The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kraken, one of the sphere’s leading crypto exchanges, on Nov. 20, alleging several violations of federal securities laws, including commingling user funds.
Though the SEC makes serious accusations against the exchange, the lawsuit also makes over 100 citations of Solana and its native coin, SOL, and more than 60 mentions of Cardano and its currency, ADA. The two are among the leading smart contract platforms whose coins are among the top 10 by market cap.
Solana and Cardano have been under increasing regulatory pressure in recent times as the SEC alleges that ADA and SOL, like Algorand (ALGO) and Near Protocol (NEAR), as mentioned in the lawsuits against Binance and Coinbase in June 2023, are unregistered securities.
Among its claims, the SEC asserts that Kraken acted as an unregistered broker and clearinghouse in its handling of crypto asset transactions, subsequently collecting billions of dollars in fees without putting in place measures to protect investors.
Specifically, the SEC claims that ADA and SOL are examples of unregistered securities issued illegally, even though “Kraken has long been on notice that its role in the offer and sale of crypto assets as investment contracts made it subject to U.S. securities laws.”
By repeatedly naming top coins, including Solana and Cardano, in its complaint, the SEC seems to be building its case for increased authority over crypto assets it deems securities under the Howey Test criteria. This aggressive stance has sparked fears of a regulatory “cloud over crypto innovation” in the U.S.
The lawsuit seeks to permanently prohibit the exchange from operating without SEC registration.
Kraken has since responded, accusing the SEC of regulating by enforcement, which “harms American consumers, stunts innovation, and damages U.S. competitiveness globally.”