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Comment by qwertox | Hacker News Reader

This is such a good explanation.

It made me understand that this is all about protecting the customers investment, and, if nobody is protecting it, then it would have to be the SEC who does it, but they can only do this if it is a security. If it isn't a security which has to be protected by the SEC -- like Coinbase is claiming -- then who is protecting it? This appears to be what the SEC wants to have answered. Coinbase instead wants the SEC to tell them what to do about it, but that they don't want to set it up as a security. Yet Coinbase would be happy with just proceeding without any protections in place.

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Which should be a choice for all US residents to participate in, residents who can also go lose their money at casinos if they wanted, but are literally barred from participating in positive expected value financial systems.

Just like Texas abortion laws, this is not enforced against the US resident, it is against the service providers, which has allowed this framework to persist for 70 years.

Casinos are pretty highly regulated.

at the state level, and the choice is still available to participants to lose their money whether it is plainly obvious or buried in 30 pages of disclaimers

The SEC appears to be arguing that Coinbases product should be regulated as a security.

for you to say that, you missed my point quite far.

"regulated as a security" itself can mean 100 different things, and its not a nuanced enough take to know if a product can be offered at all, to whom it can be offered to, what disclosures are necessary if any, and more

I guess they are indirectly saying that if they are not under any other regulation (which they know they aren't), they will have to be treated as a security.

They are expecting Coinbase to show them who is regulating them. If they don't do it, they must be sued.

I mean, maybe? It’s quite clear to most people at casinos that they can lose all their money. Is it just as clear to people who “lend” uninsured money to a company?

A casino is similar to a lottery, you expect to lose some, but also to have the (small) chance to win a lot.

Coinbase is promising a fixed 4% earning. If they are to be taken serious, 4% does not mean the risk of losing it all, like in a casino.

Because there is a power and information asymmetry at work, and humans are not perfect rational actors.

The institutions that would want to operate these have the power to run massive advertising campaigns promoting them as the best place to earn money (with a bunch of quick disclaimers just like the various medical ads that people have gotten so used to now).

The people who would be preyed upon by this are not those with the education and experience to tell what's a sound investment and what's a bunch of bullshit, but precisely the opposite.

And though I know that there are many—perhaps you're among them, perhaps not—who would say "anyone who can fall for such a scheme deserves to lose their shirt", personally, I believe that we live in a society and we have a greater duty to care about each other than that.

But you see how locking people out of risk locks them out of reward right? The interface to regulate should be on the educational front, not on the access front. Instead the regulatory framework we have leads to the accredited class being protected from competition and is a direct antecedent to the neo gilded age landscape we are in now. IMO the want for regulation that "protects" investors on the margin while hurting the majority by locking them out of risk is the wrong approach, and always has been.

In theory, it locks people out of reward.

In practice, it locks them out of scams.

It is horrendously irresponsible to enable practices that we can predict will, with very high probability, result in significantly greater ability for predatory and unscrupulous actors to take advantage of the public, especially if the purpose is merely to allow the wealthy—and it is only the wealthy who can genuinely take advantage of such things; the rest of us simply can't afford to take those risks—to try their hand at high-stakes gambling.

The current outcome is a mistake, no one specific law, but perpetuated by fear that paycheck to paycheck people will get scammed

It is an overfitted system that has created more and more compliance in response to rare scams that occurred within the rules of their system anyway! If companies didnt find it too expensive to go public earlier nobody would be trying to have this conversation. People wouldnt be getting ripped off in massive SPAC deals because the target companies would be public already.

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