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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

#531

Post by georgeecollins »

lclc wrote: post #404
georgeecollins wrote: post #52

Earlier quoted context omitted.

Rather that claim knowledge, I would suggest you read Matt Levine's newsletter on this. He is a former securities lawyer who is extremely knowledgeable. -- I mean very extremely, he wrote an entire Business Week magazine about it. Some key takeaways: For historical reasons as well as practical ones (who would you sue) BTC and ETH are probably considered commodities. Most of the rest are very similar to ICOs which wer…

For ETH they can sue Vitalik Buterin, the rest of the Ethereum Co-Founders, and the Ethereum foundation. They are the issuers and majority of the ETH supply is there since the beginning.

Maybe they will. I don't know anything Buterin. But it seems like whoever created bitcoin was sincerely trying to make an independent token for exchange or a digital commodity. Many of the subsequent versions of crypto behave exactly like fraudulent securities, with hype, poor disclosure, wash trading and pump and dump. It makes sense to go after the predatory things first and cut some slack to things that were well intended.

Again, I don't know anything about the creators of ETH, but they may have a better defense of their actions then-- say -- Sam Bankman Freid.

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

#532

Post by scott_w »

blq10 wrote: post #321
scott_w wrote: post #274

Earlier quoted context omitted.

Enforcement agencies don't have to stop you ahead of time, even if that action is disallowed or even illegal. For example, police officers will regularly sit by the side of the road with a speed gun. They'll make no attempt to stop you driving at 150mph on the motorway but, in the UK, you'll receive a court summons through your door after the fact (and probably lose your license).

They are not required to do so, no. However, abusing retroactive enforcement does create a pretty clear case that the SEC is not interested in forming a regulatory framework for the exchange of digital commodities - instead preferring to import securities frameworks and punishing participants in the nascent industry. Why should anyone reasonably believe the SEC has intentions to allow crypto to exist, and that coinag…

> However, abusing retroactive enforcement

Statements like this create a pretty clear case that you haven’t read or shown any real interest in the SEC investigation and litigation related to crypto.

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

#533

Post by mrguyorama »

paulddraper wrote: post #521
mrguyorama wrote: post #518

Earlier quoted context omitted.

Fun story, it literally doesn't matter what Mr Gensler says or doesn't say, the related law exists on paper. Gensler doesn't make the rules. The SEC is tasked with enforcing the rules. If your company wants to know what is and isn't a security, that's up to your legal department to put together a working theory, one you think could win in court if the SEC sues you. Judges are the only people who get to clarify law wi…

> Gensler doesn't make the rules. He literally does. Hence the "SEC Rulemaking Process." [1] [1] https://www.sec.gov/oig/reportspubs/aboutoigaudit347finhtm

The very first sentence of that executive summary actually lays it out nicely: The SEC is bound by the law that congress writes, including the laws around securities. Gensler can only make rules that are in alignment with the relevant laws. The Howey test and securities laws are actually pretty much out of his jurisdiction, and more importantly, his individual and personal opinion about whether or not BTC or ETH are securities literally doesn't matter.

This is just the reality of operating in a grey area. If you believe you are in compliance with the law, and the regulators disagree or otherwise are giving you a hard time, then the matter WILL be settled by the courts or congress. Importantly, if Gensler comes out tomorrow and says "No tokens are securities, trade anything you want, we won't go after anyone", that isn't binding, and it doesn't change the law, and the next head of the SEC is still free to take you to court for being in violation of the law.

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

#534

Post by JumpCrisscross »

ceejayoz wrote: post #507
JumpCrisscross wrote: post #497

Earlier quoted context omitted.

> 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

Coinbase wants the SEC to come up with a process for them to register with the SEC that's amenable to cryptocurrency, via a "petition for rulemaking"; https://www.sec.gov/rules/petitions/2022/petn4-789.pdf . (The SEC is, rightly IMO, saying "nah".) Again, the point is that both Congress and the SEC make "the rules" around securities. Congress defined securities and gave the SEC the ability to write the rules for secu…

> Congress defined securities and gave the SEC the ability to write the rules for securities, with some specific requirements

Right. Like choosing what's important and what's not. (It's also a totally dishonest framing by Coinbase. Their business model, a unified broker, exchange and custodian, is fundamentally in violation of the '34 Act. They're asking the SEC to break the law.)

What makes no sense to me is the stupidity of fighting the case. I understand Coinbase's PR rallying the crypto base before. They were making a lobbying push to change the law. And the base would throw money at them. But now? Either management has reason to believe they can run out the clock on the SEC before Congress changes the rules. Or they're as delusional as the base.

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

#535

Post by yieldcrv »

ceejayoz wrote: post #523
yieldcrv wrote: post #509

Earlier quoted context omitted.

