Coinbase does not list securities. End of story
blog.coinbase.com
blog.coinbase.com
All crypto should be treated as securities. The rampant insider trading, lack of transparency in project finances and decision making is insane.
I've consulted for a few crypto projects. In most of them, the founders completely misused ICO funds for personal gains and traded their own tokens with inside info.
If your project token is available to be purchased and sold in the US, they should be subject to the same rules other securities follow.
Scamming people shouldn't be this easy.
> The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
For example, foreign currency is not a security, and an intuitive stance would be that crypto is far closer to foreign currency than it is to stocks. Other sources have a more useful definition in my opinion [1]:
> Firstly, a security is simply a financial instrument that represents a specific ownership position in either a corporation, a creditor related to a governmental body, a publicly traded corporation, or rights to ownership as represented by an option. The security must represent some type of financial value. Securities are generally categorised as either debts or equities, with a debt security indicating money that has been borrowed and must be repaid.
Under this definition, it is hard to see how the average "boring" cryptocurrency is a security.
This is probably going to be the point of contention. There's no shortage of people wanting to argue Bitcoin really does have financial value, cures cancer, etc...
1) If there is no contractual agreement for future performance, it cannot be a securities contract (a "security").
That we can test before applying 2) the Howey Test, and then 3) assessing whether it's a Payment, Utility, Asset, or Hybrid coin/token
From https://en.wikipedia.org/wiki/SEC_v._W._J._Howey_Co. :
> "In other words, an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise."[1]
> "The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value."[1]
Collectible coins, trading cards, beanie babies, real estate, and rare earth commodities, for example, are not securities per US securities law. Do these things fail a hypothetical and hopefully helpful "must be an agreement for future performance" litmus test for whether a thing is a security per US case law precedent?
What must be fed into the FTC CAT is a different set of policies.
From "Guidelines for enquiries regarding the regulatory framework for ICOs [pdf]" (2018) https://news.ycombinator.com/item?id=16406967 https://westurner.github.io/hnlog/#comment-16407277 :
> This is a helpful table indicating whether a Payment, Utility, Asset, or Hybrid coin/token: is a security, qualifies under Swiss AML payment law.
> The "Minimum information requirements for ICO enquiries" appendix seems like a good set of questions for evaluating ICOs. Are there other good questions to ask when considering whether to invest in a Payment, Utility, Asset, or Hybrid ICO?
> Are US regulations different from these clear and helpful regulatory guidelines for ICOs in Switzerland?
Does a person have the responsibility of evaluating contracts before entering into them; for example, with the belief that it's a securities agreement for future performance? What burden of responsibility has a securities investor?
Does that business sell any registered securities at all? Why did you think they were selling you a security? Were you presented with a shareholders agreement? A securities agreement? Any sort written contract? Why did you think you were entering into a securities contract if there was no contract?
When does the Statute of Frauds apply to phantom contractual agreements for future performance?
Statute of Frauds: https://www.investopedia.com/terms/s/statute-of-frauds.asp :
> The statute of frauds (SOF) is a legal concept that requires certain types of contracts to be executed in writing. The statute covers contracts for the sale of land, agreements involving goods worth over $500, and contracts lasting one year or more.
> The statute of frauds was adopted in the U.S. primarily as a common law concept—that is, as unwritten law. However, it has since been formalized by statutes in certain jurisdictions, such as in most states. In a breach of contract case where the statute of frauds applies, the defendant may raise it as a defense.* Indeed, they often must do so affirmatively for the defense to be valid. In such a case, the burden of proof is on the plaintiff. The plaintiff must establish that a valid contract was indeed in existence.
Statute of Frauds: https://en.wikipedia.org/wiki/Statute_of_frauds
Q: When should you check for a contractual agreement for future performance, for future returns? A: At least before you give more than $500.
What process does your state have for approving assets for listing by cryptoasset exchanges? When or why does a state reject a cryptoasset exchange's application to list a cryptoasset?
Is it the case that SEC does not provide a "formally reject an unregistered security which is thus not SEC jurisdiction" service?
If some 50 states failed to red flag a cryptoasset, I find it unreasonable to fault cryptoasset exchanges for choosing to list, or retail investors for failing to review a contract for future performance and investing.
I'm not an expert on security law. All I know is that there needs to be far better regulation around crypto whether it's labeling them as securities or creating brand new regulation. It's just way too easy to scam people in crypto.
China got this right by banning cryptocurrencies. It seems like the US is happy to wallow in its own crypto scam waste while other countries are more efficient with how they allocate resources in their economies.
You probably aren't from the US, but we don't have a top down rule of how resources are allocated like other countries. It is a free market, so if someone wants to waste their resources building electric cars or a search engine - they are more than welcome to do so.
