U.S. Sen. Cynthia Lummis (R-WY) said the U.S. Securities and Exchange Commission (SEC) continues to punish crypto companies that do not have the legal framework they need to be compliant. This announcement came on November 20th, following the news that SEC had filed a complaint against the San Francisco-based crypto exchange Kraken.
"The SEC cannot continue ruling by enforcement. Crypto asset companies have repeatedly tried to get guidance from the SEC only to be hit with enforcement actions, causing unnecessary harm to consumers. It is time for Congress to pass a regulatory framework to provide clear rules to the SEC on what is a security and what is a commodity. The Lummis-Gillibrand Responsible Innovation Act will rein in the SEC and allow financial innovation to thrive in the United States," said Lummis.
Kraken said in a blog post that on Nov. 20, the SEC filed a complaint alleging that Kraken has been operating as an unregistered exchange, broker, and clearing house. "We disagree, and intend to vigorously defend our position in court," the post said. Kraken emphasized that the SEC is not alleging that Kraken has committed any fraud, market manipulation, breaches of fiduciary duty, or misuse of funds, but rather that Kraken needed to obtain a special securities license because the digital assets supported on its platform are "investment contracts."
Kraken said in the blog post that the SEC's argument has already failed in court in another case. Kraken also denounced the SEC's "come in and register" position, arguing that the SEC does not actually offer a path to do so. "The SEC is demanding compliance with a regime that doesn’t exist," the post said.
Kraken said that both Republican and Democrat lawmakers have criticized the SEC's approach to policing the digital asset industry, pointing out that the SEC's lawsuits are not protecting the public. "Congressional action by elected lawmakers, not agency enforcement, is the right path to creating new law for centralized crypto trading platforms in the United States," the post said.
Kraken refuted the argument that crypto exchanges do not want to be compliant. In the blog post, Kraken said it holds licenses and registrations in multiple countries. "We have consistently advocated for practical, effective rules for digital assets," the post said.
Kraken emphasized that this lawsuit will not disrupt its operations in the U.S. and globally.
Kraken CEO Dave Ripley said in a post on X, "We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position...We believe Congressional action is the most appropriate path to resolving the lack of regulatory clarity in the U.S and will continue to support these efforts to bring clarity and certainty to the chaotic environment that has been created in the U.S."
Lummis and Sen. Kirsten Gillibrand (D-N.Y.) announced in July that they were reintroducing their bipartisan Responsible Financial Innovation Act, which aims to establish comprehensive regulatory guidelines for the digital asset industry, according to a post on X. Lummis said in the post that the bill will "fully regulate crypto asset exchanges" by requiring them to register with the Commodity Futures Trading Commission (CFTC).
