent enforcement actions, resulting in avoidable consumer detriment.

However, the Senator advocated for the enactment of a regulatory framework by Congress to furnish the SEC with unambiguous rules.

Furthermore, she added that the regulations should specify which assets are commodities and which qualify as securities.

The Responsible Financial Innovation Act, introduced by Senator Lummis and Kirsten Gillibrand in 2023, seeks to classify most cryptocurrency assets as commodities.

Investigation Into Kraken

Earlier in February 2023, the US SEC had initiated an investigation into Kraken for potential violations of offering unregistered securities in the US.

The most recent complaint made similar allegations, contending that the exchange unlawfully generated hundreds of millions of dollars through crypto trading.

However, Kraken continued to operate as an exchange, broker, dealer, and clearing agency without registering with the SEC, according to the complaint filed with the agency.

Conversely, Kraken has a track record of reaching settlements with the US SEC.

The exchange formally consented to cease its cryptocurrency staking service operations and remit $30 million in penalties in February 2023.

This action constituted a regulatory crackdown on retail investors’ crypto staking.