Kraken agreed to end U.S. staking in $30 million SEC settlement

On February 9, 2023, Payward Ventures, Inc. and Payward Trading Ltd., the Kraken entities named by the U.S. Securities and Exchange Commission, agreed to end their crypto-asset staking-as-a-service program for U.S. customers and pay $30 million in disgorgement, prejudgment interest and civil penalties. The SEC filed its complaint in the Northern District of California on February 9, alleging that the program was an unregistered securities offering.

The settlement was immediately consequential for customers. Kraken said it would automatically unstake U.S. clients’ non-ether assets, return them to spot wallets and prorate final rewards through February 9. Staked ether was the exception because Ethereum withdrawals were not yet enabled; Kraken said those balances would continue earning rewards until they could be unstaked after the network’s Shanghai upgrade. U.S. clients could not add new staked assets, while service for non-U.S. clients continued through a separate subsidiary.

What the SEC alleged

Kraken had offered the program since December 2019. Customers transferred eligible tokens to Kraken, which pooled assets, decided how much to stake and paid customers returns that Kraken determined rather than simply passing through whatever a protocol produced. The SEC’s February 9 complaint described benefits including no staking minimums, regular payouts and, for many assets, instant unstaking that a person validating directly might not receive.

The scale figures in the complaint were allegations drawn from the SEC’s investigation, not an independently audited market dataset. It said the program had more than 135,000 unique U.S.-based usernames as of June 2022. It also said U.S. investors had placed more than $2.7 billion worth of crypto assets into the program from its December 2019 launch through mid-2022. The SEC release said Kraken advertised annual returns as high as 21 percent.

Those dates and windows matter. The figures do not describe balances outstanding on February 9, 2023, do not measure the entire staking market and should not be used to infer a February 9 token-price move.

Why the action mattered

The case drew a legal line around one centralized intermediary’s packaged service, not around proof-of-stake consensus itself. The SEC’s theory was that Kraken offered an investment contract built from custody, pooling, operational work, liquidity features and Kraken-set payouts, and therefore had to register the offer and sale under Section 5 of the Securities Act of 1933.

That distinction mattered institutionally because staking also names the protocol activity by which validators commit native assets to help secure proof-of-stake networks. The complaint did not charge individual validators, amend any blockchain protocol or establish through a litigated judgment that every staking arrangement was a security. It resolved charges against two Kraken entities on agreed terms.

The action nevertheless put other U.S. intermediaries on notice that the SEC viewed at least some custodial staking products as securities offerings. It also removed a live retail product instead of producing a generally applicable rule through notice-and-comment rulemaking.

A disputed enforcement path

Kraken consented without admitting or denying the complaint’s allegations. As of February 9, the proposed final judgment still required court approval, so the record supports an agreement and immediate product changes, not yet an entered final judgment.

SEC Commissioner Hester Peirce dissented on February 9. She agreed that more transparency around staking programs could be useful but argued that the agency had not supplied a workable registration path and that staking services varied too much for a single enforcement action to provide broad guidance. Her statement documents disagreement inside the Commission; it did not alter the settlement or convert the case into a binding rule for the wider market.

The verified development is therefore narrower than either slogan that surrounded it: Kraken’s U.S. on-chain staking service ended under a $30 million SEC settlement, while the legal treatment of other staking models remained dependent on their specific structure and facts.