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Comment by TimPC | Hacker News Reader

This is huge. Essentially if they find anyone sold crypto to unaccredited investors they would be engaging in illegal sales of a security. This may lead to lawsuits where crypto sellers find they are on the hook for the losses of people they illegally sold to. It may also lead to jail time for a substantial portion of the crypto community.

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No, this is just a SEC vs CFTC turf war. Neither is willing to concede the "territory" to the other; the only notable part here is that the SEC still doesn't think ETH is settled. It's a minor TV interview, not something "huge".

https://www.klgates.com/CFTC-and-SEC-Perspectives-on-Cryptoc...

The odds of this happening are effectively 0, federal government is working on a regulatory framework for crypto markets and it definitely doesn’t involve jailing anyone for sales that have previously been considered legal by basically everyone

It would probably run afoul of the Constitutional protection against "ex post facto" laws.[0] If something (in this case, selling Bitcoin) was legal when you did it, but is now a crime, it is unconstitutional to prosecute you for it.

[0]: Article I, Section 9 <https://en.wikisource.org/wiki/Constitution_of_the_United_St...>

Is this ex-post facto? Its not like the law is new or that its suddenly illegal, people just weren't sure before if it was violating the law, which is really different from creating a new law.

I also think it's unlikely, but California did at one point revoke a tax exemption and applied that decision retroactively, expecting interest on unpaid taxes that the law at the time said you didn't owe. As I recall, this wasn't considered ex-post-facto simply because being fined for under paying taxes isn't the same thing as convicting someone as a crime, so the rule of law doesn't have to work the same way. You can take any constitutional protection and someone will come up with an argument in their head for why it doesn't apply to things they don't like.

Unregulated selling of securities has been a crime for a very long time. There are no ex-post issues at work here.

But the SEC (and other branches) has been slow at providing regulatory clarity. So they share part of the blame.

Agency rules are not laws, and thus are not actually subject to the prohibition against ex post facto laws. Notably, if existing laws or rules would already apply to make activities illegal, and the new rules are simply making that explicit, the courts will upheld (criminal) charges based on the new rules.

Importantly, with agency rules, courts can and have looked at the "intent of the law" authorizing the agency's rules to uphold criminal convictions under newer agency rules that were technically within the scope of the rules at the time the acts were committed.

This happens all the time in the tax world; see for example the Bermudan tax loss harvesting scheme that got a lot of people sent to prison even though the schemes were technically within the rules at the time accounting firms started selling them to clients.

No, this is grossly misleading. Bitcoin is the only one he was prepared to say publicly at that moment was a commodity. That doesn't really say anything about other coins other than he's not willing to take a public stand at that moment.

Essentially if they find anyone sold crypto to unaccredited investors they would be engaging in illegal sales of a security.

Well, yes. That's the Howey test. It's pretty simple. A lot of crypto issuers liked to think it didn't apply to them, but the SEC has been saying consistently that it does. There's argument over whether crypto brokers, exchanges, or miners are subject to regulation. But anybody who created and issued a cryptocurrency is clearly making a public offering of a security.

The crypto community got away with a lot during the "line goes up" phase, because the SEC usually acts only when investors lose money. After a 2 trillion US dollar loss in market cap, that phase is over. There will be more complaints and more enforcement actions.

So far at least, this is not the worst bear market ever in crypto. ETH right now is down about 80%, but in 2018 it dropped 94%.

It's the biggest financial impact. Last time around, it wasn't that big a financial market segment.

Curious, do you think this makes a fast recovery less likely? Or more?

The minor coins that went down are down forever.

>It may also lead to jail time for a substantial portion of the crypto community.

I'm cracking up over here. Are you actually being serious?

They'll be kept company there by all the people who caused the 2008 US housing crisis.

I’d claim that tax misrepresentation would likely lead to some jail time, particularly for those that don’t have the funds for legal representation. As far as I can tell, the prevailing point of Bitcoin is to make capital gains.

If crypto is a commodity, people still owe the same capital gains tax.

The IRS has been giving tax guidance on crypto for years; any US person in crypto with half a brain has been following it.

Agreed. I was providing an example whereby a person could end up in jail from participating in crypto.

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