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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

#61

Post by yokem55 »

throwaway22032 wrote: post #38

It's not clear to me why almost any of these coins even need to be listed by regulated exchanges. Couldn't they just stick with BTCUSD and a few others then let decentralized exchanges deal with crypto-crypto trade? Would they really lose that much business? I always assumed (though I've never actually checked, it doesn't interest me that much) that almost all of the shitcoins were like, the long tail few % of revenu…

You could probably address 99% of the market only selling BTC, a stable coin, and small amounts of Eth needed for gas and then any other trading could happen on dex's. And you could make that a modestly profitable business if you run a tight ship. But you won't build an empire doing that.

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

#62

Post by everfree »

ceejayoz wrote: post #44
nickff wrote: post #37

Earlier quoted context omitted.

Well, the SEC told everyone to register, but didn't actually tell them how they could. From what has been made public, it seems like the SEC strung Coinbase along for about two years, then said that their application was inadequate (without stating any criteria).

I promise you, a procedure to become a registered securities exchange exists (demonstrably, as registered securities exchanges exist widely) and Coinbase has enough people and money to find it. (I’m not the expert to hire for this, but https://www.investopedia.com/terms/s/sec-form-8-a.asp looks promising.)

The question is whether a procedure to become a registered exchange of crypto securities exists, and that promise seems to be a lot more dubious.

Coinbase doesn't care if it can offer its customers shares of AAPL or TSLA. They care whether they can start brokering the types of securities that are found on public ledgers.

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

#63

Post by anonymouskimmer »

Off-topic but addressing the article, text which can be highlighted with a mouse should also be obviously a link (underlined, or in an aqua font in this case) if it functions as a hyperlink.

> On June 5, the SEC filed thirteen charges against crypto giant Binance, companies under its control, and its CEO Changpeng “CZ” Zhao. The charges against the companies involve unregistered offers of securities and investment schemes; failing to register with the SEC as an exchange, broker, broker-dealer, or clearing agency; and making materially false and misleading statements to investors. Two of the charges are against CZ specifically, as the control person over Binance and Binance.US.

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

#64

Post by Hermitian909 »

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.

> unable to produce an interpretation of the law consistent with a completely analytical meaning letter of the law

The legal profession writ large (including legislators) consider this a feature, not a bug. The reason this is the legal profession's opinion essentially three points:

1. You can't write "bug free" laws and regulations

2. Fixing mistakes in laws and regulations is slow

3. The amount of damage someone can do with unintended legal cover can be catastrophic (imagine if I found a legal loophole to take possession of your home!)

So this has been chosen as the "least bad" solution. My personal opinion is that the SEC is acting within the spirit of the law which is what we should expect and if congress wanted to change things they should pass a new law.

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

#65

Post by habitue »

triceratops wrote: post #19
habitue wrote: post #17

Earlier quoted context omitted.

The issue is that if most coins are securities, then that means in order to operate, Coinbase has to become a registered securities exchange in order for it to do what it does. The regulations for securities exchanges are onerous, but also many of them aren't possible to comply with for crypto because of how it works. So the SEC is saying "You are an unregistered securities exchange" And coinbase is saying "Please gi…

> aren't possible to comply with for crypto because of how it works Why is this? Thanks for the other detail you provided.

Yeah, I'm not an expert here, but I believe it might be the reporting rules. This is the law that governs it, though it delegates a lot to the SEC and the particular requirements could be in the rules that the SEC puts out itself

https://www.sec.gov/about/about-securities-laws#secexact1934

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

#66

Post by jcranmer »

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…

Then you stopped reading right before you got to the part of the article that really highlights the central lie of Coinbase:

> 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 would need to fundamentally change its business model in order to separate these functions, and thus far seems unwilling to do so.

Coinbase's real complaint is that it wants regulation to change so that Coinbase is in compliance, rather than Coinbase changing so that it is in compliance. The lack of "clarity" isn't that it's unclear whether or not Coinbase is compliant, but that it's unclear how Coinbase can become compliant without changing foundational aspects of how it's structured. To honestly argue why regulation should change, you would need to explain why a currently-noncompliant policy should be compliant. In other words, why does an apparent conflict of interest in "traditional" finance not actually exist for the crypto industry (or at least why we should be okay with it existing).

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

#67

Post by ceejayoz »

everfree wrote: post #62
ceejayoz wrote: post #44

Earlier quoted context omitted.

I promise you, a procedure to become a registered securities exchange exists (demonstrably, as registered securities exchanges exist widely) and Coinbase has enough people and money to find it. (I’m not the expert to hire for this, but https://www.investopedia.com/terms/s/sec-form-8-a.asp looks promising.)

The question is whether a procedure to become a registered exchange of crypto securities exists, and that promise seems to be a lot more dubious. Coinbase doesn't care if it can offer its customers shares of AAPL or TSLA. They care whether they can start brokering the types of securities that are found on public ledgers.

The process is the same; securities are securities, crypto or otherwise. They don’t like that process, so they’re asking for a special one just for them. The SEC just said no.

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

#68

Post by mthoms »

ceejayoz wrote: post #30
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…

> 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…

SEC: "The vast majority of digital tokens are securities!"

Anyone: "Okay then, is [insert ANY crypto here other than BTC] a security?"

SEC: "We decline to answer, or give a hint, but the vast majority of digital tokens are securities!"

I really don't care what happens, or how it got to this point, but this state of affairs is absolutely and unequivocally ridiculous and absurd.

https://www.youtube.com/watch?v=VhA1dZXeao0

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

#69

Post by everfree »

ceejayoz wrote: post #55
everfree wrote: post #49

Earlier quoted context omitted.

"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…

(Removed, I had confused Coinbase Earn with Coinbase Lend.)

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

#70

Post by pylua »

Hermitian909 wrote: post #64
pylua wrote: post #15

Earlier quoted context omitted.

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.

> unable to produce an interpretation of the law consistent with a completely analytical meaning letter of the law The legal profession writ large (including legislators) consider this a feature, not a bug. The reason this is the legal profession's opinion essentially three points: 1. You can't write "bug free" laws and regulations 2. Fixing mistakes in laws and regulations is slow 3. The amount of damage someone can…

Is the spirit of the law always aligned with the analytical meaning ? Do you think it is here ?

I understand the spirit of the law, but I do not feel like that can override an analytical interpretation.

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