SEC Sues Cryptocurrency Exchange Kraken!

The U.S. Securities and Exchange Commission (SEC) sued Kraken in federal court on Thursday, alleging that staking crypto as a utility violates federal securities laws.

Kraken to Pay $30 Million to SEC

Cryptocurrency exchange Kraken will shut down its staking service, paying $30 million to settle with the US SEC.

SEC chairman Gary Gensler said:

“Staking platforms must register and provide investor protection with full, fair and accurate disclosures.”

Kraken offers a range of services under its staking umbrella, including a crypto lending product that offers returns of up to 24%. The source said that this is also expected to be closed under the deal.

Kraken’s staking service offered 20% APY, promising to send staking rewards to customers twice a week, according to its website.

Bloomberg reported on Wednesday that Kraken is close to an agreement with the SEC to offer unregistered securities.

The election comes a day after Coinbase CEO Brian Armstrong tweeted that he had heard rumors that the SEC would prevent retail customers from engaging in staking, a technique for promising crypto tokens to manage blockchains like Ethereum.

The SEC declined to comment on Armstrong’s comments Wednesday night. Coinbase also offers its own staking services.

SEC Chairman Gary Gensler has previously said he believes staking through intermediaries like Kraken can meet the requirements of the Howey Test, a decades-old Supreme Court case widely used as a measure of whether something is a security under US law.

Kraken made the following statement on the subject after the development:

This applies to all staked assets except Staked Ether(ETH), which will not be staked after the Shanghai upgrade. Kraken will continue to offer staking services for non-US customers through a separate Kraken subsidiary. Starting today, Kraken will automatically remove all US Client assets registered to the on-chain staking program.

*Not investment advice.