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SEC charges Kraken for operating as an unregistered securities exchange

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Re: SEC charges Kraken for operating as an unregistered securities exchange

#181

Post by smabie »

lmm wrote: post #132
landemva wrote: post #126

Earlier quoted context omitted.

> I feel pretty good about considering stable coins securities. Take that further to airline points and Chipotle points. If the stablecoin does not provide returns to the holder, how is it an investment contract?

> Take that further to airline points and Chipotle points. No-one is holding those with an "expectation of profit". Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.

What? You could say that about the US dollar.

Regardless, that's not why people hold stable coins.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#182

Post by lowkeyoptimist »

landemva wrote: post #139
lmm wrote: post #132

Earlier quoted context omitted.

> Take that further to airline points and Chipotle points. No-one is holding those with an "expectation of profit". Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.

Stablecoins are supposed to be stable, and not rise or fall. There is no expectation of profit for a stablecoin like USDC. And USDC doesn't pay interest. People use it for stability and for payments.

Last I checked, you could get 5% interest on your USDC. Is that just something where the exchange is lending it out?

Re: SEC charges Kraken for operating as an unregistered securities exchange

#183

Post by lmm »

DennisP wrote: post #160
lmm wrote: post #138

Earlier quoted context omitted.

> To me, it feels like chasing opinion and public sentiment - not following rigid, established legal patterns. The sentiment is an integral part of the established legal pattern - the Howey test is about "expectation of profit". Even if based purely on vibes, I think the man on the Clapham omnibus might well say: someone buying Bitcoin today, or Ethereum in 2018, is not expecting to profit from the efforts of their r…

Bitcoin still rolls out upgrades occasionally. At this point Ethereum doesn't really have "a dev team." There are about ten independent client teams, who have public meetings to come to agreement on upgrades, plus an open research community. When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake? Because it's not all…

> When you say that an ETH buyer is "expecting to profit from the efforts of the dev team" which wasn't the case in 2018, are you talking about proof of stake?

Not proof of stake qua proof of stake, but the fact that substantial changes to ethereum (like proof of stake) - things that change the usability of the network, and so could be reasonably expected to change the value of ethereum tokens - are still being worked on.

> The Howey test, incidentally, is also about an investment contract.

No, it's the definition of an investment contract. If it included whether something was an investment contract that would be circular.

> That's why an equity is a security, but a bar of gold is not, even if you bought the gold as an investment.

No, the reason gold isn't a security is there's no common enterprise and, more importantly, no efforts of others. You might buy it as an investment, but the investment isn't because you think the gold devs are going to add new features that make gold more useful.

> Lack of contract is why the SEC lost their case against Ripple recently.

Whatever you think about Ripple or cryptocurrency in general, that ruling was just utterly bizarre. You can make reasonable arguments for why these things aren't securities (even if I don't agree with you) but that judgement wasn't it. It's not a precedent for anything, it's just crazy.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#184

Post by AnthonyMouse »

jcranmer wrote: post #73
ascendantlogic wrote: post #65

I feel like this won't end up going well for the SEC. This whole methodology of telling exchanges "I don't know, you figure it out" when they ask for clarity and then turning around and suing them for not figuring it out is extremely shaky legal ground.

Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. And the situation with cryptocurrencies seems to be broadly similar: there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just n…

> if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse.

The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other.

So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime.

Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.

And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#185

Post by ac29 »

landemva wrote: post #139
lmm wrote: post #132

Earlier quoted context omitted.

> Take that further to airline points and Chipotle points. No-one is holding those with an "expectation of profit". Whereas essentially the only use of "stablecoins" is as investment schemes; even if someone isn't expecting the value of their stablecoin to rise against USD, they're expecting it to rise against something.

Stablecoins are supposed to be stable, and not rise or fall. There is no expectation of profit for a stablecoin like USDC. And USDC doesn't pay interest. People use it for stability and for payments.

> USDC doesn't pay interest

Coinbase, who co-founded USDC, absolutely pays interest on USDC: https://www.coinbase.com/usdc

(they call it rewards instead of interest in an attempt to avoid regulation, but it is functionally the same thing)

Re: SEC charges Kraken for operating as an unregistered securities exchange

#186

Post by zztop44 »

palmfacehn wrote: post #172
cool_dude85 wrote: post #166

Earlier quoted context omitted.

