Kraken’s Top Lawyer Says Signs of Progress in U.S. Congress Put SEC in Legal Bind

The exchange’s chief legal officer, Marco Santori, said the regulators must leave the big questions for Congress, and lawmakers are showing they’re moving forward on crypto.

AccessTimeIconMay 12, 2023 at 8:33 p.m. UTC
Updated May 12, 2023 at 8:45 p.m. UTC

While the U.S. Securities and Exchange Commission (SEC) continues to rain enforcement fire onto the crypto industry, Kraken’s chief legal officer, Marco Santori, says a specific legal doctrine could undermine the regulator’s authority.

The so-called major questions doctrine – a point of U.S. administrative law that suggests federal agencies shouldn’t step in front of Congress to engage on points of major economic significance – has been cited by Coinbase (COIN) in its preemptive defense of a pending SEC action, and Santori thinks it’s especially relevant as lawmakers start work on crypto oversight.

“The fact that Congress is taking this up, and you have representatives on both sides of the aisle – two committees having a historic joint hearing on it – these are all indicators that there is in fact a major question,” Santori said in an interview. “A court might look at what Congress is doing and say that the agency is getting ahead of its mandate from Congress, that this is a major question that ought to be decided by Congress.”

The top lawyer for Kraken, which itself had settled a major recent SEC accusation that its U.S. staking services amounted to an offering of unregistered securities, said the SEC and its sister agency, the Commodity Futures Trading Commission (CFTC), will have to bear in mind that doctrine, based in U.S. Supreme Court rulings.

“The agencies have to decide for themselves whether this is a major question,” said Santori, who was among the witnesses at this week’s joint hearing of the House Financial Services Committee and the House Agriculture Committee.

Santori said he was heartened that most lawmakers from both parties seemed to think legislation was in order for crypto oversight, though he acknowledged that the uncertainty of the Senate’s view leaves some question about its potential.

Edited by Nikhilesh De.


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.