You are confusing economic policy with enforcement of laws. If the majority of people thought LSD what a good idea, they would elect people who would change that law.
At least acknowledge the difference between ICO funds, NFTs, native tokens, inflationary or deflationary assets, liquidity pools, slush funds with voting and governance attached.
Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
* Indexed says that you'll "gain exposure to passively-managed crypto index portfolios represented by a single token" and references their $2.25m assets under management.
* Kromatika says that they'll be selling some reserved KROM tokens on an ongoing basis in order to fund their project.
* DappRadar says that, by buying their RADAR token, you will help scale their "Dapp store".
The second and third are perhaps arguable, although I struggle to believe that anyone would buy their tokens except as an investment in the future of their platforms. The first is the most obvious security imaginable. This kind of thing is why I don't usually engage with the details of specific coins; at least when we're talking about exchange-listed coins, they all end up being like this.
They don't want to distinguish between any of that and instead want to blanket all of them and say that they are all the same. Not all NFTs are JPEGs and there is an obvious difference between a 'coin' vs a 'token' where those blockchains which allow tokens, you will see them have ICO launches since 2016.
> Even getting some nuance on the different ways in which one thinks different crypto assets are a scam would be nice. But here I see no engagement or interest in the particular assets in question or the details of the story. Why?
I think the right approach is to wait for the Ripple vs SEC case which will not only determine whether if XRP (Ripple's blockchain coin) is a security or not, but the wider implications on other coins and tokens. But as for ICOs in general, the SEC has already cracked down on unregistered ICOs in 2018, making them illegal in the US.
Overall I don't think you will get a rational response on this site about anything mentioning crypto. Instead, the typical response you will get on HN is always to the extreme: 'All of crypto is scam', 'Ban it all, ban everything crypto, all of it', 'web3 should die in a fire'.
It is indeed the same absolutist nonsense that doesn't add any new arguments other than spreading regurgitated garbage that is recycled from other anti-crypto supporters and repeated here.
> It's so tiresome.
Yes, isn't it? Can we regulate this space under the same rules as other finance yet? Or do we need Joe Public to be ripped off for a few more billion first?
Its rampant in discords and telegram chats.
If my exchange was accused of having an employee doing something so damaging as insider trade against my customers, I would deny it if it were false, or apologize and promise corrections/reparations if it were true.
Instead, Coinbase does not deny that their employee damaged their customers, but instead spend their effort in denying the legal technicality that could make them liable.
I've made up my mind, Coinbase leadership are scumbags.
I think the fact that Coinbase does not deny that their employee acted wrongly is a good thing.
Their stance is that cryptocurrencies aren't securities to avoid ("unfair") SEC regulatory capture.
Obviously they don't deny it because it's true, that's not my point. My point is that even being true, their first concern could be their customers, but it's not because they're scumbags.
[1] in case you missed it https://www.justice.gov/usao-sdny/pr/three-charged-first-eve...
And the result of that rests on the Ripple vs SEC case for determining if XRP or any other crypto is a security of not.
I suppose hubris and cryptocurrencies go together, but it still struck me.
In the UK, we just designate certain markets as "regulated" (stocks for instance) and others as not (eg FX). That would avoid this whole nonsense where the SEC etc have to argue that some things ARE securities and others are NOT (if bitcoin is a security then stamps definitely are, do the SEC want to regulate stamps? Or Baseball cards or cars, the examples are pretty endless...).
Watching all of this makes me think regulators either being disingenuous or dumb. I doubt it's the latter. So is this someone just grabbing power for its own sake ("I can get more salary and a better office if we get to regulate crypto)? Or maybe trying to get media coverage to up their personal brand for a political career? Either way, if congress wants the SEC to do this, they should pass such a law, and if they haven't then the SEC should be careful what it sticks it's nose into not least because regulating all of Crypto would be exceedingly difficult and error prone.
A BTC ETF could maybe be the same.
Similarly shares in a farm would be regulated, but farms (or cattle :) ) would not be. Otherwise the SEC ends up regulating all known trade and/or value production...
Say what you want, but I consider these three people fraudsters, even if the law doesn't exactly cover this "angle".
I expected Coinbase to react like this, of course. And I hope the whole scam thing in crypto will eventually be properly regulated.
I'm all for innovation in Fintech; I am not in favor of scamming millions of people just because the laws are not up to speed with it.
Former Coinbase PM charged in cryptocurrency insider trading tipping scheme - https://news.ycombinator.com/item?id=32180428 - July 2022 (370 comments)
Having different options is what makes life fun. If you want safe, regulated, buy your bonds, etf and so on. If you want extremely risky investments where you have no one to blame but yourself, there's crypto.
The focus should be on informing people how risky these assets are and that there is a very good chance they will go to 0. If you are fully informed of the risks then you're free to gamble your money.