Kraken Fined $1.25M for Offering Margined Crypto Products in US

The Commodity Futures Trading Commission (CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term) issued an order on Tuesday charging the crypto Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, Kraken for illegally offering margined retail commodity transactions in digital assets.

The futures regulator has already settled the charges with the crypto exchange, requiring it to pay a civil penalty of $1.25 million, along with a cease and desist order from further violations of regulatory rules.

Kraken was founded in 2011 and is one of the oldest crypto exchanges in the US and over the globe. Additionally, it is well-regulated and even holds a crypto banking license in the US state of Wyoming.

However, it is not allowed to offer margined products in the United States as it is not registered with the CFTC as a futures commission merchant (FCM).

According to the official announcement, Kraken offered digital asset margined products from around June 2020 to July 2021 to its US customers. The exchanges supplied the digital asset or fiat to pay the seller for the asset when a customer took a margined position. The exchange required them to repay or exit the position within 28 days, else it automatically liquidated the positions.

“This action is part of the CFTC’s broader effort to protect US customers,” said Vincent McGonagle, CFTC’s Acting Director of Enforcement. “Margined, leveraged or financed digital asset trading offered to retail US customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations.”

Rush in the US Crypto Derivatives Market

While crypto derivatives are popular in the international markets, only a few exchanges are licensed to offer them in the United States. But now, major crypto exchanges in the country are slowly jumping to receive permission to provide crypto derivatives.

Most recently, Coinbase applied for membership with the National Futures Association, while the US affiliate of FTX acquired the CFTC-regulated crypto derivatives exchange LedgerX.