SEC Drops Lawsuit Against Kraken, Signaling Shift in Crypto Regulation
The U.S. Securities and Exchange Commission (SEC) has announced that it will be dropping its ongoing enforcement lawsuit against the American cryptocurrency exchange Kraken. This development was revealed in a statement from the firm on Monday.
In November 2023, the SEC initiated legal action against Kraken, alleging that the exchange had improperly commingled customer and corporate funds, while also operating as an unregistered securities broker, clearing agency, and dealer. Rather than opting for a settlement with the SEC, Kraken decided to contest the charges. A federal judge initially ruled that the SEC had a plausible case, which meant the matter would proceed to trial.
Now, pending approval from the SEC’s commissioners, Kraken has stated that the charges will be dismissed “with prejudice,” which means there will be no admission of wrongdoing on Kraken’s part, no penalties imposed, and no changes required to their business operations.
This victory for Kraken comes at a pivotal moment, as the SEC appears to be retreating from its rigorous enforcement stance regarding cryptocurrency cases that was prevalent during the tenure of former Chair Gary Gensler. The Commission’s current leadership has signaled a shift away from the controversial “regulation by enforcement” approach adopted under Gensler, expressing a commitment to establishing clear regulatory frameworks for the cryptocurrency sector.
In a blog post on Monday, Kraken remarked, “The SEC’s decision to dismiss its lawsuit against us (and many others) is more than just a legal victory — it represents a turning point for the future of crypto in the U.S. This ends a wasteful, politically motivated campaign, alleviates uncertainty that has hindered innovation and investment, and paves the way for a stable, forward-thinking regulatory environment.”
While the SEC is moving towards dropping various crypto cases, not all defendants are off the hook. Several prominent companies, including Ripple and Cumberland DRW—the crypto trading division of the renowned Chicago-based trading firm DRW—continue to be embroiled in legal disputes with the regulator. Furthermore, although many of the SEC’s investigations into the crypto sphere have been closed without resulting in enforcement actions—such as those involving OpenSea, Gemini, Robinhood Crypto, and Uniswap—other investigations into firms like Crypto.com, Immutable, and Unicoin remain active.
