{"id":552370,"date":"2023-02-16T01:05:17","date_gmt":"2023-02-15T22:05:17","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/the-sec-shook-kraken-down-for-30m-but-it-doesnt-mean-they-had-a-case\/"},"modified":"2023-02-16T01:05:17","modified_gmt":"2023-02-15T22:05:17","slug":"the-sec-shook-kraken-down-for-30m-but-it-doesnt-mean-they-had-a-case","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/the-sec-shook-kraken-down-for-30m-but-it-doesnt-mean-they-had-a-case\/","title":{"rendered":"# The SEC shook Kraken down for $30M, but it doesn&#8217;t mean they had a case"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3c56df8accb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3c56df8accb\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/the-sec-shook-kraken-down-for-30m-but-it-doesnt-mean-they-had-a-case\/#%E2%80%9D_The_SEC_shook_Kraken_down_for_30M_but_it_doesnt_mean_they_had_a_case_%E2%80%9C\" >&#8221; The SEC shook Kraken down for $30M, but it doesn&#8217;t mean they had a case &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_The_SEC_shook_Kraken_down_for_30M_but_it_doesnt_mean_they_had_a_case_%E2%80%9C\"><\/span>&#8221; The SEC shook Kraken down for $30M, but it doesn&#8217;t mean they had a case &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjMtMDIvN2EwNTYzOTItNWJjYy00M2I4LTk1OTItYjdjNDk3MGM1MTUzLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-71a7a826>The settlement between Kraken (Payward Ventures) and the United States Securities and Exchange Commission set off alarm bells in the crypto community this month. <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">App<\/a>arently, Kraken \u2014 one of the most compliance-minded crypto exchanges in existence \u2014 decided to buy its peace rather than fight with the SEC for years over whether it was offering unregistered \u201csecurities\u201d through its staking program. The nature of the settlement is that Kraken neither admitted nor denied the SEC\u2019s allegations, and the existence of the settlement, technically speaking, cannot be used as legal precedent for any argument either side of the issue might present.<\/p>\n<p>That said, the settlement matters, as it will clearly chill crypto staking in the United States. As SEC Chairman Gary Gensler said, \u201cWhether it\u2019s through staking-as-a-service, lending, or other means, crypto inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>ries, when offering investment contracts in exchange for investors\u2019 tokens, need to provide the proper disclosures and safeguards required by our securities laws.\u201d Gensler casts a wide net, indeed, for what the SEC considers to be \u201cinvestment contracts,\u201d and running staking out of business was perhaps precisely what he had in mind.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Expect the SEC to use its Kraken playbook against staking protocols<\/em><\/strong><\/p>\n<p>That the SEC was successful in pressuring Kraken out of $30 million does not, however, make the agency\u2019s position legally or logically correct. As a preliminary matter, \u201cstaking\u201d and \u201clending\u201d are totally different things. Staking is the process by which one pledges one\u2019s coins or tokens to a proof-of-stake blockchain, either directly or by delegating one\u2019s coins to a third party, for the purpose of securing the network. Stakers are the ones through whom the blockchain\u2019s consensus mechanism operates, as they \u201cvote\u201d on which blocks will be added to the chain. The process is algorithmic, and the reward is automatic when one\u2019s position is electronically \u201cselected\u201d as the validator for a given block.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Settlements are not law. They&#8217;re a decision that the economics of settling are better than fighting, no more.<\/p>\n<p>The SEC thinks staking-as-a-service is a security. Kraken didn&#8217;t admit or deny either way.<\/p>\n<p>It may be a tough question, but the SEC hasn&#8217;t answered it either way today.<\/p>\n<p>\u2014 Jake Chervinsky (@jchervinsky) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/jchervinsky\/status\/1623792748464594944?ref_src=twsrc%5Etfw\">February 9, 2023<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>Stakers don\u2019t necessarily know who the other stakers are, nor do they need to know, as the fate of one\u2019s stake is dependent only on following the rules of that blockchain as to \u201cliveness\u201d (availability) and other technical considerations. There are risks of \u201cslashing\u201d (losing your coins) for bad behavior or unavailability, but again, these are algorithmic remedies doled out automatically according to transparent rules built into the code. Put simply, in staking, it\u2019s between you and the blockchain, not you and the intermediary.<\/p>\n<p>Lending, in contrast, invokes the entrepreneurial and managerial skill (or lack thereof) of the people to whom you lend. This is a distinctly human enterprise. One does not necessarily know what the borrower is doing with the money; one simply hopes to get it back with a return. This <em>counterparty risk<\/em> is in part what the securities laws are intended to address. In lending, the relationship is between the lender and the borrower, which relationship that can take all kinds of unexpected turns.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Kraken staking ban is another nail in crypto\u2019s coffin \u2014 And that\u2019s a good thing<\/em><\/strong><\/p>\n<p>The reasons why staking arrangements are not \u201cinvestment contracts\u201d (and thereby \u201csecurities\u201d) wer stated eloquently by Coinbase chief legal officer Paul Grewal in a blog post.\u00a0Put simply, merely serving as an intermediary does not render the underlying economic relationship an \u201cinvestment contract.\u201d Yet the SEC here does not seem to want to entertain the differences between service providers and counterparties.<\/p>\n<p>It is true that third parties, such as Kraken, serve a custodial role in the staking relationship \u2014 that is, they may hold the private keys to the particular coins the client intended to stake. However, serving as a custodian of a fungible asset, especially where such a custodian holds collateral on a 1:1 basis to back every customer account, is a discreet service. <\/p>\n<p>There is nothing to suggest that Kraken, Coinbase or any other staking-as-a-service provider, otherwise uses human judgment, intuition, grit or any other hallmark of one\u2019s entrepreneurial or managerial ability, to advance or inhibit the staker\u2019s purpose. One\u2019s reward does not improve or decline based on how the intermediary performs. There should be (and are) rules and regulations for how custodians function, but possession does not, by itself, a security make. <\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Ari Good<\/strong> is an attorney whose clients include payments companies, cryptocurrency exchanges and token issuers. His practice areas focus on tax, securities and financial services compliance matters. He received his juris doctor from the DePaul University College of Law in 1997, his Master of Laws in taxation from the University of Florida in 2005, and is presently a candidate for the Executive Master of Laws in securities and financial regulation from the Georgetown University Law Center.<\/div>\n<\/div>\n<p class=\"post-content__disclaimer\"><em>This article is for <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/the-sec-shook-kraken-down-for-30-million-but-it-doesn-t-mean-they-had-a-case\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; The SEC shook Kraken down for $30M, but it doesn&#8217;t mean they had a case &#8220; The settlement between Kraken (Payward Ventures) and the United States Securities and Exchange Commission set off alarm bells in the crypto community this month. Apparently, Kraken \u2014 one of the most compliance-minded crypto exchanges in existence \u2014 decided&#8230;<\/p>\n","protected":false},"author":1,"featured_media":552371,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2023-02\/7a056392-5bcc-43b8-9592-b7c4970c5153.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74863,75540,74898,133582,75269,71511,55229,70934,8575],"class_list":["post-552370","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-cryptocurrencies","tag-kraken","tag-sec","tag-staking","tag-us-government","tag-government","tag-law","tag-regulation","tag-usa"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/552370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=552370"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/552370\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/552371"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=552370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=552370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=552370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}