From afar what appears to be going on here is that the sec did nothing for years and years then ftx blew up and sbf went to jail and within the sec there was fear that they appeared asleep at the wheel. So they oversteered and decided to drum up some complaints to look like they are taking action but in reality probably don’t fully understand the space so aren’t able to clearly articulate a case.
Coinbase issued Wells notice by SEC
181–190 of 327 posts
Re: Coinbase issued Wells notice by SEC
#182I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. In some states I can use my money to hire hookers, or buy drugs. But if I want to buy crypto, all of a sudden that is a p…
Not so much protecting you, but ensuring a fair playing ground. If crypto is "finance", then it has to be subject to financial regulations.
There is no such law. Pokemon is no different than a digital token with respect to the applicability of securities law, the SEC's inconsistent treatment of the respective assets notwithstanding.
And your argument begs the question of why any restrictions should be placed on people buying/selling financial products to regiment how they do it.
Re: Coinbase issued Wells notice by SEC
#183There's a really interesting split of opinion on this. I wonder how much that aligns with the commenters personal ownership of cryptocurrecy. If anyone's willing to share their usage with their comment, that may help explain the split.
Personally, I had about $50 on coinbase at one point. As I felt that I wasn't "getting" cryptocurrency. Once I was satisfied that it wasn't useful to me I moved almost all of it out, although I still have some "dust" which seems too small to spend.
Coinbase seems designed to look like a trading platform, they feature graphs that show historical gains (and IIRC tweak the timelines of those graphs so they are always looking like the trend is up... super scammy...). I've only purchased one thing with coinbase, mostly because I thought that was a good way to move funds out. So personally, I didn't get value and I'm not going to lose money if Coinbase/cryptocurrencies tank.
The securities question appears to boil down to three questions:
1. expectation of profits
2. a common enterprise
3. depends “solely” for its success on the efforts of others.
For #1, coinbase appears to actively hype that with their "graph goes up" design. Their "learning" tool asserts that many tokens also have utility, but that seems only aspirational. Shouldn't coinbase track which tokens they feature actually have utility, avoid listing any that don't yet have usage, and delist any tokens when it's clear they have no utility? They have the data to assess that.
For #2, I'm honestly not familiar with the term.
For #3, this seems tied up in #1. If the token has utility, then the coinbase user could "use it" and engage in the market for non-speculative reasons, which should make it go up in value. If there is no utility, then there's nothing the user can personally do to increase the value.
But all this seems like a distraction to me. Coinbase seems deceptive to me in how they promote tokens to users. It's clearly a gambling platform that is trying to sprinkle on just enough "utility" to skirt the rules. The law and guidelines will eventually get updated, I don't think coinbase is entitled to SEC clarifications faster than the SEC is ready to share them. SEC is not their personal lawyer. A company trying to skirt the law with careful positioning should understand they are operating a risky business.
Re: Coinbase issued Wells notice by SEC
#184Some here have said it’s the SEC who should have a more collaborative spirit. But all of their incentives, job descriptions, and reason to exist are to _enforce laws_ not be chummy with startup executives. The “mean” approach to securities enforcement is what we as a society need…there are far too many scams and people who run them, and those scams seem especially concentrated within the crypto world. After the blitz…
In the blog past Coinbase General Counsel asks for "guidance". The guidance for future "crypto entrepreneurs" is going to come from the outcomes of these enforcement actions. CryptoExpert: "We want guidance. We want regulation." SEC: "Your product/service is a security." CryptoExpert: "No it's not!" Damodoran called cryptocurrency "currency made by the paranoid for the paranoid." [paraphrase] Let's be honest, coopera…
Other parts of the government do not agree with that take:
https://fortune.com/crypto/2023/03/08/stablecoins-ether-comm...
The CFTC has been regulating cryptocurrencies just like the SEC. Which part of the government has been breaking the law? HN legal experts will figure it out with snark.
