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

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

#121

Post by nnx » Tue, Jun 13, 2023, 4:18 AM UTC

potatototoo99 wrote: post #31

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…

In bitcoin software contributors can propose changes to the protocol and software, but they have no absolute power since they can just be rejected by the miners, who are not paid directly from bitcoin raising in price, but from fees from the operation of the network itself. So there is no organization or entity promising returns for owning bitcoin. In Ethereum, a centralized group of people put together a public sale…

"In Ethereum, a centralized group of people put together a public sale of the token, promising great returns in exchange due to their visionary ideas. This is all perfectly fine, except they didn't register their sale as a security"

If I write a book with visionary ideas that promises to change your life (great returns) and continue to work on revisions as I come up with new ideas - should I register it as a security before I can sell my book?

The whole concept of securities laws makes little sense if you try to expand its reach beyond narrow traditional finance use cases... if even those cases make sense in the first place.

Might be better off repealing all this complexity/bureaucracy and better enforce existing generic laws about theft/fraud...

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

#122

Post by vba616 » Tue, Jun 13, 2023, 4:19 AM UTC

cypress66 wrote: post #103

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…

A congressman asked gensler face to face if ethereum is a security and gensler declined to answer. So no, the SEC has not been clear.

It suggests bad faith to ask why the SEC didn't crack down earlier. Sure, it was politics, but it seems entirely understandable.

We all know that before the crypto bust, a lot of people would've been starting a witch hunt if the SEC had tried to enforce the law. Congress, for starters.

Gensler is being opportunistic now because that's the reality they have to work with.

The wealthy and powerful in this country take it on themselves to personally ruin public servants who get in their way sometimes.

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

#123

Post by humanizersequel » Tue, Jun 13, 2023, 4:32 AM UTC

jbverschoor wrote: post #104

jcranmer wrote: post #66

Earlier quoted context omitted.

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 — a…

No that’s not the case. Coinbase wants CLARITY. The SEC does not give any guidance, response, or anything related to this issue. At the same time it’s a laat struggle between the SEC and the CFTC. The SEC messed up for years but not protecting consumers against fraud. Now they’re trying to prove their reason existence / gov funding. In one of the (I think MIT lectures 2018) videos, btw? Gensler stated that [probably…

>In one of the (I think MIT lectures 2018) videos, btw? Gensler stated that [probably all crypto except Bitcoin, but including Ether, are moody moody most likely securities].

As recently as 2 months ago Gensler declined to say whether or not Ether is a security in front of congress.

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

#124

Post by semiquaver » Tue, Jun 13, 2023, 4:36 AM UTC

JohnFen wrote: post #7

pylua wrote: post #2

It is scary to me how much legislating is done by these government bodies inside the (executive ?) branch. I do sympathize with anyone trying to get clear requirements in black and white terms of what is and isn’t acceptable . I think this is more of a systemic failure.

The SEC is not part of the executive branch. It is an independent agency. While it is also not part of the legislative branch, the legislative branch is the one that effectively controls it.

  > The SEC is not part of the executive branch.

You are mistaken. The SEC is very much a part of the executive branch.

  > It is an independent agency

So is the CIA. This just is a term of art for a particular type of executive agency distinct from a cabinet department with additional insulation from political control. SEC commissioners are nominated by POTUS and confirmed by the senate, a characteristic unique to the leaders of executive branch departments.

https://en.m.wikipedia.org/wiki/Independent_agencies_of_the_...

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

#125

Post by JumpCrisscross » Tue, Jun 13, 2023, 4:39 AM UTC

BLKNSLVR wrote: post #106

jcranmer wrote: post #66

Earlier quoted context omitted.

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 — a…

> are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them. This doesn't appear to be what the SEC is suing Coinbase for though, and is actually far more applicable to the question "then why were they allowed to go public?" It's possible (likely even) there are nuances I don't grok, but sued for selling unregistred securities is not the same as requiring stru…

> far more applicable to the question "then why were they allowed to go public?"

The SEC does not approve IPOs. This is made abundantly clear in the law and rules, it is hammered into every first-year securities candidate as part of their licensing and it is front and centre on every S-1.

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

#126

Post by jbverschoor » Tue, Jun 13, 2023, 4:40 AM UTC

jbverschoor wrote: post #104

jcranmer wrote: post #66

Earlier quoted context omitted.

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 — a…

No that’s not the case. Coinbase wants CLARITY. The SEC does not give any guidance, response, or anything related to this issue. At the same time it’s a laat struggle between the SEC and the CFTC. The SEC messed up for years but not protecting consumers against fraud. Now they’re trying to prove their reason existence / gov funding. In one of the (I think MIT lectures 2018) videos, btw? Gensler stated that [probably…

Can't find the part where everything except bitoin is a security, I think that was said later in public.. But these are quotes from the lecture. Interestingly, lecture 18 is not available (it wasn't either when all of this was published), but it's right in the securities/regulations part. I'd highly recommend anyone to watch all of the lectures, because they're highly informational. Gary is a super smart guy. Many people think that regulators don't understand crypto etc, but I think Gary knows a lot more than many many people.

