- The SEC has continued its spree of crypto enforcement actions with a lawsuit against Kraken.
- The lawsuit against Kraken puts popular altcoins like ADA, MATIC, and SOL back in the spotlight, but not for reasons they would prefer.
- Once again, U.S. crypto exchanges must consider whether they should continue supporting these assets on their platform.
The SEC has given notice that its onslaught of crypto enforcement lawsuits is far from over with a recent filing against Kraken. Beyond questioning the exchange’s operations and handling of customer deposits, the agency’s latest enforcement action against Kraken again raises doubt about the continued trading of several popular altcoins, including Cardano (ADA), Polygon (MATIC), and Solana (SOL) in the U.S.
Will more exchanges bow to the SEC’s pressure to delist these assets, or can the industry hold a united front?
ADA, MATIC, SOL Back in Focus
On Monday, November 20, the U.S. SEC launched an enforcement action against Kraken, alleging that it has operated as an unregistered securities exchange broker, dealer, and clearing agency. The regulator also accused the exchange of misappropriating customer deposits for operational expenses.
Like in lawsuits against Binance and Coinbase earlier this year, the SEC listed several popular altcoins, including ADA, MATIC, and SOL as unregistered securities available for trading on the exchange. In the filing against Kraken, however, the regulator seemingly reprimands the exchange for not taking the hint from its previous enforcement actions to cease support for these assets.
“Throughout the Relevant Period, Kraken has made available for trading many ‘crypto assets securities.’ These crypto asset securities are investment contracts represented by the underlying crypto asset. In fact, Kraken currently makes 17 available for trading crypto assets that have been the subject of prior SEC 18 enforcement actions based upon their status as crypto asset securities, including crypto assets trading under the symbols ADA, AXS, ALGO, ATOM, CHZ, COTI, DASH, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, SAND, and SOL,” the regulator writes.
While the SEC’s stance is not binding till a court decides, the lingering threat of enforcement actions and the legal costs it attracts gives U.S. exchanges a lot to think about.
How Will Exchanges React?
Following a July 2023 court ruling against the SEC that XRP is not an unregistered security, members of the crypto community had hoped that the regulator would review its crypto approach. However, the recent Kraken filing suggests otherwise.
Smaller exchanges are more likely to feel the heat as they may not boast the financial cushion to see out a lengthy legal battle with the SEC. Following the SEC’s lawsuits against Binance and Coinbase in June 2023, Robinhood, eToro, and Bitstamp caved into the regulator’s pressure, delisting ADA, MATIC, and SOL. The recent lawsuit against Kraken may see this trend resume.
ADA, MATIC, and SOL are posting 3.89%, 6.72%, and 7.46% losses in the past 24 hours, according to data from CoinMarketCap at the time of writing.
On the Flipside
- U.S. Representative Tom Emmer recently pushed an amendment to defund the SEC and prevent the agency from pursuing crypto enforcement actions till Congress passes crypto legislation.
- SEC Chair Gary Gensler recently asserted that the agency does not oppose legitimate businesses in response to critiques of the agency’s crypto enforcement approach.
Why This Matters
The SEC’s enforcement efforts could make it difficult for U.S. residents to trade their favorite crypto assets or push them to offshore exchanges. Mass delisting of ADA, MATIC, and SOL could affect the market capitalization of these crypto assets and their prices.
Read this to learn more about the pressure on U.S. exchanges to delist popular altcoins like ADA, MATIC and SOL:
SEC v. Binance Puts Screws on U.S. Exchanges to Delist ADA, SOL, MATIC
Crypto fund inflows continued last week. Find out more:
Crypto Fund Inflows Hit 2-Month Streak as ETP Volumes Soar