Coinbase needs far better defenses than they are using, definitely screams incompetence on their end too There are defenses to the SEC’s approach as it has nothing to do with the remoteness of some issuers, it has to do with the shaky legal ground and symbiosis that the SEC has relied upon. The SEC’s standard can be equally applied to anyone that purchased a baseball card hoping to flip it, where that unilaterally ma…

> The SEC’s standard can be equally applied to anyone that purchased a baseball card hoping to flip it, where that unilaterally makes all shops and ebay to be unregistered securities exchanges in violation of Federal Securities laws no matter what the baseball card company did to ensure otherwise. No; the baseball card market fails various bits of the Howey test. If you sold shares in a baseball card collection, that…

> the card manufacturer could cease to exist without the success of the enterprise being impacted.

while a promoter, sponsor, or other third party could pop up at any time.

it says nothing about manufacturer or issuer for that prong of the howey test.

and the same is true for all of the tokens listed in the case against Coinbase.

I guess your argument is based on looking for differences to support your worldview instead of looking for similarities, and its not clear if you're aware of the similarities.

The "manufacturer" disappearing from tokens makes them more scarce in many cases. Their functionality remains the same.

another thing you might not be aware of is that the SEC is aware of this. Other commissioners - specifically Hester Pierce - and enforcement division personnel has made this observation, the people calling the shots in the enforcement division and the head commission are avoiding this because it breaks their whole framework if the courts really feel compelled to break this down more holistically. Thats why their approach to unilaterally calling things "evidence" when they haven't even proved they are evidence is a weak evolution of their practice. Prolonging an inevitable challenge to their authority and aspects of their existence.

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

#536

Post by JohnFen »

semiquaver wrote: post #500
JohnFen wrote: post #461

Earlier quoted context omitted.

> 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 s…

The SEC is an agency of the federal government. It is not a part of any particular branch, really. The executive branch cannot just demand that the SEC engage in any particular action, unlike agencies that are formally part of the executive branch.

The legislative branch can demand particular action from the SEC, albeit indirectly, by altering, passing, or revoking the laws that the SEC is tasked with enforcing.

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

#537

Post by dlubarov »

H8crilA wrote: post #308
refulgentis wrote: post #172

Earlier quoted context omitted.

You nailed it, securities law doesn't make sense if you don't apply it to finance. Not sure that really advances the rest of the claims.

Owning the book does not promise returns.

How about, say, Pokemon cards? Lots of people buy them with an expectation of profit, which relies on the efforts of The Pokemon Company (among others) to continue to grow the player base.

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

#538

Post by dlubarov »

mrguyorama wrote: post #533
paulddraper wrote: post #521

Earlier quoted context omitted.

> Gensler doesn't make the rules. He literally does. Hence the "SEC Rulemaking Process." [1] [1] https://www.sec.gov/oig/reportspubs/aboutoigaudit347finhtm

The very first sentence of that executive summary actually lays it out nicely: The SEC is bound by the law that congress writes, including the laws around securities. Gensler can only make rules that are in alignment with the relevant laws. The Howey test and securities laws are actually pretty much out of his jurisdiction, and more importantly, his individual and personal opinion about whether or not BTC or ETH are…

Granted the the SEC is bound by federal statues, but they have certain rulemaking authority within those statues, and it's not wrong to say they create (administrative) laws.

True, administrative laws are not permanent, but when they want to change things, they need to follow a certain process under the APA. Particularly relevant to the case at hand, where Coinbase argues that the APA process needs to be followed - https://assets.ctfassets.net/c5bd0wqjc7v0/5PWsXaPsqQ61gA9wlF...

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

#539

Post by pylua »

mrguyorama wrote: post #526
ikiris wrote: post #118

Earlier quoted context omitted.

This is never how the law has worked

It's so much worse than that. "Laws should be exhaustively comprehensive" is a completely unworkable system. You cannot predict every possible combination of context and law, and attempting to do so would be literal combinatorics explosion. People who push that kind of system know this, and want the system to be hamstrung by exactly that situation. They want a system that can only outlaw their new, explicitly harmful…

I just want a system that is predictable , objective and that works quickly . Saying that there are flaws in the current system simply offends the gate keepers of the system.

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

#540

Post by ETH_start »

lclc wrote: post #406
ETH_start wrote: post #305

Earlier quoted context omitted.

> Ethereum has nothing like the same origin story. Ethereum was the first token sale. There was no precedent established at the time of people profiting off of token sales. The token sale agreement explicitly said not to expect a profit. It was treated by participants as more of a kickstarter to crowdfund the launch of a new kind of decentralized computing platform. Going off tangent: if a token sale explicitly state…

> Ethereum was the first token sale. That's not true. The first token sale (ICO) was Mastercoin, 1 year before Ethereum's ICO.

*first successful token sale
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