"Blockchain isn't the-- we don't have regulation because of blockchain, and we don't necessarily need a new set of regulations." https://youtu.be/l0vD_FBWk0g?t=1976

Discussion about SAFT / utility etc: https://youtu.be/iWpQpPbo7rM?t=994

XRP is a security, but "what I believe.. is just that, it's a believe". https://youtu.be/7EXcHqLg7BI?t=2767

Bitcoin is a commodity https://youtu.be/KHBi3n0hUSU?t=3591

"So we already know in the US and in many other jurisdictions that 3/4 of the market are not ICOs or not what would be called securities, even in the US, Canada, and Taiwan, the three jurisdictions that follow something similar to the Howey Test that we've talked about. 3/4 of the market is non-securities. It's just a commodity, a cash crypto. So you'll hear debates about initial coin offerings. And what's a security? And what's not a security? Relevant-- relevant and important debate, but for 3/4 of the market, it's not particularly relevant as a legal matter, as a regulatory matter. "

https://youtu.be/KHBi3n0hUSU?t=1591

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

#127

Post by bb88 » Tue, Jun 13, 2023, 4:41 AM UTC

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…

TIL to stop reading the top voted comment if it appears to be outrage and just read the article for myself instead.

Just FYI here's the quote in context. She's posing a hypothetical here and not actually comparing Coinbase to a heroin dealer. This is very much in the style of Matt Levine at Bloomberg, btw.

    If a company went to the FDA and said “hello, we’d like to start selling 
    heroin to the public for recreational use”, and the FDA said “no, you can’t 
    do that”, the company could loudly complain that the FDA was not giving them 
    a path to compliance. People would probably laugh at them.

    The company could decide the FDA was wrong, demand that they and/or Congress 
    write new rules to allow for this innovative new heroin business that would 
    bolster American capital markets, and decide that in the meantime they were 
    going to sell heroin anyway. People might not be terribly sympathetic when 
    it didn’t end well for them.

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

#128

Post by JumpCrisscross » Tue, Jun 13, 2023, 4:42 AM UTC

humanizersequel wrote: post #123

jbverschoor wrote: post #104

Earlier quoted context omitted.

No that’s not the case. Coinbase wants CLARITY. The SEC does not give any guidance, response, or anything related to this issue. At the same time it’s a laat struggle between the SEC and the CFTC. The SEC messed up for years but not protecting consumers against fraud. Now they’re trying to prove their reason existence / gov funding. In one of the (I think MIT lectures 2018) videos, btw? Gensler stated that [probably…

>In one of the (I think MIT lectures 2018) videos, btw? Gensler stated that [probably all crypto except Bitcoin, but including Ether, are moody moody most likely securities]. As recently as 2 months ago Gensler declined to say whether or not Ether is a security in front of congress.

> Gensler declined to say whether or not Ether is a security in front of congress

Whether Ether is a security is irrelevant to this case, based on an investigation which pre-dates Gensler’s term at the SEC, which is about whether Coinbase is required to register and operate as a securities exchange on account of having traded e.g. Solana. The entire argument obsessing over his refusing to come to conclusions until facts are established reminds me of creationists picking a tiny, side element of scientists’ arguments and then spending their entire time arguing with themselves over a point with zero germaneness.

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

#129

Post by butitsFake » Tue, Jun 13, 2023, 4:42 AM UTC

everfree wrote: post #88

ceejayoz wrote: post #86

Earlier quoted context omitted.

Good luck with that “But we really wanna!” argument in court.

I don't really care. I've got a large enough international stock allocation that if the USA loses its status as the financial capital of the world over the next several decades, I'll be just fine in retirement. Companies like Coinbase and a16z have publicly stated their intentions to establish international arms to hedge against the US regulatory environment, and there's no reason my portfolio can't follow their lead…

[flagged]

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

#130

Post by KingOfCoders » Tue, Jun 13, 2023, 4:45 AM UTC

shagie wrote: post #115

BLKNSLVR wrote: post #106

Earlier quoted context omitted.

> are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them. This doesn't appear to be what the SEC is suing Coinbase for though, and is actually far more applicable to the question "then why were they allowed to go public?" It's possible (likely even) there are nuances I don't grok, but sued for selling unregistred securities is not the same as requiring stru…

SEC filing by Coinbase as a free writing prospectus related to their S1 - https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/334fdd0... QUESTION 17: “Coinbase plays the role of both broker, executing trades on behalf of clients, as well as an exchange, matching buyers and sellers. This is a unique situation. In other markets, i.e. equities, a broker would be required to be legally independent of an exchange. Could…

"What I think is important about the Coinbase business model is that we have set up our business such that there's not a conflict."

We have illegal weapons but what is special with us, we won't use them. So it's not illegal.