Kraken eyes mega funding round amid IPO speculation

US-based cryptocurrency exchange Kraken is reportedly exploring a funding round to raise over $100 million in preparation for an initial public offering (IPO). According to sources cited by Bloomberg on June 6, the funding round is expected to take place by 2025.

Kraken has not confirmed specifics regarding the IPO but stated it is “always exploring strategic paths” to support global crypto adoption. The exchange’s consideration of an IPO follows Coinbase’s successful public listing in 2021, which marked the first time a crypto exchange went public in the United States. Kraken previously indicated it would pursue a direct listing rather than a special-purpose acquisition company if it opted to go public.

The exchange faces a civil lawsuit filed by the U.S. Securities and Exchange Commission (SEC) in November 2023. The SEC’s lawsuit against Kraken started last November and accuses the exchange of operating without proper registrations as a broker, clearinghouse, or exchange. The legal action follows a settlement earlier in the year about Kraken’s staking services, where similar registration issues were raised.

In a recent court filing, Kraken refuted the SEC’s claims by arguing that the cryptocurrencies listed in the SEC’s complaint should be classified as commodities rather than securities. This classification would exempt them from certain regulatory requirements under the SEC’s jurisdiction. Kraken’s defense hinges on the application of the Howey test, which is used to determine whether certain transactions qualify as investment contracts and therefore constitute securities under U.S. law.

Kraken’s latest filing criticizes the SEC’s broad interpretation of its powers, suggesting that expanding the SEC’s jurisdiction in such a way would “gut Howey by significantly expanding the SEC’s jurisdiction to a host of investment activities that were never delegated to the agency.” Kraken argues that any major changes to the U.S.’s financial regulatory structure should be determined by Congress rather than through court decisions.