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John Deaton, who founded CryptoLaw U.S., has taken to Twitter to tell the community that Brian Armstrong of Coinbase provided the only worthy response to the SEC threatening U.S. crypto exchanges, and Kraken in particular, for their staking products.
Deaton is one of many influencers who supports Ripple Labs behemoth in its legal battle against the SEC. This lawsuit has been continuing since December 2020 as the regulator accuses the company of selling its XRP token as an unregistered security to investors.
Coinbase prepared to defend its staking service in court
In a tweet published on Sunday, chief of Coinbase Brian Armstrong shared on Twitter that he is certain that the staking services of his exchange are not securities. Besides, he is more than happy to let Coinbase lawyers defend that in court should the SEC claim otherwise. His tweet came after the SEC chair's recent interview with CNBC, in which the former stated that other U.S. exchanges with staking products should pay attention to the SEC's action against Kraken and register staking with the regulator.
Armstrong shared a link to a Coinbase blog post published on Feb. 10, in which the staking services of the platform are thoroughly explained. In particular, it says that "staking is not a security under the US Securities Act, nor under the Howey test."
💯 the only reaction the CEO of the largest and only publicly traded exchange in the United States 🇺🇸 should have 👏 https://t.co/gDsBYYXVYS
— John E Deaton (@JohnEDeaton1) February 12, 2023
It adds that attempting to adapt U.S. securities legislation to regulating crypto-based processes like staking will basically stop U.S. users from accessing crypto staking and will drive providers of these services out of the U.S., while customers from other countries will keep using them.
At the start of February, Coinbase, a publicly traded company and the largest crypto trader in the U.S., won a class action lawsuit against it filed by investors. The suit was dismissed and the stocks of the company (COIN) soared by 28% on that news.
SEC charges Kraken over its staking program
Last week, the U.S. securities regulator charged U.S. exchange Kraken — spearheaded by Jesse Powell — with offering staking-as-a-service to its customers without warning them of all the risks associated with that kind of investment.
The case was settled after Kraken agreed to pay a $30 million fine and was forced to close down its staking offer for U.S.-based customers. The program offered clients returns between 4% and 21% without disclosing risks.
Later on, Powell sarcastically tweeted that he basically regrets paying the fine to the SEC, feeling that it was the wrong move since he could just watch the recent Gary Gensler interview to CNBC first and then fill in a form on the SEC website to register Kraken's staking product.
Alex Dovbnya
Tomiwabold Olajide
