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“But the SEC let us go public” and other flawed arguments in Coinbase's defense

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Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#51

Post by civilitty »

boc wrote: post #35
everfree wrote: post #13

I stopped reading the article when it started comparing cryptocurrency exchanges to the business of selling heroin. No matter your opinion on the issue, that's just alarmist nonsense. I agree that it's reasonable to apply existing securities laws to cryptocurrency, and I agree that "but they let us go public" is a bad argument, but Gensler's SEC has also been intentionally obtuse about how those securities laws shoul…

Yeah agreed; at least heroin sales don’t directly fund nuclear weapons programs in North Korea, enable gigantic ransomware attacks on innocent civilians, or generate massive carbon emissions+e-waste in order to continue existing.

> at least heroin sales don’t directly fund nuclear weapons programs in North Korea

Uhhh… about that… https://en.m.wikipedia.org/wiki/Illicit_activities_of_North_...

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#52

Post by georgeecollins »

crazygringo wrote: post #12

> Coinbase, as with most crypto platforms, has decided it wants to simultaneously operate as an exchange, broker-dealer, and clearing agency. These three functions — bringing together securities orders for buyers and sellers, trading securities on behalf of others, and intermediating trades — are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them. Coinbase…

Rather that claim knowledge, I would suggest you read Matt Levine's newsletter on this. He is a former securities lawyer who is extremely knowledgeable. -- I mean very extremely, he wrote an entire Business Week magazine about it.

Some key takeaways: For historical reasons as well as practical ones (who would you sue) BTC and ETH are probably considered commodities. Most of the rest are very similar to ICOs which were securities and rife with fraud. But you can't really go after the issuers very easily for a lot of reasons. But there are two parts to the SECs laws. One part is the issuance of secuirties, the second part is the brokers (or in this case exchanges). FTX, Binance, Coinbase, do things that would be illegal to do with securities (conflicts, lack of disclosure etc.). The SEC is just pointing out that most coins are securities and what they are doing is illegal under current law.

https://news.bloomberglaw.com/mergers-and-acquisitions/matt-...

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#53

Post by [deleted] »

yieldcrv wrote: post #46
crazygringo wrote: post #12

> Coinbase, as with most crypto platforms, has decided it wants to simultaneously operate as an exchange, broker-dealer, and clearing agency. These three functions — bringing together securities orders for buyers and sellers, trading securities on behalf of others, and intermediating trades — are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them. Coinbase…

> Why didn't Coinbase just register everything non-Bitcoin? The organizations that created the assets have to register them as securities, Coinbase didn't create the assets. A broker-dealer (a securities exchange) can only trade registered securities, broker-dealers have to register to exist. So even if Coinbase went through the process of registering as a broker dealer (to be a securities exchange), they could not t…

[deleted]

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#54

Post by pseudo0 »

nickff wrote: post #32
RestlessMind wrote: post #25

I like reasoned critiques of crypto. Heck, I think many crypto actors are scammers and should be punished. However, a lot of crypto is legit and this piece reeks of bias. Some examples: - comparison with heroin - wtf? To extend that ridiculous analogy, it would be akin to FDA approving heroin based products (similar to how SEC approved Bitcoin ETF in 2021) and then going after heroin. What message is SEC trying to de…

I suspect that Gensler was obfuscating intentionally when asked about cryptocurrency. Modern regulators seem to prefer retrospective punishment over prospective advice and regulation.

It seems like a massive regulatory failure to let Coinbase IPO if there are the sort of glaring issues they claim. Coinbase has a market cap of around $10 billion, and is owned by retail investors as part of standard index funds. If it goes to zero tomorrow because of the SEC, that is billions of dollars in losses that could have been avoided by more responsible regulatory behavior. Meanwhile insiders will have cashed in through salary, stock sales, etc.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#55

Post by ceejayoz »

everfree wrote: post #49
ceejayoz wrote: post #30

Earlier quoted context omitted.

