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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

#241

Post by AnthonyMouse »

jcranmer wrote: post #66
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 — a…

> 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).

In traditional finance a "securities exchange" is like, the New York Stock Exchange. A big centralized thing of which there are barely a dozen in the whole country and most people would have trouble to name three. There are many stocks that are only registered on one exchange. That wants to be separated from other functions because otherwise it would become an abusive monopoly.

Nobody has anything like a monopoly on trading Bitcoins so that doesn't really apply.

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

#242

Post by jeltz »

everfree wrote: post #82
ceejayoz wrote: post #80

Earlier quoted context omitted.

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.

If a company can't use a piece of accounting software that's gaining worldwide relevance, that's the company's problem. If an entire country can't use a piece of accounting software that's gaining worldwide relevance, that's the country's problem.

Here in the real world that is the software company's problem. Countries do not change their laws just to make some random accounting software company happy, unless they bribe some politicians first.

Accounting software have tons of local adaptations.

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

#243

Post by JumpCrisscross »

nnx wrote: post #121
potatototoo99 wrote: post #31

Earlier quoted context omitted.

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…

> 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

Is there an expectation of profit in those buying your book? No? Then it’s not a security.

It’s a multi-prong test. Investor protection laws are substantial; everything is constantly being challenged in courts as a security.

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

#244

Post by AnthonyMouse »

rjbwork wrote: post #228
AnthonyMouse wrote: post #220

Earlier quoted context omitted.

> It's not the job of regulatory agencies to advise companies on how to become compliant with the law and their rules. Honestly this should be a core mission of all regulatory agencies and the fact that it isn't is a disgrace.

It would be absurdly burdensome and expensive for the government to have to advise people on how to follow the law when they're not following the law. If you're not sure how to follow the law, get an expert in the law! That's why there's a regulated profession that explicitly provides expert advice on following the law. I don't want to press too far, because I don't think you actually meant it, but...it's like you're…

> It would be absurdly burdensome and expensive for the government to have to advise people on how to follow the law when they're not following the law.

Isn't this the exact same burden it would be for that person to hire a lawyer? All it would do is require the government to internalize the cost of regulatory compliance, which would increase efficiency by aligning the incentives of the government with reducing compliance costs.

> If you're not sure how to follow the law, get an expert in the law! That's why there's a regulated profession that explicitly provides expert advice on following the law.

Except that they don't actually have the authority to tell you if you're following the law. If you hire a lawyer and they tell you that the law is ambiguous and there isn't any relevant caselaw yet, you still have no idea if you're following the law or not. Meanwhile no one with the authority to make a binding determination will give you an answer.

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

#245

Post by Dylan16807 »

JumpCrisscross wrote: post #237
Dylan16807 wrote: post #232

Earlier quoted context omitted.

> Would you really want a big government agency to decide on the merit of your business ehen you IPO? I said the exact opposite of that. Please look at the second sentence again. I want them to decide if I'm trading securities, especially when "this might be considered a security" is in my S1. Nothing more.

> want them to decide if I'm trading securities, especially when "this might be considered a security" is in my S1. Nothing more Investment banks would love this. It’s pro bono legal advice. If this is important, require a legal opinion or no-action letter prior to investing in the IPO. Coinbase didn’t secure those and investors didn’t demand it. Here we are.

You could make them pay for it.

Also there is potential fine revenue.

But for big enough companies, some amount of taxpayer-paid analysis makes sense. It ultimately benefits consumers.

Isn't analyzing the S1 "pro bono legal advice" to begin with?

And they did have legal opinions, just not from the SEC that is still almost entirely refusing to evaluate crypto tokens. Would a no action letter have been feasible?

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

#246

Post by _fizz_buzz_ »

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.

The reason Gensler probably didn't want to say anything publicly: Ethereum is legally a bit of mess and should have clearly been classified as a security when it ICOed, but the SEC kind of dropped the ball. Gensler knows this, the Coinbase lawyers know this and the congressman asking probably also knew that Ethereum was in a bit of a grey area. Honestly, crypto folks should be happy that SEC is taking a "don't ask, don't tell" approach with Ethereum. This is how Matt Levine put it:

"Some of them did securities offerings, but by the time the SEC noticed they were too entrenched and decentralized and it would have been a pain for the SEC to go after them. Ethereum, most notably, very very clearly did an ICO in 2014, raising about $18.3 million by selling ETH tokens. If they did that today, or in late 2017, the SEC would have some serious questions. But by the time the SEC got around to cracking down on ICOs in 2017, Ethereum was big and decentralized and the SEC would have had a hard time, practically and legally, challenging its 2014 ICO. And so everyone sort of grudgingly concedes that ETH is not a security."

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

#247

Post by [deleted] »

rjbwork wrote: post #228
AnthonyMouse wrote: post #220

Earlier quoted context omitted.

> It's not the job of regulatory agencies to advise companies on how to become compliant with the law and their rules. Honestly this should be a core mission of all regulatory agencies and the fact that it isn't is a disgrace.

It would be absurdly burdensome and expensive for the government to have to advise people on how to follow the law when they're not following the law. If you're not sure how to follow the law, get an expert in the law! That's why there's a regulated profession that explicitly provides expert advice on following the law. I don't want to press too far, because I don't think you actually meant it, but...it's like you're…

[deleted]

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

#248

Post by bb88 »

growse wrote: post #201
friend_and_foe wrote: post #177

Earlier quoted context omitted.

I did... the article lists several examples with the claim that the SEC cannot be expected to understand every business under the sun before approving a public sale, completely ignoring the fact that in this case, knowing if a company is operating as an unregistered securities exchange is their supposed expertise and reason to exist. Did you read it?

Do you think that if the SEC thinks that Coinbase is operating some sort of unregulated securities exchange, that they should bring some sort of enforcement action?

Also do you think that if Coinbase admitted that the SEC might take adverse regulatory action in the S1, should anyone be surprised when the SEC actually does?

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

#249

Post by hannob »

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…

> However, a lot of crypto is legit and this piece reeks of bias.

Reminds me of the fortune teller admitting that most fortune tellers are scammers, you just have to go to the legit ones.

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

#250

Post by rjbwork »

AnthonyMouse wrote: post #244
rjbwork wrote: post #228

Earlier quoted context omitted.

It would be absurdly burdensome and expensive for the government to have to advise people on how to follow the law when they're not following the law. If you're not sure how to follow the law, get an expert in the law! That's why there's a regulated profession that explicitly provides expert advice on following the law. I don't want to press too far, because I don't think you actually meant it, but...it's like you're…

> It would be absurdly burdensome and expensive for the government to have to advise people on how to follow the law when they're not following the law. Isn't this the exact same burden it would be for that person to hire a lawyer? All it would do is require the government to internalize the cost of regulatory compliance, which would increase efficiency by aligning the incentives of the government with reducing compl…

>If you hire a lawyer and they tell you that the law is ambiguous and there isn't any relevant caselaw yet, you still have no idea if you're following the law or not.

Then you have a couple of choices with various outcomes. One of which is exactly what is happening to Coinbase right now. You can either 100% unambiguously follow the law, or you can push your luck and adhere to what you think either is or should be the law. In the latter case you may become said case law, whether you are able to continue your current ambiguously legal business practices or not!

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