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Comment by thepasswordis | Hacker News Reader

I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates.

In some states I can use my money to hire hookers, or buy drugs.

But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder?

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> I can take my money and put it into a slot machine, gamble it on horses, gamble it on sports games. I can buy useless thousand dollar sneakers, I can buy pokemon cards. I can waste my money on absurdly overpriced art, give it to scammy non-profits, donate it to scammy spoiler political candidates.

> In some states I can use my money to hire hookers, or buy drugs.

> But if I want to buy crypto, all of a sudden that is a problem and the government needs to come in and "protect" me from it. Why is that, I wonder?

If the casinos advertised slot machines as an investment, would you still wonder?

He probably would. I have access to a bunch of good investment opportunities that US citizens don't have, because they are "protected" from accidentally making money. I have a stack of little pamphlets outlining interesting investment deals in Australia all labelled with "don't show this to anyone in the US, if you are a US person this isn't for you and we ask that you don't read it". This isn't crypto, only standard shares. Nothing fancy.

It is pretty stupid. Good for me, it means I don't have to compete against people with money, but it does showcase how crazy the policies are. It is, in some senses, as bad as the Chinese capital controls.

Bitcoin has outperformed a number of investments so far and has proven more reliable than, eg, some bonds by Credit Suisse. If people want to put money there it is passing tests of legitimacy right now. Outperforming the Swiss is a reasonable bar.

The Swiss =|= Credit Suisse

Also, I know of a bridge that is up for sale. A Nigerian prince told my late uncle who used to work there in the oil and gas sector. But don't tell the Americans, no need to waste such a great investment opportunity.

Credit Suisse certainly does not encompass all Swiss, but it certainly includes a number of them.

https://en.wikipedia.org/wiki/Metonymy

The fact that you are equating this major Swiss bank to bridge salesmen and Nigerian princes kind of proves OP’s point.

It seems you did not read OPs comment completely, did you? The second refered to his investment opportunuties that have "not for US citizens" written on them.

And Credit Suisse wasn't the most stable bank to begin with, despite being the second largest in Switzerland. So of course their bonds have been riskier than others. On the other hand, hadn't Credit Suisse failed those bond returns would have been higher as well. No idea why people just don't get the link between risk and returns

Investment opportunities in major Australian companies. You might have your own thoughts about the Australian market, but we're hardly talking wild risk here. Although, in fairness, Transurban Group probably does sell bridges and Rio Tinto/BHP probably do a lot of business with Nigerian Princes so you might get some irony points. But the profits are there.

But let us not get distracted from the main point, the US regulations in the area are the stuff of laughter. They're literally being forbidden from raking in easy money by their own government for no good reason.

Ah yes, the good ol' trick old as scammers themselves, investment pamphlets with secret sauces, magically unavailable those holding US passports because some made up reasons (or actual regulatory concerns which should interest you if you are smart).

Also, investing in shares, competing for shares, my friend I don't think you understand all this mumbo jumbo you wrote

Isn’t this pretty standard among developed countries and not unique to the US?

I don’t think, to reverse the example, that US companies can offer investments to Australians without an AFSL or without oversight by ASIC or APRA.

Bernie Madoff also outperformed the major banks. I bet you would have been mocking people for not investing in his schemes

I guess if you have a problem with the laws of the country or state you are in, you should take it with your local legislator. They're the only ones able to do something about it. Skirting the legislation because one considers it "stupid" is not gonna bring anybody very far.

I suppose you apply those principles consistently even for things you find morally repugnant?

I cannot find off the top of my head those morally repugnant laws you might be talking about. And as we were mentioning, financial regulation and investors protection for one are definitely not morally repugnant - to me.

Let’s not pretend like anyone thinks we can reasonably reach out to someone and have any impact on what the SEC does. This country runs off money, not voter sentiment, and we all know it.

I may be misremembering but I seem to recall that the Pokemon cards and other collectible card games go out of their way to clarify that they are NOT investments.

A huge number of crypto projects never advertised their tokens as an investment, and explicitly and repeatedly stated that they are not investments and should not be expected to appreciate, yet the SEC still charged them with promoting an unregistered security.

I get scam emails that say "this is not a scam!", too.

