Kraken Fined $30 Million by SEC for Offering Unregistered Staking Services
On February 10th, 2023, the Securities and Exchange Commission (SEC) fined the cryptocurrency exchange, Kraken, $30 million due to providing staking services to their clients without the proper registration. The SEC argued that Kraken failed to adhere to federal securities laws and did not implement the required “disclosures and safeguards”.
Kraken has agreed to a settlement in which it will pay a fine of $30 million and stop offering securities through its crypto asset staking services and programs. If you are unaware of staking, it is a process in which cryptocurrency investors can obtain new tokens by locking their tokens with a blockchain validator through the process of staking.
This happens when the staked tokens are used to validate the data on the blockchain.
The SEC has accused Kraken of offering staking services to the public in order to make high returns with little to no information regarding the company’s financial stability or the ability to pay out promised returns.
Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), emphasized the need for crypto businesses to adhere to the proper disclosure and safety measures mandated by securities laws when offering investment contracts in exchange for tokens. Gurbir S. Grewal, the SEC’s Director of Enforcement, then announced the termination of an unregistered crypto staking program designed to protect retail investors.
Kraken has agreed to a permanent judgement that prohibits the company from violating the Securities Act of 1933, and from selling or offering securities through crypto asset staking services or staking programs. They have also halted their staking program and provided monetary relief.
The SEC conducted an investigation with the help of many experts, and a settlement agreement has been made. This agreement needs to be formally approved by a court.
Some Tweets related to SEC vs Kraken news.
All the SEC has done by banning staking on CEX is to stop centralized entities from abusing their role in the US.
Individuals can still stake directly on chain.
— Duo Nine ⚡ discord.gg/ycc (@DU09BTC) February 10, 2023
Today, Kraken settled with the SEC around its staking product. Kraken is my favorite exchange of choice. Nevertheless, we at @cakedefi have structured our staking product very different from the very beginning in 2019. Sharing a detailed blog post and video later tonight. ✅
— Dr. Julian Hosp (@julianhosp) February 10, 2023