Wednesday, July 2, 2025

SEC Goes After Kraken, Sues Crypto Exchange for Failing to Register

San Francisco-based cryptocurrency exchange, Kraken, is facing legal action from the US Securities and Exchange Commission (SEC) for allegedly operating as an unregistered securities exchange.

The lawsuit, filed in a San Francisco federal court, is part of SEC Chair Gary Gensler’s initiative to assert regulatory control over the cryptocurrency market. The SEC contends that digital assets, including those traded on Kraken, fall under federal securities laws.

Kraken, one of the world’s largest cryptocurrency exchanges with over 10 million clients, plans to vigorously defend itself. The exchange argues that the regulation of cryptocurrency exchanges should be determined by Congress and rejects the SEC’s interpretation of digital assets as legally flawed, factually inaccurate, and detrimental as a policy.

Co-founder Jesse Powell has called SEC’s move an “assault on America,” and claimed that the $30 million Kraken levied in February only bought them 10 months “before the SEC comes around to extort you again.”

The SEC alleges that since 2018, Kraken, operating as Payward Inc and Payward Ventures Inc, neglected securities laws, generating hundreds of millions of dollars from crypto transactions while disregarding investor protection regulations. 

The SEC further accuses Kraken of deficient internal controls and inadequate record-keeping, including commingling customer funds with its own and using customer accounts for operating costs.

Kraken, founded in 2011 and backed by investors such as Blockchain Capital and Digital Currency Group, maintains that any alleged commingling amounted to the use of fees already earned. The SEC seeks civil penalties, disgorgement of ill-gotten gains, and an injunction to prevent Kraken from continuing to operate as an unregistered exchange.

Related: Kraken to Hand Over User Data to the IRS

This legal action follows similar SEC lawsuits against Binance and Coinbase in June, both of which are contesting the regulator’s claims. The SEC’s enforcement chief, Gurbir Grewal, stated that Kraken’s failure to register has created a business model with conflicts of interest, putting investors’ funds at risk.


Information for this story was found via US SEC, Reuters, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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