You losing the context here. The point was that slot machines are a scam, but also a billion dollar industry.

Slot machines are typically heavily regulated.

Saying "this is not a security" in a disclaimer does not stop your ICO/token/shitcoin from being a security.

Marketing a token as an investment and selling unregistered securities are two different things. You can do the latter without the former and it's still illegal.

Please read about the Howey test. Saying "its not a security" obviously doesn't matter anymore than if i rob someone and say "not a robbery" during the crime

Can you give an example of one?

Pretty much all of them: they go out of their way to state it is not an investment.

Taken the GNT token, used in the Golem network, for example:

https://assets.website-files.com/62446d07873fde065cbcb8d5/62...

Just reading this and I don't understand how anyone would say this passes the Howey Test. This is clearly a security. The only possible debate is whether there is an expectation of profit, but I can't see anyone seriously entertaining that debate -- there was an ICO! What do you think the median person buying into that ICO was expecting? "I'm going to spend a few thousands dollars on this token that might have utility in this project in a few years"?? Come on.

If this is a security, then so is pokemon.

This is a token sale. It never called itself an "ICO".

The whitepaper never once claimed the token is expected to profit its owners, and repeatedly warns of the risk of loss. It explicitly says the paper is not an investment prospectus as well.

>>What do you think the median person buying into that ICO was expecting? "I'm going to spend a few thousands dollars on this token that might have utility in this project in a few years"?? Come on.

If it turned out that the median person buying Pokemon cards were doing it for the purpose of deriving a profit, that wouldn't turn Pokemon cards into securities.

The difference between pokemon and this is the common enterprise component. This is very obviously a common enterprise; pokemon is very obviously not.

Can you name one?

AFAIK horse races and slot machines are regulated, so they are required to operate within a framework. This "guarantees" that you are not investing your money on rigged horse games or on slot machines misrepresenting your odds of winning or outright lying to you.

IMHO the correct reaction to this should be to make regulation requirements accessible and manageable so that the overhead is not prohibitive to smaller entrepreneurs. No regulations will create lemon markets and lemon markets don't self correct because the people who turn in it into lemon markets can just walk away rich.

Not so much protecting you, but ensuring a fair playing ground. If crypto is "finance", then it has to be subject to financial regulations.

The definition of what "finance" is seems somewhat arbitrary doesn't it?

Person A: spends $1k per year on lottery tickets and doesn't win anything.

Person B: puts $1k into BTC at the years high and sells at the bottom getting back $200.

Both people had the goal of making a double percentage return. One had an arguably significantly higher chance of doing that.

One person was able to buy their lottery tickets at the corner store in cash, no questions asked.

The other had to file a ream of identity documents, sign an investment statement and keep constant watch on "regulations", tax obligations and even in some cases the base legality.

And then Person C comes along, and over the course of the same year sinks $1k into a bunch of clothes they never wear and eventually throws away and nobody bats an eye.

When it comes to "finance", whose money is it, really?

You’re just making things up now. Person B doesn’t have to “file a ream of identify documents” or keep watch on regulations to put $1k into Bitcoin.

As for taxes, you owe them on lottery winnings as well. And for any non trivial amount, you will pay them.

Which of the worlds various hundreds of disparate tax obligation and financial regulation jurisdictions are you referring to?

Or have you "made up" there's just one and its yours?

If you're going to attack the regulations, at least address what the regulations are there for. The regulations are very very simple, it provides a baseline to ensure that people understand what they're investing in. That's it! That's what the regulation is there for. When someone buys clothes or a lottery ticket they know exactly what they're getting - and lotteries are regulated to ensure they operate the way people expect them to, there's laws surrounding selling counterfeit clothes.

That's all this is. Ensuring people know what they're buying. And it's for good reason, generally it's difficult to even get experts in crypto to agree on the properties of a particular product, so misunderstanding what crypto does it a very valid concern.

That's so inaccurate.

What part of the SEC siphoning millions of dollars of customer-created profits out of crypto companies, and then letting them continue on doing business almost exactly the same as before has anything to do with educating people about anything?

What has NY's extensive restrictions on crypto business versus other states have to do with educating people about what crypto is?

