[discodave]

> For what its worth, banks don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves.

And that is why banks are regulated, must register, follow certain rules etc.

> Kraken has been operating under the money transmitter licensing scheme for a decade

Yeah, but that doesn't give them a license to operate a securities exchange, or a bank. How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?

[legutierr]

> How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?

Quite a few. In fact, all of the major centralized exchanges operating in the US are authorized to do so because they are licensed money transmitters (with the exception of some that might be operating under the NYS "Trust" licensing scheme), and none of them are broker-dealers regulated by the SEC, because until very recently the SEC has taken the position that broker-dealers are not allowed to sell crypto assets.

For years the money transmitter licensing scheme was understood to be the correct (and sufficient) licensing scheme under which a crypto exchange could legally operate in the United States. It is only since the beginning of the Biden administration that the SEC has taken the position that crypto exchanges have an obligation to register with the SEC. The Ripple lawsuit was filed at the tail end of the Trump administration (after the election), but it was not targeted at exchanges. It's also worth noting that the judge in the Ripple case found that exchange-traded XRP tokens are not securities. In other words, the SEC's assertion of authority over exchange-traded Ripple tokens was explicitly denied.

There is good reason to believe that SEC will be unsuccessful in asserting even broader authority over all tokens that are available on Kraken.

[westurner]

In order to justify such a specific claim against Kraken to be heard, isn't it necessary to first qualify that such assets are themselves securities?

Am I crazy to call this vexatious harassment?

If P then Q:

If {x,y,z} are securities, [ then {Exchanges a, B, and C} have provided securities exchange services of assets {x,y,z} without the requisite license are thus owe a civil fine. ]

But how is a suit against Exchange A the appropriate forum to hear whether assets {x, y, or z} are securities?

Given that - presumably - assets {x,y,z} are not yet ruled to be securities, there was not sufficient cause or standing to make a claim of bad faith or intent to provide exchange services for unregistered securities.

Exchange A operated in good faith, pursued the requisite state and federal procedures for assessing whether or not such assets were securities, and specifically does not intend to sell securities.

Should there be an is_this_a_security() function of a US government regulatory agency, defendants would be required to request such review before listing said specific types of assets.