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Coinbase CEO: we're preparing to go to court with the U.S. SEC

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Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#121

Post by johnrob »

jcranmer wrote: post #31
VWWHFSfQ wrote: post #2

Sounds like the free lunch is over. Maybe my view is too simplistic, but Coinbase facilitates the sale of "assets" that the buyer expects to increase in value. By definition, that's a security, right?

The Howey test requires that a security be (1) an investment of money (2) in a common enterprise (3) with the expectation of profit (4) to be derived from the efforts of others. Cryptocurrencies very clearly meet (1) and (2). Many tokens are likely to meet (3), but it's not universal. But (4) is where you have the most room to argue. I don't know what Coinbase offers for sale. But I'm certain that least some of the t…

If you want to transfer the asset to another party (the main purpose of crypto currency), that requires effort from the community of miners. Would that satisfy the condition?

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#122

Post by iudqnolq »

johndhi wrote: post #68

This story is INCREDIBLY interesting on a lot of levels. Here's one level: Paul Grewal, the 'head lawyer' referred to in the underlying articles, is a former United States federal (magistrate) judge. He was the judge who oversaw part of the Apple v. Samsung patent cases, some of the biggest technology cases litigated in history. In other words, he's basically as respected in the legal community as you can possibly im…

He's not betting his name as much as you think. It's normal for lawyers to continue having excellent careers after losing significant cases.

(Also for full clarity magistrate judge is the lowest level in the federal system. Not that that isn't impressive, though)

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#123

Post by latchkey »

traveler01 wrote: post #65
0zemp1c wrote: post #7

I actually agree with Armstrong here - the SEC has had plenty of time to assess the market for crypto products and offer clear rules...it almost feels like the indecisiveness is an intentional policy used to cow the industry.

Dangerous to side with crypto stuff on Hackernews...

No, it isn't.

I side with crypto all the time and I see plenty of other people do it too. I also see the same loud voices, with a lot of karma, repeat their tropes over and over again. If people believe that it is "dangerous", that is a sad way to control a narrative.

Here we are 10+ years later and crypto hasn't gone to zero. If anything, it is discussed more than ever. What HN requires is sane responses about crypto, and this is one of them.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#124

Post by awb »

j0hnyl wrote: post #42
arcticbull wrote: post #13

Earlier quoted context omitted.

The definition of a security is found in the application of the Howey test. The SEC has a nice long explanation of how you apply Howey to crypto. Basically every token is a security. Always has been. With the possible exception of Bitcoin due to the way it was initially distributed. [1] [1] https://www.sec.gov/files/dlt-framework.pdf

How can it be proved that people are buying tokens like Eth/Solana because they expect those tokens to go up in value? Plenty of people are buying those tokens so that they can participate in their respective ecosystems as developers.

In that sense, it's more like gold which has investment potential, but also utility outside of its investment potential.

But if you're using gold as a productive asset, then you're modifying it and repurposing it to an extent that its value is no longer tied to its weight.

When you're using a token as a productive asset, its value is still tied to its market value. So in that sense, it's different and probably more closely related to an investment.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#125

Post by SAI_Peregrinus »

jcranmer wrote: post #31
VWWHFSfQ wrote: post #2

Sounds like the free lunch is over. Maybe my view is too simplistic, but Coinbase facilitates the sale of "assets" that the buyer expects to increase in value. By definition, that's a security, right?

The Howey test requires that a security be (1) an investment of money (2) in a common enterprise (3) with the expectation of profit (4) to be derived from the efforts of others. Cryptocurrencies very clearly meet (1) and (2). Many tokens are likely to meet (3), but it's not universal. But (4) is where you have the most room to argue. I don't know what Coinbase offers for sale. But I'm certain that least some of the t…

Coinbase offers a "staking service" where they run the node to perform validations (4) using your staked currency (1) on the Ethereum blockchain (2) and promise to give you a share of any profits (3).

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#126

Post by rurp »

rekttrader wrote: post #32
arcticbull wrote: post #8

Earlier quoted context omitted.

That's one way of looking at it. The other way of looking at it is that everyone who went to the SEC and asked them if they could do something was told absolutely not. The people who didn't ask seemed to be getting away with it. So everyone stopped asking. However that didn't change the facts of the situation. At some point even the mightiest ostrich must get rekt.

The sec is not a supervisory agency, they’re a regulator meaning they step in after the fact for investor protections. The sec had plenty of open sessions where folks in the industry would ask for guidance and yet it was not gotten because they don’t tell the capital or crypto markets what should be in the markets they’re here to pull down the things that shouldn’t be. The sec allows “junk bonds” if you disclose the…

While derivatives have certainly been abused and traded recklessly, they aren't inherently bad or reckless. In fact, the first order use for most is to reduce volatility as a hedging mechanism. Selling covered call options to reduce volatility or using a CDS to guard against default risk are normal things that happen all the time, they just don't make headlines because they are common and boring transactions.

Derivatives have uses and risks just like any other financial instrument and need to be well regulated, not demonized.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#127

Post by legitster »

chomp wrote: post #33

There's a few people picking sides here in the comments. Just reminding everybody that it's possible for two sides to be at issue; the SEC can be trying its best to apply its mandate in a world where technology has surpassed the law, and in a void of congressional action, and as a result giving very vague guidance so that it can squeeze its mandate into the crypto realm. And Coinbase can be purposely threading the ne…

I think part of the issue here is that the SEC is being decidedly coy. The remedy they are seeking is for the industry to essentially end itself.

I think it's fine to say that the SEC is trying it's best to apply a mandate and them seeking guidance from congress are all good ideas, but them beating around the bush and attempting some subterfuge is not a good look for a regulatory agency.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#128

Post by rchaud »

> “We think the most onerous outcome could be that, if various crypto assets are deemed securities, Coinbase would therefore need to register as a securities exchange, in order to keep offering trading in those assets,” Barclays added.

All this, plus talk of leaving the country, just to avoid registering as a securities exchange?

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#129

Post by ProjectArcturis »

johndhi wrote: post #68

This story is INCREDIBLY interesting on a lot of levels. Here's one level: Paul Grewal, the 'head lawyer' referred to in the underlying articles, is a former United States federal (magistrate) judge. He was the judge who oversaw part of the Apple v. Samsung patent cases, some of the biggest technology cases litigated in history. In other words, he's basically as respected in the legal community as you can possibly im…

This an existential issue for Coinbase, so it's not surprising they would shell out for the best lawyer they could get. And it's not surprising that Grewal would quit his judgeship for a payment that's probably more than 10x his annual salary. Grewal is risking very little. He'll be set for life regardless of how this turns out.

Re: Coinbase CEO: we're preparing to go to court with the U.S. SEC

#130

Post by max51 »

tehlike wrote: post #50
treypitt wrote: post #45

Coinbase and Armstrong tried for months to get the SEC to tell them if their Earn/Staking product constituted a security, and they declined to answer. Serving a Welles Notice makes it clear Gensler is a bad faith regulator https://podcasts.google.com/feed/aHR0cHM6Ly91bmNoYWluZWQubGl...

Why did sec need anything to say when it was clear the product was a security from the beginning?

if it was that clear, why would they refuse to confirm it?

You can't argue an answer is super evident and at the same time insist that it is impossible for you to provide it.

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