SEC drops case against Kraken in latest crypto reversal

Kraken is off the hook after the Securities and Exchange Commission dropped its civil enforcement action against the cryptocurrency exchange.

The case was dropped with prejudice, which means the agency cannot refile the charges against the company. The SEC sued Kraken for allegedly operating as an unregistered securities exchange, broker, dealer and clearing agency in November 2023. 

The announcement is the latest in a string of dismissals by the SEC under the new Trump administration. The SEC in February dismissed or paused at least nine cases against crypto companies, including ones against the largest players. The SEC previously sued crypto exchanges Coinbase and Binance but dropped the actions last month. 

"The commission's decision to exercise its discretion and dismiss [the Kraken] pending enforcement action rests on its judgment that the dismissal will facilitate the commission's ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action," the SEC wrote in a statement Thursday.

The SEC under the Biden administration issued several enforcement actions against cryptocurrency companies following the collapse of crypto exchange FTX in 2022. This led to many in the industry feeling targeted in what they refer to as "Choke Point 2.0."

President Donald Trump ran partially on a promise to ease regulations for the industry. At a bitcoin conference in Nashville in July, Trump chided Biden-era SEC Chair Gary Gensler to cheers from attendees. The now-president promised to make the United States "the crypto capital of the planet" in his conference speech. 

Trump, who previously called crypto a "scam," embraced the industry in his 2024 campaign, leading crypto enthusiasts to become major donors. A report from the nonprofit watchdog group Public Citizen found nearly half of all corporate funds donated in the 2024 election were from crypto companies — about $135 million. Coinbase and Ripple alone accounted for more than 80% of the donations.

The SEC confirmed the news Thursday but Kraken previously announced the news on March 3 in a blog post on its website entitled "A win for fairness." Kraken in the post said there would not be any admission of wrongdoing, no penalties paid and no changes to the business. 

"The SEC's decision to dismiss its lawsuit against us (and many others) is more than just a legal victory — it's a turning point for the future of crypto in the U.S.," the company wrote in the post. "It ends a wasteful, politically motivated campaign, lifts uncertainty that stifled innovation and investment, and clears the path toward a stable, forward-thinking regulatory regime."

The company has faced scrutiny from regulators since 2018. Cumulatively, Kraken has agreed to pay more than $30 million in fines, largely thanks to a 2023 settlement with the SEC where Kraken stopped offering digital asset staking services in the U.S., which the SEC argued was an illegal sale of securities. Kraken later restarted the staking operations. 

Officially known as Payward Inc., Kraken was founded in 2011 in San Francisco and is helmed by co-chief executive officers Arjun Sethi and David Ripley. Kraken's website states it has more than 10 million users in 190 countries, processing more than $207 billion in quarterly trading volume. The company in January disclosed 2024 revenue of $1.5 billion, more than double from the year prior, with $380 million in adjusted earnings before interest, taxes, depreciation and amortization. 

In 2020, Kraken became the first crypto company to receive a bank charter with a special-purpose depository institution license from the state of Wyoming.

Kraken is reportedly looking to go public as soon as the first quarter of next year and has been working to raise funds ahead of an initial public offering, according to Bloomberg. The publication reported earlier this week that Kraken was exploring raising as much as $1 billion in debt and is reportedly in preliminary talks with Goldman Sachs and JPMorgan Chase.