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US SEC sues Coinbase, one day after suing Binance

reuters.com

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Re: US SEC sues Coinbase, one day after suing Binance

#391

Post by esonoi »

paulddraper wrote: post #215
butlerm wrote: post #48

If you look up the definitions of "security", "financial instrument", "commodity", and "currency", it is pretty clear that a plain vanilla crypto-currency like Bitcoin is no ordinary security nor a financial instrument. It is not a claim on something else, even less so than a traditional bank note. It is more like a commodity. Since when is "aluminum" a security? A crypto currency business however may be engaged in t…

> Crypto currency is a commodity Could you explain this to me? Are there any other examples of non-physical commodities?

Crypto is more a commodity than currencies, because unlike currency, crypto is subject to the same speculative supply and demand forces as conventional commodities.

Examples of non-physical commodities: music and apps.

Example of something that doesn’t exist at all: Carbon Offsets which are credits for negative production of GHG. Credits can be purchased on the market by companies to offset their own emissions for regulatory or other reasons.

Re: US SEC sues Coinbase, one day after suing Binance

#392

Post by chrisco255 »

jcranmer wrote: post #120
butlerm wrote: post #48

If you look up the definitions of "security", "financial instrument", "commodity", and "currency", it is pretty clear that a plain vanilla crypto-currency like Bitcoin is no ordinary security nor a financial instrument. It is not a claim on something else, even less so than a traditional bank note. It is more like a commodity. Since when is "aluminum" a security? A crypto currency business however may be engaged in t…

SEC isn't suing Coinbase over Bitcoin. They're suing under two things: 1. Unregistered exchange for several tokens the SEC believes are securities: > This includes, but is not limited to, the units of each of the crypto asset securities further described below—with trading symbols SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO—(the “Crypto Asset Securities”). 2. Unregistered sale of securi…

The SEC provides NO guidance on what is or isn't a security. We have the Howey test to go off of. There is no way to register, no legal way to achieve anything that should be legal in a democratic capitalist society. You just have the threat of an SEC lawsuit on nebulous terms. It's completely fucked up.

Another incredibly important point is the $1 million net worth and $200k income based test for becoming an "accredited investor" is racist, classist, sexist, and evil. People should have the right to invest their money how they see fit. If you want people to sign some kind of disclosure, or some kind of term sheet that makes it very clear to a retail investor what they're getting into, fine. But the law as it exists is outrageously undemocratic.

In regards to the SEC, a system that was built for 1933 is not even relevant in a world where you can spin up a million new tokens in 10 seconds and deploy to 24/7 worldwide markets in 5 minutes from anywhere.

Keeping the 1933 SEC Act in tact in 2023 is like trying to keep Prohibition going even though it's raining whiskey from the sky.

Re: US SEC sues Coinbase, one day after suing Binance

#393

Post by dcow »

JumpinJack_Cash wrote: post #314
dcow wrote: post #294

Earlier quoted context omitted.

You consume it by trading it or, for a direct analog to your example, by showing off your wallet balance. Your Fortnite skin is no more consumable than a BTC. It just has a different value and use.

> > You consume it by trading Hence the SEC is right to clampdown on crypto for violations of securities law, in order to prevent bubbles that emerge when the only use for something is trading it for something else. We already have that, people who want to participate in that game know where to go, the stock market. > > for a direct analog to your example, by showing off your wallet balance That's the most circular t…

1st, you need to read up on how commodities and securities are regulated. 2nd, showing off your wallet balance is the same as showing off your NFT, and NFTs, digital skins, etc. are all obviously consumables.

Re: US SEC sues Coinbase, one day after suing Binance

#394

Post by lmm »

davorak wrote: post #386
lmm wrote: post #381

Earlier quoted context omitted.

