Kraken exchange has been forced to stop providing staking services after paying a fine of $30M
One of the largest cryptocurrency exchanges, Kraken, was compelled to discontinue offering staking services after agreeing to pay the Securities and Exchanges Commission a $30 million punishment (SEC).
According to the SEC, Kraken’s staking program qualifies as a security, and because the business didn’t fully disclose its financial situation to consumers, their investments were at danger.
“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by their securities laws.” said SEC Chair Gary Gensler.
SEC therefore is classifying managed staking as an investment contract with the definition from the Supreme Court stating: “An investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”
The director of the SEC’s Enforcement Division, Gurbir Grewal, accused Kraken in a statement of “unregistered offering and selling their crypto-asset staking scheme” and of promising investors “earnings” that are “excess profits unrelated to any economic reality.”
Most likely, staking itself played little part in the decision-making process. SEC is taking measures to basically compel crypto exchanges to register with the SEC since that is all they want. A fiduciary relationship of trust may exist for managed staking, but for a company like Kraken, that argument is ad inito because the act of placing money on Kraken establishes the relationship, whereas staking makes no further changes.
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