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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

#81

Post by asperous »

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…

From the wikipedia article it seems the Howey test is the legal test if something is a security:

"an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise."

So presumably the logic is, lend is a security because people are "investing" securities in a contract and expecting returns not through their own efforts.

Sec has additional guidance here: https://www.sec.gov/corpfin/framework-investment-contract-an...

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

#82

Post by habitue »

rjknight wrote: post #76
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…

IANAL, but isn't the point of the Howey test that you're making investments with variable returns, where those returns depend on the efforts of others? If Coinbase is _guaranteeing_ you a 4% return, then there is no variability and the efforts of others are irrelevant. Coinbase could spend all of the money on JPEGs of my cat and they would still have to pay a 4% return to the people they borrowed the money from.

They're guaranteeing it in the same way that when you buy a corporate bond with a 4% yield, you're guaranteed to get the money[0]. A bond is still a security.

[0] Right? Counterparty risk!

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

#83

Post by [deleted] »

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…

[deleted]

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

#84

Post by [deleted] »

dustintrex wrote: post #71
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…

Agreed, and this line pretty much sums it up: > Customers won’t be “investing” in the program, but rather lending the USDC they hold on Coinbase’s platform in connection with their existing relationship. "Give me money for a fixed period of time and I'll pay a guaranteed return on your principal. No, it's not an "investment", you're just lending it in connection with our existing relationship!"

[deleted]

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

#85

Post by yla92 »

elliotec wrote: post #21

I see it here: https://medium.com/@coinbaseblog

Weird. I see the post in the link above as well but when I click the link, it got redirected to medium.com

Edit: if i click "Read more" at the end of the article, I am able to see the whole post.

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

#86

Post by seibelj »

peterbonney wrote: post #69
seibelj wrote: post #31

Earlier quoted context omitted.

Coinbase wants to know the legal rationale as to why it's a security, but SEC is stonewalling them and goading them to get into a legal fight. The opposite of "talk to us, come in" that the SEC claims the crypto industry refuses to do.

It is clear from their own blog post that they have communicated with the SEC in considerable detail, and the SEC has told them in no uncertain terms not to proceed. It sounds to me like the SEC welcomed the discussion, it’s just that Coinbase doesn’t like the answer they got.

The blog post says they did not give a rationale. That is the entire essence of the post. Did you read the post?

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

#88

Post by modeless »

habitue wrote: post #82
rjknight wrote: post #76

Earlier quoted context omitted.

IANAL, but isn't the point of the Howey test that you're making investments with variable returns, where those returns depend on the efforts of others? If Coinbase is _guaranteeing_ you a 4% return, then there is no variability and the efforts of others are irrelevant. Coinbase could spend all of the money on JPEGs of my cat and they would still have to pay a 4% return to the people they borrowed the money from.

They're guaranteeing it in the same way that when you buy a corporate bond with a 4% yield, you're guaranteed to get the money[0]. A bond is still a security. [0] Right? Counterparty risk!

Not all loans are bonds though. How does the law define the difference?

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

#89

Post by gnee »

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…

When you put your money into a saving account, you're lending the bank your money with an 0.04% interest rate. Is that a security?

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

#90

Post by OldHand2018 »

dataflow wrote: post #73
OldHand2018 wrote: post #70

Earlier quoted context omitted.

> 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 instantly just makes me feel like they’re playing a PR game. Grewal was a federal (magistrate) judge in SF before he quit to go work at Facebook. Everyone I kn…

> his entire legal career has been patents I'm confused, is patent experience particularly relevant to this case about securities law?

No, that's why I'd like to assume that when he says he doesn't know why the SEC has a problem with their plan, he is telling the truth and this isn't just a PR attempt.
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