> In the linked video the questioner is asking about about potential future cases/decisions and one reason not to comment on specific cases/decisions, as is what happened in the video[0], is that an agency does not want to telegraph their moves ahead of time, since that would give potential criminals a heads up that they are on a deadline and need to focus on cover up their crimes. That's putting the cart before the…

> That's putting the cart before the horse. Catching criminals is supposed to be a means to an end; compliance with the law is supposed to be the end, and getting people to voluntarily stop doing crimes is a win. "We can't tell people what the law is because then they might stop breaking it" is absurd policy. The questioner was not asking about what the law was. They were asking a future potential case or enforcement…

> So far it seems like the SEC is ruling and enforcing the above cases, clear cut cases. If you have a part of the current enforcement that is on something that is ambiguous rather than pretty clear cut then I would be interested what makes it ambiguous and potentially reading more into it.

This article is in significant part about the SEC going after Coinbase, which made a significant effort to stay on the right side of the rules and only allow crypto tokens that operated in ways that are closely analogous to e.g. frequent flier miles. They wrote a great many blog posts giving their perspective and calling for regulatory clarity.

Re: US SEC sues Coinbase, one day after suing Binance

#395

Post by jpadkins »

mulmen wrote: post #163
dcow wrote: post #142

Earlier quoted context omitted.

Respectfully, I think your understanding is behind the curve. Even the SEC says BTC itself is a commodity. You consume a BTC by using/trading it. You consume gold or maple syrup by using/trading it. Just because the uses are a little different doesn't mean it's incompatible with the definition of commodity. If I started using gold in a nonsensical way you wouldn't start saying "oh now it's a security", would you?

I think the hangup with BTC as a commodity is that I can make a loaf of bread with wheat and eat it and the amount of wheat in the world is depleted as a result. Similarly I can use gold to build a cell phone or some jewelry and while it is possible to recover it isn't as simple as trading BTC. How is a BTC consumed ?

shaping gold into jewelry doesn't consume it. One of the reasons its been currency for 5k years is because you can melt it down and re-use it as coins or other jewelry etc. Gold isn't consumed, for the most part.

Re: US SEC sues Coinbase, one day after suing Binance

#396

Post by dcow »

dgfitz wrote: post #322
dcow wrote: post #198

Earlier quoted context omitted.

The sale is taxable obviously and of course. The same is true for gold and crypto. But your relatives didn't get a tax bill for 25% of the value of the oil the moment it was prospected, did they? Their land value went up but they weren’t taxed on the value increase either (that happens when the land is sold).

Maybe I'm mistaken, but my property taxes increase as the value of the property increases. The sales tax is a tax on the sale itself when sold at price $X.

Sorry I meant you're not taxed on the value of the oil at the moment it increases the property value. You are correct that eventually the property value might increase in the eyes of the county assessor or via sale of the property and there would be a measurable effect in that regard.

Generally though, you also don't pay property taxes on securities (property tax is a pretty specific tax and a unit of crypto currency doesn't directly translate). I don't have any apropos objection to a property tax on crypto at the moment mostly because that's not the point being discussed. We just don't do it currently. The more appropriate analogy would be like you have barrels out and oil rained from the sky. Now you have some barrels of oil. Your land value doesn't increase, but also you don't get taxed because you collected oil from the sky. You get taxed when you sell the oil. Maybe we do need a tax on the latent potential of your property to generate crypto, or that information should be factored into property value, but again that's not quite what we're discussing.

Re: US SEC sues Coinbase, one day after suing Binance

#397

Post by dragontamer »

andreygrehov wrote: post #379
dragontamer wrote: post #369

Earlier quoted context omitted.

https://www.sec.gov/news/press-release/2023-102 > “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions,” said SEC Chair Gary Gensler. “In other parts of our securities markets, these functions are separate. Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fra…

This is indeed straightforward, but I'm not complaining about it. If all of these requirements had been outlined by the SEC prior to the release of the products, Coinbase would've followed the rules. Now when all of these products are in production, the SEC woke up and like: "heeey, this is a security, you must follow the rules". But there were no rules before. So, shall Coinbase just sit there and wait while the SEC…

> But there were no rules before.

The rules always were there. Just that the SEC was willing to turn a blind eye for years on this issue.

The reason why SEC couldn't ignore this anymore is FTX and SBF. It became clear that cryptocoins are full of fraudsters, and the cryptocoin community has absolutely no way to differentiate from the fraudsters and the legitimate groups.

