23 April, 2024

Chamber of Digital Commerce Stands with Kraken in SEC Regulatory Dispute

28 Feb, 2024

28 Feb, 2024

  • The Chamber of Digital Commerce filed an amicus curiae brief defending Kraken against the SEC’s lawsuit, challenging the broad classification of digital assets as securities.
  • Kraken disputes the SEC’s allegations of operating an unregistered securities exchange and has sought to dismiss the case.
  • Amidst regulatory challenges, Kraken launches a new division targeting institutional clients, aiming to leverage the growing interest in Bitcoin ETFs.

The Chamber of Digital Commerce has recently taken a stand in the ongoing legal dispute between Kraken, a prominent cryptocurrency exchange, and the U.S. Securities and Exchange Commission (SEC). By filing an amicus curiae brief on February 27, the Chamber aims to challenge the SEC’s approach toward the regulation of digital assets. This move marks a significant moment in the ongoing debate over the regulatory framework for digital assets in the United States.

The crux of the Chamber’s argument is the SEC’s attempt to classify all digital asset transactions as securities transactions, which it deems legally incorrect. The Chamber argues that digital assets constituted merely as lines of computer code, enabling functionality on blockchain networks, should not inherently be treated as investment contracts. Citing legal precedents where digital tokens were not automatically considered securities, the Chamber emphasizes the need for a transaction-by-transaction assessment.

Furthermore, the Chamber criticizes the SEC’s regulatory strategy, which it sees as an overreach lacking legislative backing. It argues that such enforcement actions hinder innovation and could negatively impact the trillion-dollar digital asset space and the broader U.S. economy. The filing refers to prior cases, such as those involving Ripple and Terraform Labs, where the SEC’s stance did not lead to a wholly favorable outcome for the regulator.

Kraken has refuted the allegations brought against it by the U.S. SEC in the initial lawsuit filed in November 2023. The charges accuse the cryptocurrency exchange of operating an unregistered securities exchange, among other regulatory violations. In response, Kraken has initiated legal proceedings to dismiss the case, challenging the SEC’s claims. This legal battle comes after Kraken’s settlement with the SEC over staking services in February 2023, agreeing to pay $30 million and discontinuing those services in the U.S.

This case is part of a larger pattern of regulatory scrutiny, with similar allegations being made by the SEC against other crypto exchanges like Coinbase and Binance. These cases, initiated in June 2023, hint at the SEC’s intent to regulate the digital asset industry more tightly, treating digital assets as securities by default.

Amidst this backdrop, on February 27, Kraken announced the launch of a new division aimed at institutional clients, signaling its ambition to capture a share of the growing Bitcoin ETF market. This move, led by Staked co-founder Tim Ogilvie, aligns with the increasing institutional interest in cryptocurrency, highlighted by the recent approval of Bitcoin ETFs and the significant inflows they have attracted since their inception in January.


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