Why's it surprising to see anti-market sentiment when we've been given a very clear look at how the free market has operated in the crypto space sans government regulation? The whole ecosystem has been dominated by grifts, outright scams, rug pulls, ponzis, unregulated gambling, etc. etc. with no end in sight. Why didn't the free market step up?

It is surprising to see these sentiments on a site ostensibly for entrepreneurs and builders. If you'd prefer a centrally planned and regulated economy, that is a different discussion. From my side, I believe you should enjoy your views and the living situation which accompanies it. Not interested in arguing the virtues of either approach here. Taking exception with the inaccurate characterizations is as far as I go.…

Because the word “free” famously has only one meaning, and everyone agrees what that is.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#187

Post by AnthonyMouse »

adastra22 wrote: post #168
xalava wrote: post #151

Earlier quoted context omitted.

The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1] On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2] That said, there would have been better course of action to protect consumers,…

Important nit: they ruled Ethereum was a security, as the initial issuance was at least partially a pre-sale. They just decided in that one case to explicitly not go after Ethereum. The only non-security exception they've named was bitcoin.

Which seems like kind of an arbitrary distinction anyway.

Suppose you create a new coin under similar circumstances as Bitcoin. No pre-mine. But it's a new coin and nobody cares about it, so nobody is mining it, so you can go mine it yourself and get all the block rewards for a while. Then once you have a lot of it you go about promoting the coin and developing the technology which causes it to be worth something.

In theory the difference is that anybody else could have mined the coin from the first day too, but at that point nobody else had any reason to think it would ever be worth anything.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#188

Post by palmfacehn »

zztop44 wrote: post #186
palmfacehn wrote: post #172

Earlier quoted context omitted.

It is surprising to see these sentiments on a site ostensibly for entrepreneurs and builders. If you'd prefer a centrally planned and regulated economy, that is a different discussion. From my side, I believe you should enjoy your views and the living situation which accompanies it. Not interested in arguing the virtues of either approach here. Taking exception with the inaccurate characterizations is as far as I go.…

Because the word “free” famously has only one meaning, and everyone agrees what that is.

laissez-faire if you like

Re: SEC charges Kraken for operating as an unregistered securities exchange

#189

Post by jongjong »

pmulard wrote: post #94
jongjong wrote: post #80

Earlier quoted context omitted.

The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?! If my startup fails because I hired the wrong people, I take the full b…

The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this fo…

I agree, FDA has no place in a free market. In a free market, companies would be able to sell poison to their customers... BUT, if something happened to the customers, they (or their estate) would be able to seek damages through the justice system. The problem we have with regulations is that they deflect responsibility... Any company can say "Look, we adhered to all the regulations" and use that as the basis to avoid taking responsibility if it turns out that the regulations were not adequate. Then they can just play the victim and demand more regulations. If you remove the regulator and just let the company deal directly with the consumer and don't let the government interfere with the free market to promote specific producers over others, then it would work itself out. The company would know that they have no regulatory shield to hide behind and they'll be forced to consider long-term implications of their decisions or face severe consequences and backlash from consumers.

Re: SEC charges Kraken for operating as an unregistered securities exchange

#190

Post by adastra22 »

AnthonyMouse wrote: post #187
adastra22 wrote: post #168

Earlier quoted context omitted.

Important nit: they ruled Ethereum was a security, as the initial issuance was at least partially a pre-sale. They just decided in that one case to explicitly not go after Ethereum. The only non-security exception they've named was bitcoin.

Which seems like kind of an arbitrary distinction anyway. Suppose you create a new coin under similar circumstances as Bitcoin. No pre-mine. But it's a new coin and nobody cares about it, so nobody is mining it, so you can go mine it yourself and get all the block rewards for a while. Then once you have a lot of it you go about promoting the coin and developing the technology which causes it to be worth something. In…

If you're looking for consistency and logic in regulator rulings, I'm afraid you're going to be left wanting.
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