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On November 20, 2023, the SEC filed a complaint in the United States District Court for the Northern District of California against Payward, Inc. and Payward Ventures, Inc. which, together, do business as Kraken.1 The complaint alleges Kraken has been operating for a decade as an unregistered securities exchange, broker-dealer, and clearing agency.  

The complaint highlights certain risks resulting from Kraken’s unregistered status and merging of these traditionally separate market functions into one business, including comingling of customer crypto assets and cash with its own. However, unlike the SEC’s action against Binance, which charges (negligence-based) fraud, this is a pure registration case.  

The complaint names no new crypto assets that, in the SEC’s view, constitute securities under the Howey test or otherwise.2  


At this point, it seems unfair to the staffers in the Enforcement Division who must litigate these registration-based cases. Let them bring the fraud cases. That is where the market needs them.

Instead, they are asked to tilt at windmills in the fog of regulatory uncertainty when it is the job of the rulemaking divisions of the SEC and the Commission itself to provide clarity and guidance on such issues. Yet, more than eight years after the Ethereum blockchain was created, two years as SEC Chair, five years as CFTC Chair, and a stint as an MIT professor of blockchain, Gary Gensler refused to say whether ETH was a commodity or a security at a hearing before the House Financial Services Committee.3

As we here at SKrypto have said before, a good, honest lawyer could write both sides of the brief on the securities law status of many of these tokens. Dispiritingly, the SEC’s complaint against Kraken says, “For purposes of prevailing on the Exchange Act claims set forth herein, the SEC need only establish that Kraken has engaged in regulated activities relating to a single crypto asset security during the Relevant Period.”

Technically, true. A victory, we suppose, but a pyrrhic one at best. Like the muddled result in the SEC’s action against Ripple Labs, it would offer little clarity to market participants and investors on the securities law status of other tokens.


1 On Feb. 9, 2023, the SEC filed a settled action against Payward Ventures, Inc. in connection with the unregistered offer and sale of Kraken’s staking-as-a-service program.

2 Instead, the complaint notes that Kraken makes available for trading tokens that have been the subject of other SEC enforcement actions, namely ADA, AXS, ALGO, ATOM, CHZ, COTI, DASH, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, SAND, and SOL.

3 Chair Gensler is willing to say BTC is not a security so, perhaps, the gestation period for a decision on the securities law status of a token is more like 14 years.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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Philip Moustakis | Partner

A former senior counsel in the SEC’s Division of Enforcement, Philip advises companies and individuals at Seward & Kissel on cryptocurrencies and blockchain technology, SEC enforcement matters, other regulatory investigations, and internal investigations. As a founding member of the SEC’s Cyber Unit, Philip advised the Commission on cryptocurrencies and investigated matters involving initial coin offerings (ICOs), unlawful touting of ICOs, and other violations of the federal securities laws related to cryptocurrencies. Publicly filed enforcement matters Philip spearheaded included the SEC’s first ever Bitcoin-related enforcement action against the operator of Bitcoin Savings & Trust, a Bitcoin-denominated Ponzi scheme, settled proceedings against an operator of a Bitcoin-related social media marketing venture and a popular Bitcoin betting site for the offer and sale of unregistered securities, and settled proceedings against an operator of unregistered cryptocurrency-denominated securities exchanges and broker-dealers.

“The SEC is a principles based regulator, and it will assert its jurisdiction over any securities offering or transaction, as it has done since the onset of the ICO craze, regardless of the technology used to facilitate such an offering.”

Philip’s thoughts on the recent SEC enforcement action against Kik Interactive, Inc. as published in the Crowdfund Insider article “Former SEC Senior Counsel Comments on Kik Ruling: Kik Could Have Benefited From Traditional Capital Markets Lawyer"


Anthony Tu-Sekine | Partner

As the head of Seward & Kissel’s Blockchain and Cryptocurrency Group and a frequent commentator on all things crypto, Anthony advises clients on a wide range of evolving topics, including how to structure and issue security and utility tokens, registered and unregistered offerings of security tokens, token custody, transfer and liquidity issues, non-security opinions, and investments in crypto assets by funds and other investors. A recognized leader on physical precious metals funds, Anthony represented APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of OneGold.com, which allows investors to own gold documented on blockchain. He also:

  • Represents ShelterZoom, a leading blockchain-based SaaS contract management platform;

  • Helped form a tokenized hedge fund;

  • Provides advice in connection with ransomware payments made in cryptocurrencies; and

  • Worked with sponsors of bitcoin ETF and OTC products.

“You can work with regulators or you can really try to piss them off… If you really want to do the latter, then you should expect that they will bring every tool they have against you.”

Anthony’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”


Casey Jennings | Counsel

A member of Seward & Kissel’s Financial Services Regulatory Group and Blockchain and Cryptocurrency Group, Casey advises financial services companies – including banks, broker-dealers, investment funds, service providers, and financial technology companies – on federal and state banking and securities law issues and the structuring of new financial products, including anti-money laundering, deposit issues, token offerings, custody of traditional and crypto assets, transfer and liquidity issues, Volcker Rule issues, and investments in crypto assets by funds and other investors. Before joining the firm, Casey served as counsel to the Consumer Financial Protection Bureau, where he developed and implemented financial regulatory policy, including the first CFPB rulemaking to rely on unfair, deceptive, and abusive acts and practices (UDAAPs) authority. Since then, he has:

  • Represented e-retailer APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of the online marketplace, OneGold.com.

“The whole notion of crypto is that there are no gatekeepers and the BSA requires that there be gatekeepers. Those two notions are very much at odds with one another. But the BSA is the best system that we’ve got right now.”

Casey’s perspective on crypto AML regulations as published in Cointelegraph article “How U.S. authorities are using old AML tools to crack down on crypto”