SEC is simply not in a position to keep turning a blind eye to the cryptocoin world after $10,000,000,000+ was stolen by FTX and SBF.

Re: US SEC sues Coinbase, one day after suing Binance

#398

Post by arcticbull »

lmm wrote: post #394
davorak wrote: post #386

Earlier quoted context omitted.

> That's putting the cart before the horse. Catching criminals is supposed to be a means to an end; compliance with the law is supposed to be the end, and getting people to voluntarily stop doing crimes is a win. "We can't tell people what the law is because then they might stop breaking it" is absurd policy. The questioner was not asking about what the law was. They were asking a future potential case or enforcement…

> So far it seems like the SEC is ruling and enforcing the above cases, clear cut cases. If you have a part of the current enforcement that is on something that is ambiguous rather than pretty clear cut then I would be interested what makes it ambiguous and potentially reading more into it. This article is in significant part about the SEC going after Coinbase, which made a significant effort to stay on the right sid…

> ... which made a significant effort to stay on the right side of the rules and only allow crypto tokens that operated in ways that are closely analogous to e.g. frequent flier miles.

They list ICOs by the fistful.

I sorted alphabetically and only had to go as far as AAVE to find the first obviously-a-security.

They really didn't try and stay on the right side of anything.

Frequent flyer miles are generally considered to fall under the IRS rebate rule. They're considered rebates on purchases. There's no investment of money (they're a rebate on a purchase), there's no common enterprise, there's no expectation of profit derived from the efforts of others (after all airlines generally devalue miles 10-20% year over year). It fails all prongs of the Howey test. Not to mention you don't own your frequent flyer miles, the airline program does.

If you find me a crypto token that operates 'like a frequent flyer mile' I'll happily tell you why you didn't.

> They wrote a great many blog posts giving their perspective and calling for regulatory clarity.

They wrote a lot of blog posts, I'll give you that. They have regulatory clarity, they just don't like it. [1, 2, lots of case law].

[1] https://www.sec.gov/corpfin/framework-investment-contract-an...

[2] https://www.sec.gov/litigation/investreport/34-81207.pdf

Re: US SEC sues Coinbase, one day after suing Binance

#399

Post by dcow »

acjohnson55 wrote: post #357
dcow wrote: post #161

Earlier quoted context omitted.

Meh, I'm no bull but I also don't think "cryptos are mostly useless" is accurate. I believe there are solid use cases for distributed global ledger and digital replacement for cash . Is Bitcoin the winning/best manifestation? I doubt it, we likely need something much more energy efficient (like Chia is trying to be). But I don't think the idea is bust. It just isn't as overwhelmingly applicable as people dreamed it m…

I think that it's still unproven that a distributed global ledger is actually a fundamentally useful thing, outside of speculation. We're 15 years out from the invention of Bitcoin, and if all of blockchain technology snapped out of existence today, there are very few people, other than speculators, who would be impacted. It has comprehensively failed to be adopted into any value chains.

Which is why I'm extremely long on crypto and patient. It takes more than 15 years to fundamentally change the type of things crypto might really be useful for. And as a currency it's already shown traction, just not ubiquitous adoption. The currency use case requires people to stop creating volatility by hyper speculating with it, so I welcomed the crypto winter. I remember when people bought pizza with bitcoin. It wasn't that long ago, as you point out.

Re: US SEC sues Coinbase, one day after suing Binance

#400

Post by MagicMoonlight »

butlerm wrote: post #48

If you look up the definitions of "security", "financial instrument", "commodity", and "currency", it is pretty clear that a plain vanilla crypto-currency like Bitcoin is no ordinary security nor a financial instrument. It is not a claim on something else, even less so than a traditional bank note. It is more like a commodity. Since when is "aluminum" a security? A crypto currency business however may be engaged in t…

Gold is a commodity because it exists in the real world and you make it. Bitcoins aren't a commodity because a random person or entity has created it with the intention of selling it to people as a financial instrument.

You can't issue more gold. And to pre-empt your inevitable reply: the limited supply of bitcoins is not equivalent because Apple also has limited amounts of stock. Doesn't make it a commodity.

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