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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

#491

Post by ceejayoz »

yieldcrv wrote: post #482
ceejayoz wrote: post #419

Earlier quoted context omitted.

> So the SEC changed its strategy recently and started suing exchanges using circular logic, claiming assets that they never said were securities to be securities and saying "these are unregistered securities and you are trading them in violation of Federal Securities laws", having never proved in court that these were securities. You're describing the procedure of proving in court that they're securities. The SEC cl…

When the SEC had a disagreement about the category of an asset or transaction, they would go to court to hoping to get the judge to agree those were securities being traded noncompliantly, with the defendant being the issuer After getting an agreeing verdict on that they would go to the promoters and exchanges and sue them too Now they're skipping that and going straight to the exchanges, because the SEC wasn't exact…

Coinbase is a lot more accessible to the SEC than a shitcoin out of China or Bulgaria or whatnot. It's hardly an unreasonable choice, and I'm not aware of any legal theory that says the SEC can't (or even shouldn't) take that approach.

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

#492

Post by paulddraper »

ceejayoz wrote: post #340
paulddraper wrote: post #187

Earlier quoted context omitted.

Huh??? The SEC decides when, what, and for whom it enforces rules?

This is extremely common practice in our system. https://en.wikipedia.org/wiki/Prosecutorial_discretion

Kinda violates "justice is blind" trope, no?

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

#493

Post by cududa »

kjs3 wrote: post #476
semiquaver wrote: post #438

Earlier quoted context omitted.

> clear requirements in black and white terms of what is and isn’t acceptable. I’ll give you the benefit of the doubt and assume you have been misled by this frequently made claim. It’s just not true. The requirements have been clearly stated for a long time, they’re just not what people in the crypto space want to hear, so they pretend the guidance and law doesn’t exist. This document dates from 2019 and lays out in…

I wish I could upvote this a couple of dozen times, because it's really the core of the issue. All this "the SEC won't give us guidance" is theater.

And the fact that it's stuck so well is what troubles me so much. The Securities Exchange Act is about a hundred years old and written in a way a laymen can understand the gist of it.

It's a security. Just because you called it something else doesn't mean there aren't laws or guidance on how to register it. They just don't want to.

Everyone into crypto parrots the "they won't give us guidance" line without even doing 5 minutes of research.

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

#494

Post by alwayseasy »

PretzelPirate wrote: post #403
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…

> Ethereum is an extremelly centralized business The development of Ethereum is more decentralized than the development of Bitcoin. Bitcoin is primarilly developed by Bitcoin Core while Ethereum has multiple client implementations. Anyone can join the Core Devs meeting and discuss new features and push back on ideas. You can also propose these features outside of the core dev meetings and never attend that meeting if…

The crux of the problem for ETH is its first few months after launch where they indeed raised money. So ETH was a security at first (according to the Howey test) but now probably not anymore.

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

#495

Post by Dylan16807 »

jacquesm wrote: post #490
Dylan16807 wrote: post #214

Earlier quoted context omitted.

FDIC is great, sure. But there's a significant difference in risk in having $500 in Amazon gift cards versus that store in the dying mall that's probably going to be gone in six months. And it's reasonable to try to figure out which one Coinbase is. There are many value that are neither trivial nor worth the effort of upgrading from pretty safe storage to completely safe storage.

These have nothing to do with each other.

It's a very direct analogy about safety of money-like assets.

Sometimes things are not pocket change but also not worth insuring.

I don't think the advice to never have an uninsured balance is helpful to the question that was asked.

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

#496

Post by ceejayoz »

paulddraper wrote: post #492
ceejayoz wrote: post #340

Earlier quoted context omitted.

This is extremely common practice in our system. https://en.wikipedia.org/wiki/Prosecutorial_discretion

Kinda violates "justice is blind" trope, no?

Meh, "justice is stupidly aggressive" isn't an improvement.

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

#497

Post by JumpCrisscross »

ceejayoz wrote: post #480
JumpCrisscross wrote: post #450

Earlier quoted context omitted.

> the SEC makes most of the nitty gritty procedure/rules out of those definitions and directives The violations the SEC describes in its complaint (¶ 8) are not nitty gritty. It's all bare-boned Exchange Act malfeasance.

Agreed, but entirely irrelevant to the point at hand.

> entirely irrelevant to the point at hand

What? The laws Coinbase is being charged with violating are creatures of the Congress and courts, not the administrative state. This is not a case of "the agency that enforces the rules is also charged with creating them" [1].

