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The SEC has told us it wants to sue us over Lend. We don’t know why

blog.coinbase.com

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Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#51

Post by ivalm »

McAtNite wrote: post #48
ivalm wrote: post #28

Earlier quoted context omitted.

They are operating by transparent rules. Howey test has been on the books since 1946: 1. The existence of an investment contract 2. The formation of a common enterprise 3. A promise of profits by the issuer 4. The use of a third party to promote the offering

I think part of the confusion is, if the product is what they claim it is, it already exists with a multitude of other companies. There’s a US company named Celsius in NY that already offers fixed interest for crypto and loans. Ethereum has a dozen different defi options for lending out crypto. This isn’t some new thing that the SEC has never seen before. It seems weird that if the SEC intends to use that ruling that…

Existence of prior rule breakers doesn't mean that it is not forbidden. In reality SEC does try to pursue lots of crypto businesses and in general goes in the order of size rather than chronology.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#52

Post by askmike »

ivalm wrote: post #37
bpodgursky wrote: post #30

Earlier quoted context omitted.

At minimum, if that was true, Coinbase's competitors would not be freely operating the same service without SEC action.

Coinbase competitors are largely operating in legally gray/black zone. Regulators do try to crack down and will likely to continue these efforts.

And in crypto SEC is usually late to enforce. They only last week cracked down on the Bitconnect ponzi, which collapsed in January 2018 (that's an eternity in crypto)

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#53

Post by McAtNite »

ivalm wrote: post #51
McAtNite wrote: post #48

Earlier quoted context omitted.

I think part of the confusion is, if the product is what they claim it is, it already exists with a multitude of other companies. There’s a US company named Celsius in NY that already offers fixed interest for crypto and loans. Ethereum has a dozen different defi options for lending out crypto. This isn’t some new thing that the SEC has never seen before. It seems weird that if the SEC intends to use that ruling that…

Existence of prior rule breakers doesn't mean that it is not forbidden. In reality SEC does try to pursue lots of crypto businesses and in general goes in the order of size rather than chronology.

That’s a possibility as well, and at the end of the day we only have Coinbase’s perspective on the interactions.

To be honest, as someone who follows crypto, I get the impression that the SEC simply doesn’t know what they want to do with crypto yet.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#54

Post by seehafer »

ac29 wrote: post #39
seehafer wrote: post #32

Earlier quoted context omitted.

Are the other companies already providing lending services public? Public companies get orders of magnitude more scrutiny from SEC relative to private companies.

Other US companies providing similar products include Gemini, Kraken, and BlockFi. I dont think any of them are public. BlockFi's lending product has already been banned by several state regulatory agencies, but if they've been sued or warned by the SEC, I dont think thats been made public.

Right. My point is that many federal agencies have mandates that dictate where they focus. For instance the SEC may come after any privately-owned startup, after the fact, if there’s overwhelming evidence of fraud (see: Theranos).

But when you go public you enter into a whole new level of scrutiny, because regulating public markets is why the SEC even exists.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#55

Post by pavlov »

bpodgursky wrote: post #40
ac29 wrote: post #34

Earlier quoted context omitted.

Something tells me courts wont be too sympathetic to the "but other people are criming as well" argument.

That's not true at all? There is a ton of precedent for courts striking down selectively-enforced laws. Equality before the law is extremely important to how courts rule in the US.

The SEC intentionally does “regulation by selective enforcement”, as shown by their actions following the 2017 ICO bubble:

https://corpgov.law.harvard.edu/2019/11/21/regulation-by-sel...

It shouldn’t be a surprise to anyone in this space.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#57

Post by hackingforfun »

ac29 wrote: post #39
seehafer wrote: post #32

Earlier quoted context omitted.

Are the other companies already providing lending services public? Public companies get orders of magnitude more scrutiny from SEC relative to private companies.

Other US companies providing similar products include Gemini, Kraken, and BlockFi. I dont think any of them are public. BlockFi's lending product has already been banned by several state regulatory agencies, but if they've been sued or warned by the SEC, I dont think thats been made public.

There is a difference between lending assets and staking assets. Of the ones you mentioned, I've only used Gemini and Kraken. Gemini Earn offers similar lending products to Coinbase Lend (a % return is given when certain assets are lent) [1][2].

Kraken offers staking services [3], which are technically not "lending", but are staking rewards gained from staking assets in proof of stake protocols such as Ethereum 2.0, Polkadot, Kusama, Cosmos, Cardano, Solana, etc. These staking rewards could also be earned directly from the protocols, if users wanted to stake via their own hardware, but Kraken takes a fee in this case due to reducing the hassle for users to need to do this themselves (and some proof of stake protocols have slashing which means users would lose the coins they have staked if their hardware goes down or their connection is interrupted), so there is some reduction of risk as well for the user in that case. However, this also means the staking power is more centralized at the exchange level, which is a downside, but that is a different part of the discussion.

FWIW, Coinbase has staking services as well [4], but Coinbase Lend, which hadn't even launched yet, was going to be something different. It looks like Coinbase was going to achieve that 4% interest on USDC in Lend via Compound [5] (which is a DeFi protocol they actually helped launch a few years ago [6]). Assets can already be lent directly to Compound via users, without Coinbase as an intermediary.

Anyway, my point in bringing this up is there is difference between lending assets and staking assets, and actually both lending and staking can be done directly by users, without any of these exchanges as intermediaries.

[1] https://www.gemini.com/earn

[2] https://www.coinbase.com/lend

[3] https://www.kraken.com/en-us/features/staking-coins

[4] https://www.coinbase.com/staking

[5] https://blockworks.co/coinbase-compound-labs-launch-usdc-hig...

[6] https://techcrunch.com/2018/05/16/cryptocurrency-compound-in...

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#59

Post by anigbrowl »

busymom0 wrote: post #9

Hmmm, the link just redirects to medium's home page for some reason.

I can't believe anyone hosts their stuff on Medium. It's an increasingly trash platform; you go to some website.com and then get n announcement that you've viewed too many medium stories this month. That didn't happen with this specific story, but the fact that Coindesk a relying on someone else to host their blog creates a poor impression - why would I trust their security or anything else, before I get near their financial products? Strange decision.

Incidentally, I do think the SEC owes people clarity in matters of legal reasoning, but am not sure Coinbase is being fully forthright with readers here based on various other observations in the thread.

Re: The SEC has told us it wants to sue us over Lend. We don’t know why

#60

Post by darig »

uncomputation wrote: post #23

I actually initially wanted to be on Coinbase’s side here, but after a quick google of “Howey test” and reading even just the introduction on Wikipedia, I cannot imagine how they don’t see the SEC’s reasoning about Lend wrt Howey. If you want to argue that Howey does not apply or fight the decision/lawsuit, then fine. But feigning ignorance of something a (non-legal expert) programmer can connect the dots of instantl…

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