Kraken Suspends Staking Operations to Agree with SEC

The U.S. Securities Exchange Commission has accused Kraken affiliates Payward Ventures Inc and Payward Trading Ltd for failing to register and submit to the SEC their staking program as a service. Kraken announced that it has agreed to halt its staking program in response to the SEC’s accusations. In addition, the company agreed to pay $30 million in damages and civil penalties.

Kraken will also automatically unstack all US client assets registered to the on-chain staking program. Therefore, the staking rewards have also been removed. This applies to all staked assets except Ethereum (ETH), which will not be staked after the upcoming Shanghai upgrade. According to the official statement made by Kraken, US customers will no longer be able to stake any assets, including ETH. However, according to the statements made, Kraken will continue to offer staking services for non-US customers through a separate Kraken subsidiary for different customers.

Staking services will continue uninterrupted for non-US customers, according to Kraken’s statement today. These clients can continue to use the staking service as usual, staking unstaked assets and automatically earning staking rewards. SEC Chairman Gensler said:

“Today, we are taking another step to protect individual investors by closing this unregistered crypto staking program, in which Kraken not only offers investors high returns unrelated to any economic reality, but also retains the right to pay them no returns. Among other things, it provided investors with zero information about its financial condition and even whether it had the means to pay the returns marketed in the first place.”

On the other hand, according to the SEC complaint, Kraken has been offering and selling cryptoasset staking services to the public since 2019. In this way, Kraken pooled certain crypto assets transferred by investors and staked them on behalf of investors. Allegedly, Kraken offered these services to US customers in violation of the US Government’s securities terms and regulations.