Re: Coinbase issued Wells notice by SEC
#185From afar what appears to be going on here is that the sec did nothing for years and years then ftx blew up and sbf went to jail and within the sec there was fear that they appeared asleep at the wheel. So they oversteered and decided to drum up some complaints to look like they are taking action but in reality probably don’t fully understand the space so aren’t able to clearly articulate a case.
Enforcement actions historically are cyclical, so there's nothing new here.
> so aren’t able to clearly articulate a case.
Coinbase's staking programs are likely in violation of securities acts of 1933 and 1934. And they most certainly strike all boxes of the Howey test.
Re: Coinbase issued Wells notice by SEC
#186Earlier quoted context omitted.
Everyone knows what they are doing when gambling etc But nowadays crypto is being pitched as an investment to the layperson who doesn’t understand the risks and isn’t being told those risks by the exchanges. It’s those folks the SEC is trying to protect. That and prevention of larger market issues that can arise from unregulated financial services, ie FTX
>Everyone knows what they are doing when gambling etc No they absolutely do not.
They do. Everyone knows they get the money only if the wind otherwise they lose it all. Most underestimate the "house always wins" factor, but that's not the point here.
Crypto advertises with FOMO on a new world. It's "everybody is doing it, don't be a sucker but a winner in the future", and not "this is a risky asset where you might lose everything".
Re: Coinbase issued Wells notice by SEC
#187Earlier quoted context omitted.
In 1946, SEC v W.J. Howey Co. (328 U.S. 293) ruled the meaning of “security” as used in the provision of § 2(1) of the Securities Act of 1933 defining “security” as : “For purposes of the Securities Act, an investment contract (undefined by the Act) means a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or…
I understand (1) and (3) seems somewhat self-explanatory (although the quotes around "solely" give me pause.) But I don't understand "common enterprise" at all.
The term "common enterprise" refers to the pooling of resources from multiple investors, who are united in their pursuit of a common goal or objective.
So hyperbole above is false, real estate, in the simple sense, isn't regulated by the SEC.
Re: Coinbase issued Wells notice by SEC
#188There's a really interesting split of opinion on this. I wonder how much that aligns with the commenters personal ownership of cryptocurrecy. If anyone's willing to share their usage with their comment, that may help explain the split. Personally, I had about $50 on coinbase at one point. As I felt that I wasn't "getting" cryptocurrency. Once I was satisfied that it wasn't useful to me I moved almost all of it out, a…
There’s very little utility in web3 currently, apart from speculation on price appreciation. So in that sense much if not all of it could be securities. On the other hand you’d need to rule on a case by case basis, since future real uses cases might actually pop up. I think this is one of the SEC’s problems - they just technically can’t keep up with the number of new tokens. So instead they try to target exchanges. On the other hand a Forex trading platform isn’t a securities platform - so the case isn’t as clear cut as one would believe.
Re: Coinbase issued Wells notice by SEC
#189Earlier quoted context omitted.
> If anything your issue should be with the regulators for not regulating, not Coinbase for trying to operate a business responsibly as possible without clear regulation. I very explicitly _do not want_ lawmakers to move at the speed of start-ups. Start-ups are there to move fast and break things. Laws are more rigid, and thus NEEDS to take it slow to get a full picture of the risk/reward before legislating. Coinbase…
Coinbase has been operating since 2012. The big crypto ICO wave was in 2017. The total market cap of digital assets today is ~ $1.2 billion. It's crazy for the SEC to make no regulations, allow Coinbase to go public two years ago, and now to make some vague threat to sue without actually saying what Coinbase is doing wrong. Just because you don't like crypto tech companies doesn't mean the SEC can just not do its job…
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Re: Coinbase issued Wells notice by SEC
#190Earlier quoted context omitted.
> I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates. > In some states I can use my money to hire hookers, or buy drugs. > But if I want to buy crypto, all of a sudden that…
A huge number of crypto projects never advertised their tokens as an investment, and explicitly and repeatedly stated that they are not investments and should not be expected to appreciate, yet the SEC still charged them with promoting an unregistered security.
Can you give an example of one?