[1] https://news.ycombinator.com/item?id=36307273

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

#498

Post by arcticbull »

Eisenstein wrote: post #263
arcticbull wrote: post #208

Earlier quoted context omitted.

> 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. So uh, you know you just described the opioid crisis in a nutshell right? Modern opioid painkillers are in fact generally if not entirely accurately, 'heroin based products.' Not just that, prior to the Narcotics Tax Act of 1914 it was kind of a fr…

I hate to do this but I don't want people to read your comment and make that their understanding of history: The FDA did not exist until 1930. Even if you count the predecessor agencies they did not 'approve' drugs. They were tasked with fraud prevention (selling things that weren't what they claimed to be) and safety in the sense that the product wasn't poison, but not with ensuring that the thing it claimed to be w…

It is certainly unclear what I meant when I said "they were approved by the FDA" - I was referring to 'modern opioid painkillers' - medications like oxycodone and fentanyl [1], not heroin. Those enjoy FDA approval to this day. Heroin, as a schedule I is not recognized as having any medical use.

[1] https://www.accessdata.fda.gov/scripts/cder/daf/index.cfm?ev...

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

#499

Post by kerkeslager »

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…

> > 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.

and...

> The previous HN thread seemed to mainly be of the opinion that Coinbase wasn't registering the non-Bitcoin crypto, but that the problem was the SEC wasn't giving clear guidance on whether they needed to be.

See, this is why we need regulation. It's to deal with people like the HN crowd who will go up to the limit of the law with no consideration for ethics whatsoever.

A normal, ethical person would never run into the problem Coinbase has here. They'd see that the differing parts of their business had conflicts of interest which were pitting them against their own customers, and they'd do the right thing by splitting them up so that their customers are served. The law never has to get involved, because good people don't need the law to tell them to do the right thing.

But contrary to the end-stage capitalist beliefs of HN, corporations are not good people. Capitalism doesn't result in the best service for the lowest cost. If there's any way at all that corporations can make a profit by screwing over other people and getting away with it, they will, or someone else will. Without regulation to limit this, bad people bubble to the top. Coinbase has plenty of smart people who could have noticed the ethical problems here, but they didn't, because they didn't care. Coinbase has been successful monetarily because when they had a choice to do what's right or what's profitable, they chose to do what's profitable.

And as is typical of HN, the top comment identifies with the bad guys. The problem, in your eyes, isn't that what Coinbase did caused conflicts of interest which harm consumers. The problem, in your eyes, is that regulation wasn't clear enough for Coinbase to know exactly which conflicts of interest they could get away with. Like Coinbase, you're unconcerned with ethics, instead blaming regulators for getting in the way of the only thing you care about: profits.

This place has a serious problem.

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

#500

Post by semiquaver »

JohnFen wrote: post #461
semiquaver wrote: post #124

Earlier quoted context omitted.

> 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 l…

> The SEC is very much a part of the executive branch. Not according to the government, and they're the horse's mouth on this. > SEC commissioners are nominated by POTUS and confirmed by the senate This is correct, but not really to the point.

  > Not according to the government, and they're the horse's mouth on this.
You seem to be referencing some specific statement that you didn't provide.

I'm guessing that you are confused about the phrase "independent agency". Or possibly you're remembering cases like Lucia v. SEC where certain SEC staff were (unsuccessfully) challenged as not conforming with the Article II appointments clause. The insulation of these sort of agencies from direct presidential oversight continues to be a source of debate in conservative legal circles, but where these agencies sit in the constitutional order is not remotely controversial. They're not part of the judiciary and they're not part of Congress so they can only be part of the executive.

  > The executive branch also includes executive departments, independent agencies, and other boards, commissions, and committees.
https://www.usa.gov/branches-of-government

  > The SEC is an independent federal agency
https://www.sec.gov/strategic-plan/about

QED.

More to the point, congress lacks the ability under the constitution to create government structures outside the three branches. The language establishing the SEC makes very clear that its structure conforms with how Article II defines the executive branch:

  > There is hereby established a Securities and Exchange Commission (hereinafter referred to as the ‘Commission’) to be composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate.
https://www.govinfo.gov/content/pkg/COMPS-1885/pdf/COMPS-188...

  > he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law:
https://constitution.congress.gov/constitution/article-2/

The SEC is established and appropriated by congress, staffed by people who receive government paychecks, led by presidential appointees, etc etc. I'd be interested to know whether you think it's either

  - not part of the US government
  - part of a different branch
  - part of the US government outside a branch that the constitution specifies
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