The United States Securities and Exchange Commission (SEC) has announced the dropping of its action against Kraken. This move is a big win for the entire crypto industry. Kraken hailed the win as innovation without fines or changes to business practices.
The SEC sued Kraken on November 20, 2023, claiming that Kraken was operating as an unregistered securities exchange, broker, and clearing agency. The regulator also noted that Kraken was merging customer and operational accounts, which put users at a risk.
All of this happened after Kraken already paid $30 million and closed down its U.S. staking services in an earlier settlement in February 2023. Despite the settlements, the exchange constantly denied doing anything wrong and blamed the SEC for failing to provide clear regulatory guidance for crypto firms.
SEC Backs Down
The SEC has officially dismissed its lawsuit against Kraken with prejudice, meaning the case cannot be reopened. The settlement does not include penalties, admissions of fault, or changes to Kraken’s business operations.
The company credited the ruling to growing recognition of the need for balanced regulation after new SEC and White House leadership. The dismissal also indicates a potential shift in the SEC’s enforcement approach, after industry calls for more consistent and clearer regulatory guidelines.
Regulatory Shifts and Future Implications
The dismissal of the SEC action against Kraken suggests a shift in regulatory policy from enforcement-based measures to clearer rules. This is similar to the SEC’s new Crypto Task Force led by Commissioner Hester Peirce. The Force aims to issue clear rules for crypto assets.
Recent actions, such as the withdrawal of restrictive accounting guidelines like SAB 121, indicate an effort to make the environment more conducive to change. Industry participants view this as a step towards balanced regulation that promotes growth. It may address compliance concerns and set a standard for other firms under similar examination.
The crypto industry has largely welcomed the SEC’s dismissal of its lawsuit against Kraken. Kraken called it a win for innovation, highlighting the necessity for balanced regulation. Industry leaders, including Kraken’s Co-CEO Dave Ripley, expressed excitement on their X page.
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