The investigation alleges that Kraken made offers to its U.S. customers that could violate securities laws.

Cryptocurrency exchange Kraken is reportedly being investigated by the U.S. Securities and Exchange Commission for violating securities offering rules.

According to a Feb. 8 report by Bloomberg, the investigation is related to some of Kraken’s offerings to U.S. customers. A person familiar with the matter said the investigation is lengthy and could reach a resolution in the coming days.

However, at this stage, it is not clear which offer the securities regulator will check.

When asked about the alleged investigation, an SEC spokesperson told Cointelegraph, “The SEC does not comment on the existence or absence of potential investigations.”

Kraken did not immediately respond to a request for comment.

Gensler said in December that his main goal for crypto regulation by 2023 was to bring crypto exchanges and lending platforms into line, which he said could happen through companies registering with the SEC or through enforcement action.

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Kraken CEO Dave Ripley said in September that he doesn’t see a need to register Kraken as an exchange with the SEC because it doesn’t offer securities, adding, “There aren’t any tokens that we’re interested in listing as securities.”

However, SEC Chairman Gary Gensler has repeatedly stated that he considers most cryptocurrencies other than Bitcoin.

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However, the SEC recently admitted in an appeals hearing on Jan. 30 in LBRY v. SEC that secondary market sales of LBRY Credit (LBC) do not constitute collateral, after attorney John Deaton convinced the judge. Emphasizing that courts have not treated the underlying assets as security in similar cases.

Regulators often prescribe the “Howie test” to determine what constitutes a security. The name comes from the 1946 case SEC v. Howe, which set the precedent in the United States for considering transactions as securities.

The court held that a transaction qualifies as an investment contract—and therefore counts as a security—when investing in a joint venture whose profits are earned solely by the labor of others.

Source: CoinTelegraph