Cryptocurrency exchange Kraken is reportedly under investigation by the United States Securities and Exchange Commission (SEC) over whether it violated the rules on securities offerings.
According to Bloomberg’s February 8 report, the probe is related to certain offerings that Kraken has made for US clients. People familiar with the matter said the investigation is at an advanced stage and a resolution could be reached in the coming days.
However, at this stage, it is not clear which offers are being examined by the securities regulator.
When asked about the alleged probe, an SEC spokesperson told Cointelegraph, “The SEC does not comment on the existence or non-existence of possible investigations.”
Kraken did not immediately respond to a request for comment.
Gensler said in December 2022 that the main goal of regulating crypto throughout 2023 is to make crypto exchanges and credit platforms aligned, which he suggested could happen through companies registering with the SEC or through enforcement actions.
related: A judge has dismissed a proposed class action lawsuit over Coinbase’s sale of securities
Kraken CEO Dave Ripley denied in September 2022 that he did not see the need to register Kraken as an exchange with the SEC, as it does not offer securities, and added “There is no token out there that is a security. Register interest”
SEC Chairman Gary Gensler has repeatedly said, however, that he considers most cryptocurrencies other than Bitcoin (BTC) as securities.
The SEC, however, recently admitted during the January 30 appeal hearing in the case of LBRY v SEC that the sale of LBRY Credits (LBC) in the secondary market is not much of a security, after the judge was persuaded by the arguments of the lawyer John Deaton, pointing out that the court never considered the underlying asset as a security in same case.
Regulators often refer to the “Howey Test” to determine what constitutes a security. The name comes from the SEC v Howey case from 1946 which set a precedent in the US regarding transactions deemed to be securities.
It is believed that the transaction qualifies as an investment contract – and is therefore considered a security – where there is an investment in a public company with profits obtained exclusively through the work of others.