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Comment by bpodgursky | Hacker News Reader

I would like to think that even the most crypto-skeptical here, those who wish the entire ecosystem would collapse in flames, would agree that the SEC and other regulatory bodies need to operate with transparent rules, making it clear when and why a company is violating the law. Operating short of that is not, by conventional definition, operating under the rule of law.

It seems pretty clear that the SEC is not currently meeting those standards, and that needs to be fixed. Whether or not the target is one we are currently sympathetic towards.

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They are operating by transparent rules. Howey test has been on the books since 1946:

1. The existence of an investment contract

2. The formation of a common enterprise

3. A promise of profits by the issuer

4. The use of a third party to promote the offering

At minimum, if that was true, Coinbase's competitors would not be freely operating the same service without SEC action.

Coinbase competitors are largely operating in legally gray/black zone. Regulators do try to crack down and will likely to continue these efforts.

And in crypto SEC is usually late to enforce. They only last week cracked down on the Bitconnect ponzi, which collapsed in January 2018 (that's an eternity in crypto)

That might change. Maybe they're going after Coinbase first?

Making an argument based on SEC's action or inaction assumes you have a good model of how the SEC makes decisions. I sure don't. Do you?

The SEC is not under obligation to sue offenders in a chronological order of market entry.

They may have been looking at this space for a while, and Coinbase’s size made them act to stop the proposed product where a smaller actor’s existing product wasn’t weighty enough to sue yet.

This is essentially "why did you pull me over for speeding officer? everyone else was speeding too!" and it's not an argument that works in court.

I think part of the confusion is, if the product is what they claim it is, it already exists with a multitude of other companies.

There’s a US company named Celsius in NY that already offers fixed interest for crypto and loans. Ethereum has a dozen different defi options for lending out crypto. This isn’t some new thing that the SEC has never seen before.

It seems weird that if the SEC intends to use that ruling that they haven’t yet applied it to any of the existing products on the market or at the very least released a guidance.

Existence of prior rule breakers doesn't mean that it is not forbidden. In reality SEC does try to pursue lots of crypto businesses and in general goes in the order of size rather than chronology.

That’s a possibility as well, and at the end of the day we only have Coinbase’s perspective on the interactions.

To be honest, as someone who follows crypto, I get the impression that the SEC simply doesn’t know what they want to do with crypto yet.

I actually agree with you. I think it is fair to say crypto is hard to get right — on the one hand there are lots of scams, on the other hand there is a large amount of investment in non-scams.

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