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Comment by whb07 | Hacker News Reader

From my untrained perspective it seems like they are warning against "the appearance of a regulated market". Therefore, all these markets should do is have a big banner at the top stating:

"We are not regulated by the SEC and any activity here is not protected by any rules and regulations which might apply to a SEC registered company. Please be careful"

Or am i crazy?

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They explicitly note that the law requires anything that is an exchange for trading things that meet the legal definition of a security must either (1) meet the requirements for and register as a national securities exchange or, (2) qualify for and secure an exemption under one of the existing legal exemptions from the registration requirement.

They note that they are particularly concerned about customers mistaking something for having the features of a regulated exchange when it does not, but the legal risk and basis for enforcement is not limited to that kind of confusion. So, no, simply announcing that you are an exchange which doesn't comply with the registration requirements won't help, and might hurt.

(3) operate outside of the US.

(3a) Not allowing US customers (3b) Hopefully in a country that does not have any extradition treaties with the US.

Yeah. You can’t just declare your business unregulated. That’s not how laws work.

It seems unlikely that it would be that easy. If it were, you'd see lots of unregulated stock markets out there in the wild (which, to my knowledge, is not the case).

Yes but there are many many markets out there which don't have any sort of regulation. The SEC's main quarrel right now appears to be that they believe investors might come to an exchange and invest believing they are as safe.

Which markets are those? Besides black markets

Well for one any sort of auction/market like ebay, flee market, high end auctioneers, the like. They are trading precious metals/jewelry, other objects in which the buyer hopes to profit at some later point in the future. No one is out there buying XYZ widget in the hopes of burning their savings.

No one is buying an ultra rare watch for $10 million in hopes that one day it will be worth less.

Those aren't securities, though, because their value doesn't depend on the efforts of the seller, which is one of the prongs of the Howey test.

oh, i expect the activity is still covered by SEC rules and regulations. the exchanges just aren't registered exchanges.

and they should probably make that clear; it might (justifiably) shave down their inevitable liability slightly.

I think that protective tone they're taking is PR. These potential enforcement actions are for your safety because we care about protecting investors.

Not that it's a power grab in the crytpo market.

FWIW, that is the explicit mandate of the SEC. It could be a power grab, but protecting unsophisticated investors is exactly what the SEC is supposed to do.

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