Crypto Giants Kraken and Robinhood Face SEC’s Growing Control
Recent actions taken by the U.S. Securities and Exchange Commission (SEC) have faced backlash from both the public and professionals within the crypto industry. Several crypto exchanges and platforms, including Kraken, Coinbase, and Robinhood, have expressed concerns about the SEC’s strict behavior towards the industry.
Critics argue that the SEC’s aggressive stance may indicate an overstep of authority, potentially stifling innovation in the crypto industry. One well-known crypto advocate, Ryan Sean Adams, believes that the SEC’s lawsuits against various crypto platforms for facilitating access to crypto for regular Americans could harm the industry and have political consequences. Adams stated, “The SEC is now suing Kraken, Coinbase, Uniswap, Metamask, and now Robinhood for the crime of helping regular Americans access crypto. This level of regulatory overreach has destroyed the legitimacy of the SEC and may lose the Democrats the election. Voters don’t want this.”
Ryan Sean Adams is not the only one dissatisfied with the SEC’s hostile approach to crypto. A group of state attorneys general (AGs) from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas have opposed the SEC’s lawsuit against Kraken, filed last year. These AGs argue that the SEC is exceeding its authority by expanding the definition of “investment contract” and asserting that cryptocurrencies are not automatically securities. They, along with industry lobbyists and other participants, have filed a joint amicus brief supporting Kraken, stating that the SEC’s actions could harm consumers and undermine state laws designed to protect them. The filing emphasizes, “States have a strong interest in preventing the potential preemption of consumer protection and other state laws by the SEC’s attempt to regulate crypto assets as securities.”
The SEC has also issued a Wells notice to Robinhood, a popular stock trading app with a cryptocurrency arm. This notice indicates a possible enforcement action against Robinhood’s U.S. cryptocurrency business. Dan Gallagher, Chief Legal, Compliance, and Corporate Affairs Officer at Robinhood, is unhappy with the SEC’s approach, arguing that the assets listed on their platform are not securities. He suggested that the basis of the SEC’s case against Robinhood may be weak.
The SEC’s attention has also turned to decentralized finance (DeFi) platforms, with Uniswap, a well-known decentralized exchange (DEX), coming under scrutiny. The issuance of a Wells notice to Uniswap is noteworthy because the SEC’s enforcement actions have primarily targeted centralized exchanges. Uniswap’s Chief Legal Officer criticized the SEC’s actions, stating that they demonstrated “arbitrary enforcement and continued power abuse.” This increased regulatory focus on DeFi platforms could have significant implications for the sector, potentially hindering its growth and innovation.
The SEC’s aggressive actions towards various crypto projects have raised concerns about the agency overstepping its authority. Critics argue that the SEC’s broad application of securities laws could impede innovation and consumer protection, bypassing state laws. The outcome of these legal battles will likely shape the future of the crypto industry and its regulatory frameworks.