Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

newsletter.mollywhite.net

Post reply on HN
Print view View original

71–80 of 557 posts

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

#71

Post by ceejayoz »

everfree wrote: post #69
ceejayoz wrote: post #55

Earlier quoted context omitted.

> 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.)

Coinbase is being sued specifically for Earn. How is it not relevant?

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

#72

Post by cmcaleer »

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.

Here is only one such brutal squeeze: registered security brokers must maintain control of all securities [0]. In practice, this means brokers use custodians[1]. Regulators have been working on making holding crypto harder for custodians [2].

[0]: Securities Exchange Act of 1934, Rule 15c3-3

[1]: https://www.sec.gov/news/public-statement/joint-staff-statem...

[2]: https://www.risk.net/investing/7956492/crypto-custody-faces-...

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

#73

Post by ceejayoz »

mthoms wrote: post #68
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…

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=VhA1dZXe…

Coinbase: “We list dozens of coins, including all the big ones. Maybe they’re all in the tiny minority?”

SEC: “No. Stop playing games. You have to register.”

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

#74

Post by anonymouskimmer »

avsteele wrote: post #40

All other arguments aside: the bottom line is that everyone who invested in crypto did it with the knowledge that Coinbase wasn't a securities broker. The SEC just can't imagine a world where customers are fine without their 'protection'. We don't want your help, we don't need your help. GO away.

> The SEC just can't imagine a world where customers are fine without their 'protection'. We don't want your help, we don't need your help. GO away.

This is all well and good until you mess up the economic system for the rest of us. The Great Depression didn't just hit those with stock certificates. And the Great Recession didn't just hit those with mortgage-backed securities.

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

#75

Post by loveparade »

I don't understand how anyone can take this obviously super-biased articles from someone who has made it their career to hate anything crypto-related seriously. It's full of personal jabs and bias like "my guess is that it’s going to involve a lot of PR stunts and headline-grabbing"

It's obvious that there is zero incentive here to do any real reporting or research. It's just clickbaity headlines and statements appealing to people who hate crypto. Of course it's hidden under a veil of neutrality with a biased selection of links that nobody actually clicks on scattered throughout the article.

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

#76

Post by anonymouskimmer »

paulpauper wrote: post #20

Congress has been far from united on the crypto issue thus far, particularly in the wake of the FTX collapse, and the various drafts of legislation that have been proposed have largely been dead on arrival. But Coinbase has put a significant amount of time, effort, and money into lobbying: in 2022, they spent $3.4 million lobbying the crypto industry (on top of Binance’s $1.1 million spent lobbying in the US, all com…

Lobbying isn't bribes to congresspeople. It's hiring some specialists who are known to congresspeople in order to sell those congresspeople a line. After a point more money doesn't buy you that much more benefit.

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

#77

Post by everfree »

wmf wrote: post #60
everfree wrote: post #26

Earlier quoted context omitted.

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.

Bitcoin has a centralized development team who is focused on increasing the coin's value. By writing more efficient clients, coordinating soft forks, and curating standards, the Bitcoin Core dev team is directly supporting the asset. So why did the SEC declare it not to be a security? We could speculate as much as we want, but at the end of the day these are the hard-hitting questions that the SEC has been avoiding, and their avoidance of these questions has been bad for everyone involved.

Right now everyone is guessing why exactly the SEC considers most of the top 10 coins to be securities, except Bitcoin, with Ethereum apparently in limbo. Most importantly, it leaves companies guessing whether they'll have to wage a bankrupting 50-million-dollar lawsuit against the SEC to try to defend themselves if they launch a coin they believe not to be a security, but that the SEC later classifies as one through their opaque reasoning process.

I mentioned it in a comment above, but the SEC needs to release something like a 10-step process for determining whether a certain crypto is a security. Something that's clear enough that a company's lawyers can apply it to their products to determine without a doubt whether they are in compliance with the law.

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

#78

Post by everfree »

ceejayoz wrote: post #67
everfree wrote: post #62

Earlier quoted context omitted.

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.

My understanding is that the corporate framework that securities licenses require is literally impossible to satisfy when trading current public blockchain assets. As in, to trade crypto as a security on your exchange, you would need to walk up to every dev team of every crypto you wanted to trade and kindly ask them to KYC/AML every single user of the blockchain so that you could be in compliance.

In practice this just means it's de-facto impossible for any centralized exchange to carry crypto securities.

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

#79

Post by everfree »

ceejayoz wrote: post #71
everfree wrote: post #69

Earlier quoted context omitted.

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

Coinbase is being sued specifically for Earn . How is it not relevant?

Sorry, I confused Coinbase Earn (staking services) with Coinbase Lend, which was a previous loan product of theirs that was targeted and shut down by the SEC in 2021.

Still, Earn may well be a security, but that's a product that will fit very cleanly into current securities law when it reaches the court, and it concerns a company's product rather than an entire new asset class, so it's not so egregious that the SEC doesn't provide clarity on it.

The big problem is with their lack of clarity on the cryptocurrencies themselves.

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

#80

Post by ceejayoz »

everfree wrote: post #78
ceejayoz wrote: post #67

Earlier quoted context omitted.

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.

My understanding is that the corporate framework that securities licenses require is literally impossible to satisfy when trading current public blockchain assets. As in, to trade crypto as a security on your exchange, you would need to walk up to every dev team of every crypto you wanted to trade and kindly ask them to KYC/AML every single user of the blockchain so that you could be in compliance. In practice this j…

That’s Coinbase’s problem.

Similarly, they won’t help you figure out how to insider trade, no matter how nicely you ask.

“Please make our illegal business legal, the rules don’t allow it” gets a predictable reception.

Post reply on HN