Kraken to Pay $1.25M Fine After Settling Charges With CFTC

Kraken will pay $1.25 million to settle charges with the Commodity Futures Trading Commission (CFTC) that it offered illegal margined digital asset transaction services and did not register as a futures commodity merchant (FCM) with the regulatory agency.

The CFTC found Kraken violated the Commodities Exchange Act by offering margined crypto products between June 2020 and June 2021 without registering as a Designated Contract Market (DCM) or FCM. Entities hoping to list or trade futures products must register as an FCM, while a DCM license is needed to offer futures products.

Kraken maintained custody of the assets purchased with margin, according to a CFTC press release.

CFTC Commissioner Dawn Stump announced in a concurring statement that it may be difficult for Kraken to comply with the law given the current guidance around issues like “actual delivery” of digital assets.

Stump said it was unclear how Kraken could be regulated as an FCM, noting that it would be “unprecedented” for a company to be registered as a DCM and FCM at once. Kraken is not registered as either, according to the NFA database.

“How Kraken would be regulated as an FCM is not entirely clear, because many of the Commission’s rules governing its regulation of traditional FCMs do not fit Kraken’s role as an exchange,” she said.

The Commissioner proposed opening up a rulemaking procedure to provide clear “rules of the road” for exchanges and other crypto entities to abide by.

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