Crypto exchange Kraken faces probe over possible securities violations: Report

The probe is reportedly looking at certain offerings that Kraken has made to its United States customers that could be in breach of securities laws.

Cryptocurrency exchange Kraken is reportedly being probed by the United States Securities and Exchange Commission over whether it breached rules around the offering of securities. 

According to a Feb. 8 Bloomberg

Kraken CEO Dave Ripley argued in September that he didn’t see a need to register Kraken as an exchange with the SECbecause it does not offer securities, adding “There are not any tokens out there that are securities that we’re interested in listing.”

SEC Chairman Gary Gensler has repeatedly said, however, that he considers most cryptocurrencies other than Bitcoin (BTC) to be securities.

The SEC however recently conceded during a Jan. 30 appeal hearing in the LBRY v SEC case that the sale of LBRY Credits (LBC) in the secondary market doesn’t constitute a security, after the judge was persuaded by an argument from attorney John Deaton highlighting that the courts had never deemed the underlying asset to be a security in similar cases.

The regulator often refers 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 U.S. for what transactions are considered securities.

It held that a transaction qualifies as an investment contract — and therefore is considered a security — where there is an investment in a common enterprise with profits earned exclusively through the work of others.