Jesse Powell

The crypto community, including prominent industry lawyers and U.S. Senator Cynthia Lummis, is sounding off about the new lawsuit filed by the U.S. SEC against cryptocurrency exchange Kraken.

The crypto space has been making its feelings known about a lawsuit filed by the United States Securities and Exchange Commission (SEC) against the crypto exchange Kraken. 

The lawsuit, filed on Nov. 20, is based on the SEC’s allegations that Kraken has been operating as an unregistered exchange, broker, dealer and clearing agency and claims that it mixes customer assets with its own.

Since the news broke, the crypto community on social media, Kraken executives and prominent lawyers have been vocal in expressing their views on the SEC’s action. 

Kraken founder Jesse Powell called the action an “assault on America” and called the SEC the U.S.’s “top decel.” Powell even warned other companies to depart the country.

On Nov. 21, the current CEO of Kraken, Dave Ripley, took to X (formerly Twitter) and said the company “strongly disagrees” with the SEC claims and plans to “vigorously” defend its position.

We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position.

As we have seen before, the SEC argues that @krakenfx should “come in and register” with the agency, when there is no clear path to…

— Dave Ripley (@DavidLRipley) November 21, 2023

As an industry leader, we will stand up to these allegations and defend the crypto industry’s right to exist in the U.S.,” he said. Ripley said that the “lack of regulatory clarity in the U.S.” will only be resolved by Congressional action, adding:

“[We] will continue to support these efforts to bring clarity and certainty to the chaotic environment that has been created in the U.S.”

Related: Kraken will share data of 42,000 users with IRS

Prominent crypto lawyer John Deaton also commented on the development, calling SEC Chair Gary Gensler a “despicable and dishonorable regulator.”

Deaton also commented on Kraken’s decision in February to pay $30 million to the SEC in a settlement deal.

@GaryGensler is a despicable and dishonorable regulator. He knew that @krakenfx believed it was buying peace for the $30M. I know some people are critical of it’s choice to settle and pay the $30M. I wanted them to fight as well. But when you decide to fight, $30M takes you only… https://t.co/WeF4YTMfip

— John E Deaton (@JohnEDeaton1) November 21, 2023

Deaton said he believes Gensler does not care about any of the parties involved — employees or investors — and said, “he’s a disgrace, and I can’t wait to see him go down.”

When asked if Kraken stands a chance against the SEC in court for round two, crypto criminal defense lawyer Carlo D’Angelo said he doesn’t see the odds being in the SEC’s favor. 

“Similar arguments have been tried and failed in other circuits. The judge in the Kraken case will likely look closely at those decisions. Judges like consistent precedents—less chance of getting reversed on appeal.”

One X user responded by saying, “Just because the sec says something, [doesn’t] make it true! Get them to explain in detail to the court how to come on and register and operate normally.”

The SEC has received a lot of backlash for its harsh crackdown on crypto, particularly as the industry is operating in a legal system that has not yet provided clear legislation for cryptocurrencies and exchanges working with digital assets.

However, the crypto space also has allies on the regulatory side. U.S. Senator Cynthia Lummis posted a response to the lawsuit, saying the SEC cannot continue to “rule by enforcement.”

The SEC cannot continue ruling by enforcement. My statement on the Kraken lawsuit below: pic.twitter.com/J3qhzU624N

— Senator Cynthia Lummis (@SenLummis) November 21, 2023

She said crypto companies’ have made repeated attempts to receive guidance from the SEC but have seen no progress. U.S. Representative Tom Emmer is also backing the industry and recently proposed defunding the SEC’s crusade against crypto.

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