> Gensler's SEC has also been intentionally obtuse about how those securities laws should apply to cryptocurrency. No. Coinbase’s complaint is that the SEC has been clear, but that they don’t like the clear answer. https://assets.ctfassets.net/c5bd0wqjc7v0/5NRidtW8lvwVEfSHpn... > Rather than initiate new rulemaking, Chair Gensler has repeatedly stated through speeches and testimony that the vast majority of digital t…

"Vast majority" isn't clarity. "Here is how we interpret the Howey test in relation to cryptocurrencies, and here is a ten step process for how we determine whether each particular cryptocurrency is a security" is clarity. Can you imagine if, back when the SEC first formed in 1934, they put out a press release saying "the vast majority of stocks are securities and need to come register, but not The Bank Of New York,…

> Can you imagine if, back when the SEC first formed in 1934, they put out a press release saying "the vast majority of stocks are securities and need to come register, but not The Bank Of New York, their stock is not a security".

This is basically what happened. Mortgage loans and certificates of deposit, for example, aren’t securities by judicial clarification, not definition in the law. (See: Marine Bank v. Weaver)

The Howey test isn’t that complicated, and Coinbase Earn ticked all four boxes.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#56

Post by throwaway22032 »

gurchik wrote: post #3

Sorry for the stupid questions, I really know very little about crypto. With that said, > Gensler firmly maintains that the vast majority of crypto assets are securities, with the exception of Bitcoin Why? From an article on Reuters[1], > Bitcoin is not considered a security because its anonymous and open-source origins mean investor profits are not dependent on the efforts of developers or managers, said Carol Gofor…

For those who saw Bitcoin and Ethereum from day 1 or close to it it makes more sense.

Bitcoin started out as a toy with no value, even perhaps a proof of concept, which eventually gained value and began to be traded. Even years after its' creation people gave it away for free, there were faucets. The creator disappeared and the protocol intentionally has been designed in such a way that making changes is difficult and there's a lot of veto power by users.

Ethereum has nothing like the same origin story. There was an expectation of value from the beginning, Vitalik is still around, and there are often huge centralized changes like PoS, the DAO rollback, etc.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#57

Post by yokem55 »

babyshake wrote: post #50
everfree wrote: post #24

Earlier quoted context omitted.

The Howey test is applied to the current status of an asset. It doesn't take an asset's origins into consideration. If you believe that Ethereum currently represents "an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others", then it is a security. If not, then not.

Is there a statute of limitations or a similar concept? For example, hypothetically would it be possible 30 years after the Ethereum ICO for the SEC to declare that ETH has been a security the entire time? As of now, it's been almost 10 years since the Ethereum ICO.

5 years unless there is evidence of active fraud.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#58

Post by toast0 »

pylua wrote: post #15
burnte wrote: post #11

Earlier quoted context omitted.

> It is scary to me how much legislating is done by these government bodies inside the (executive ?) branch. Congress explicitly delegated these authorities to these agencies as part of the administrative state overhaul in the beginning of the 20th century. The reason was to help become more responsive, and less beholden to daily politics by putting neutral experts in charge, and by and large it works. Safety and sec…

That is good history to know , thank you. It does feel like to me in this case, this is a failure due the government being slow to respond and unable to produce an interpretation of the law consistent with a completely analytical meaning letter of the law, in my opinion.

Delegate to agencies is a way for government to be less slow. In the case where congress is faster, they can pass new laws with more specifics and less left to the executive branch, but that's often not very fast.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#59

Post by GartzenDeHaes »

pylua wrote: post #33
GartzenDeHaes wrote: post #27

Earlier quoted context omitted.

It's called regulating. For areas that require complex administration, Congress passes laws that express its intent and directs the administrating agency to make rules that implement their intent. Congress can amend these laws to expand, contract, or direct the regulations made by these agencies.

Vague laws that take years of law to interpret then passed to an agency that does not have the same context of laws passed 100 years ago. If the system worked and the sec felt this way Coinbase should have never existed . This is proof that it is not working.

There were plenty of scams and scammers 100 years ago. Doing it with a computer doesn't change anything.

Re: “But the SEC let us go public” and other flawed arguments in Coinbase's defense

#60

Post by wmf »

everfree wrote: post #26
gurchik wrote: post #3

Sorry for the stupid questions, I really know very little about crypto. With that said, > Gensler firmly maintains that the vast majority of crypto assets are securities, with the exception of Bitcoin Why? From an article on Reuters[1], > Bitcoin is not considered a security because its anonymous and open-source origins mean investor profits are not dependent on the efforts of developers or managers, said Carol Gofor…

That's a good point. It sure would be helpful if Gary Gensler elaborated on his reasoning, rather than handing down his opinions with no explanation.

I think he did explain it: Most coins have a centralized development team who are focused on increasing the coin's value. It's a classic investment no different than a startup.
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