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Comment by jessedhillon | Hacker News Reader

This is a simplistic view. The law -- which requires payment processors to have some large sum of money, $500k I think, in the bank -- doesn't prevent innovation. There are still plenty of innovators in the payments space. What you don't have is a space frothing with activity and losing the public's money in fly-by-night schemes run by college sophomores. This sort of thing is what the law aims to prevent.

It's not anywhere close to the situation in China.

Serious problems are being challenged here in CA and in the US at large. I'm sorry you decided to shut down your startup in CA to protest the law. However, it is not the situation that the entire startup scene is defunct, or that we're hurtling headlong into an authoritarian regime a la China.

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Logical fallacy. The fact that some payment processors still exist does not overcome the prima facie fact that at least one startup (and probably more than one) was put out of business by this law.

Thus, if you agree that startups are engines of innovation, innovation was prevented.

If you support a regulation you must be intellectually honest enough to acknowledge its empirical costs in addition to claiming its theoretical benefits.

Not quite. Yours is a simplistic interpretation of a complex problem.

The problem is that the large sum of money is not $500K, which is the amount written in the statute, or $500K "in the bank," which is different from $500K in net assets. It's some other much higher number that isn't in writing and is completely up to a single bureaucrat's discretion. (See http://www.americanbanker.com/issues/176_126/think-computer-.... "A department spokeswoman says the actual amount needed is 'more than $1 million.'" I was told in person that the number is between $1 million and $80 million.) Even the Senior Counsel for the California DFI admitted that this dynamic reminded him of an authoritarian regime--but he's powerless to change it.

I didn't "decide" to shut down my startup to protest a law. The law shut down the startup.

Corruption in the United States looks different than it does in other countries. In other countries bribes are overt and expected. In the United States bribes are written into the law to serve an upper class that prices legal services out of most people's reach.

I also have researched requirements for becoming a licensed money transmitter, while considering starting a payments solution. From looking over your website and your company's topic in Quora, you are clearly more educated in this than I am.

However, from what I know, I believe that you are mischaracterizing the law. Perhaps this is because you feel that you have been victimized by a bureaucratic process. If what you say here and elsewhere is true, I think that it should have been possible to reach a solution that both satisfies the law and allows you to continue doing business.

It's very surprising that, in so many places across the web, you have been unable or unwilling to vocalize the possibility that the law has a legitimate intent. Even the language you use to describe your company's lack of presence in CA is misleading:

The California Money Transmission Act has forced this merchant to stop accepting FaceCash payments. You can still pay with other payment methods.

No. You have decided not to comply with the law because you object to its passing, to the entities you perceive to be backing the law, to its constitutionality, and to its implementation.

As evidenced by the fact that other startups do tackle the payments space, and will in the future, we can conclude that the situation has more to do with you than with the Act.

You're right: I do object to the law's passing, to the entities that have been documented to be backing the law (see http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_2751-2800/ab...; the members of The Money Services Round Table are clarified at http://www.federalreserve.gov/SECRS/2006/August/20060829/R-1...), to its constitutionality, and to its implementation. That doesn't mean that I "have decided not to comply with the law," which is quite a charge to levy.

Just to compare notes, I'd like to see your list of startups that have applied for and are licensed under the California Money Transmission Act. As far as I can tell, based on the DFI's monthly summaries (see http://dfi.ca.gov/publications/summaries/), one startup (Venmo) has applied, and zero startups have licenses to date. This is now ten months after the law went into effect.

As for the law's intent, the statute claims that it's "consumer protection." I doubt anyone who claims that a money transmitter needs $1 million to $80 million of net worth and $750,000 of surety bonds in order to safely transmit $1.

Good luck with your startup. You should do some more research. Right now you sound like an apologist for multi-billion dollar financial corporations.

Let's be clear: the multi-billion dollar financial corporations didn't shut you down. The state did. They're the ones with the guns.

The financial corporations are the ones with the lobbyists.

Personally, I would rather be lobbied than shot.

You waive these documents around as evidence of something -- have you ever read them or did you only get to the first paragraph where member organizations were listed? They make some very good points about the public interest in regulating money transfer; do you have any rebuttals to them?

Did you see the section of the bill analysis which reads thus:

4. Opposition None received.

Why isn't your company's name there? Surely it has to be in your interest to actually register a complaint in a venue that matters?

You throw around terms like lobbying and stymied innovation so carelessly it's difficult to believe that you've actually considered these issues. Do you know that the MSRT spent so less than $20k on lobbying activities in 2009 and 2010?

The law against paid organ donation is frustrating my efforts to create an organ-matching service. It doesn't mean that innovation is stymied in the US, it means that regulation in the public interest outweighs my own interests. If you want to be taken seriously, try showing that you're familiar with the counter-argument and can rebut it point-for-point.

You should do some more research. Right now you sound like an apologist for multi-billion dollar financial corporations.

You sound like a whiny conspiracy theorist.

I do have rebuttals to many of them, and you can read them at http://www.thinkcomputer.com/corporate/whitepapers/heldhosta.... This law is not a good example of regulation in the public interest.

Think Computer Corporation isn't listed in the opposition column because I had no idea that there was a hearing scheduled for April 19, 2010 in Sacramento on the issue. Did you?

It's pretty sad that you can buy a law for $20K. They only spent $3,600 in Virginia.

Also, "waive" and "wave" mean different things.

It's pretty sad that you can buy a law for $20K. They only spent $3,600 in Virginia.

They spent $0 on lobbying in 2007-2010: http://www.opensecrets.org/lobby/clientlbs.php?id=F21559&...

Characterizing the political process as "buying a law" doesn't do anything for your argument. It's a silly reduction. I actually think your white paper is a very thorough and serious proposal -- your message comes through very clearly and it's a good example of a professional communication.

Also, "waive" and "wave" mean different things.

Apparently you have no argument left, but thanks for spellchecking mine. You seem to be unable to distinguish legitimate criticism of the tenor and delivery of your comment from opposition. Obviously I am not opposed to loosening money transmission laws. I just think you could communicate legitimate complaints in a positive, engaging tone instead of ranting, and then becoming defensive and petty when questioned about it.

It was a while ago when I was looking into money transmission and I ultimately decided against it for other reasons.

You're completely correct. Just getting a business license in China takes a bribe and months of red stamping. Innovation is crushed in China mainly because of the IP laws (or ignoring thereof.)

> Just getting a business license in China takes a bribe and months of red stamping.

Do you have any evidence of this? From my time in china, I see a massive entrepreneur spirit. In fact everyone I spoke to was starting a business of some kind.

What colour stamps do you use in the U.S? Are they somehow superior to red ones?

> Innovation is crushed in China mainly because of the IP laws (or ignoring thereof.)

Any evidence of that as well? I would 'guess' that it is more related to the fact that there is so much low hanging fruit in the chinese economy right now, that innovation just isn't required to run a successful business.

Who were you speaking to? I just recently managed to convince my (Chinese) wife that trying and failing her own online business would be better than working as someone's slave in an industry she doesn't even like. And our friends here are too busy trying to live on the small monthly salaries they get to even consider taking a risk with a startup.

...let alone the fact if you have a successful internet startup, someone with more resources will make a carbon copy of it and there's not much you can do to shut it down.

... are you seriously positing it is "too hard" to start a business in China (the fastest growing economy in the world)?

> let alone the fact if you have a successful internet startup, someone with more resources will make a carbon copy of it and there's not much you can do to shut it down.

Because that never happens in the U.S? I can think of a number of examples just off the top of my head. But I'm worried I'm confusing your point.

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