SEC Agrees in Principle to Drop Lawsuit Against Kraken

The U.S. Securities and Exchange Commission (SEC) has agreed in principle to dismiss its lawsuit against cryptocurrency exchange Kraken, according to a statement from the company.

The case will be dropped with prejudice, meaning it cannot be refiled. Kraken will not admit to any wrongdoing, pay penalties, or change its business operations.

SEC Ends Legal Fight Against Kraken, No Fines or Business Changes

The SEC sued Kraken in November 2023, alleging it operated as an unregistered securities exchange, broker, clearing agency, and dealer.

The regulator also accused the company of commingling customer and corporate funds.

Kraken contested the charges, leading a federal judge to rule the case had enough merit to proceed to trial.

However, the exchange maintained that the lawsuit misrepresented its business and called the allegations politically motivated.

But in a blog post released on March 3, the company described the regulator's case as baseless and politically motivated, doubling down on their claim that “Regulatory actions must be based on facts, not political agendas.”

Kraken described the lawsuit as a misguided effort that misrepresented its business practices.

"The SEC's lawsuit, which mischaracterized our consistent business model, was always without merit," the company said.

The SEC's move to dismiss the case comes amid a broader shift in regulatory attitudes toward the cryptocurrency industry in the U.S.

Kraken expressed optimism that the decision to drop the lawsuit may signal the end of an era marked by contentious legal battles between federal agencies and digital asset platforms,

, pointing to leadership changes in Washington as a key factor.

"We appreciate the new leadership both at the White House and the Commission that led to this change," said a representative from the crypto platform.

The company said it remains committed to working with policymakers to develop transparent regulations that support consumer protection while allowing for technological advancement.

Now, pending approval from the SEC's commissioners, Kraken says the charges will be dropped.

Trump-Era SEC Policy Shift: Crypto Firms See Legal Relief

Kraken's victory marks a turning point in the SEC's approach to crypto enforcement.

Under former Chair Gary Gensler, the agency pursued lawsuits against major crypto firms, arguing that most digital assets were unregistered securities.

Critics condemned this "regulation by enforcement" strategy, saying it stifled innovation and pushed businesses offshore while other countries established clearer rules.

Now, the SEC is taking a different path. Since the change in leadership, the agency has dropped multiple lawsuits and investigations, including cases against Consensys, Uniswap, Robinhood, and OpenSea.

On February 27, it officially dismissed its case against Coinbase, further signaling a retreat from aggressive enforcement.

This shift aligns with President Donald Trump's broader regulatory approach. His nominee for SEC chair, Paul Atkins, is known for his pro-crypto stance, suggesting a massive change from Gensler's approach.

While Atkins awaits confirmation, acting SEC Chair Mark Uyeda has already begun scaling back enforcement efforts.

According to a February report, the SEC has created the Cyber and Emerging Technologies Unit (CETU) to fight crypto fraud rather than enforcing sweeping industry crackdowns.

In a separate but related development, Coinbase is demanding answers from the SEC. The exchange has filed an FOIA request seeking details on the costs of the SEC's crypto enforcement actions.

Chief Legal Officer Paul Grewal wants transparency on the amount of taxpayer money spent on investigations, lawsuits, and third-party contractors.

After years of uncertainty under an enforcement-first approach that pushed innovation overseas, the digital assets industry now faces the prospect of a more balanced framework that could allow American crypto businesses to compete globally while still maintaining necessary consumer protections.

This pivot raises important questions about how regulatory agencies should approach emerging technologies.

As this new chapter unfolds, the challenge will be striking the right balance between fostering innovation and ensuring market integrity; a balance that, if achieved, could position the U.S. well in a novel yet increasingly crucial sector of the global financial system.

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