And when someone buys a lottery ticket, or gambles at a casino, I can guarantee you they almost certainly have zero idea what they're buying - or they would't buy it. How's this "education" working out there?

There may well be laws around counterfeit clothes, but are there laws around selling two identical sweaters, possibly even made in the same factory in China, but one costs 100x the other one because one was "designed" by a particular brand?

Where's education and regulation on that one? People are being duped in their millions into paying hand over fist for disgustingly overpriced clothes and I don't see anyone "protecting" them.

There is no such law. Pokemon is no different than a digital token with respect to the applicability of securities law, the SEC's inconsistent treatment of the respective assets notwithstanding.

And your argument begs the question of why any restrictions should be placed on people buying/selling financial products to regiment how they do it.

Maybe if we compared the market size of the Pokemon cards trading with the crypto trading, and also the risks of one compared to the other, we might get a hint why one is in the spotlights while the other not. Not all problems can and have to be addressed at once, so having a priority list to apply your limited resources makes only sense.

If the SEC began interpreting securities laws as designating Pokemon card, wine and luxury watches securities, Congress would change securities laws. And that's why they don't. They're exploiting the novelty of cryptocurrency to give it this designation without a broad backlash.

As a matter of law though, the case for being a security is no stronger cryptocurrencies than for Pokemon cards.

You realize that the “securities” at issue here aren’t just ETH and Bitcoin, right? They are packaged financial instruments. “Stake this crypto and we’ll pay you a fixed rate of return.” That’s a bond, or a bank account. Either way, Coinbase isn’t following the rules.

https://www.coinbase.com/earn

If you think any of this is analogous to a pokemon card or people collecting pokemon cards, your understanding of what is going on right now is pretty much useless.

They're identical in terms of all legal tests for an asset being a security, your insults notwithstanding. And if you contend otherwise, it would be constructive that you articulate why instead of engaging in more low-brow sophistry.

again, they're not - i don't know which youtuber told you that, but you need to go back and re-think. It's not a personal insult to tell someone they're confused. You're confused. There isn't a generous interpretation on the planet that makes your analogy useful.

Everyone knows what they are doing when gambling etc

But nowadays crypto is being pitched as an investment to the layperson who doesn’t understand the risks and isn’t being told those risks by the exchanges. It’s those folks the SEC is trying to protect.

That and prevention of larger market issues that can arise from unregulated financial services, ie FTX

>Everyone knows what they are doing when gambling etc

No they absolutely do not.

Gambling is a pretty easy concept to understand, and it’s been with all of us since we were kids. Person A wagers an amount that a certain outcome will occur. Person B accepts that wager and agreed to the terms of the wager. If every kid on the playground can understand how a bet works I guarantee adults can too.

I can assure you many people gambling on slot machines think they'll come out ahead. Gambling can be extremely addictive and harmful, to the point the addict stops using logical reasoning.

I don't think they actually think they will come out ahead. I think they are willfully ignoring reality. Gambling addicts also lie about how much they have won gambling, but that isn't because they can't count, they just ignore the inconvenient reality, because being aware of that reality would be extremely painful when you don't feel like you can control your addiction to gambling.

Gambling is easier to understand than investments. That being said I agree there should be more regulation. You should be required to state excatly what expected value and variance is when you offer gambling games. Same with fees. "This slot machine pays off 45% of your bet on average and here is how often you win X, Y, Z" or "organizer of this poker game earns about 90% of deposited money in rake and other fees while the remaining 10% is cashed out by the winners".

It would be a better world if we had regulation forcing such disclosure but it doesn't mean that if we still don't have it for gambling we shouldn't have it for things advertised as investments.

I’ve talked with otherwise intelligent people that thought they were coming out ahead on pull tabs or Magic the Gathering cards.

Investing in crypto is also easy to understand. It’s speculation and the price might drop to 0.

It’s the psychology of both that are harder to deal with.

They do. Everyone knows they get the money only if the wind otherwise they lose it all. Most underestimate the "house always wins" factor, but that's not the point here.

Crypto advertises with FOMO on a new world. It's "everybody is doing it, don't be a sucker but a winner in the future", and not "this is a risky asset where you might lose everything".

For better or worse, the US controls international banking. If we lose that, we essentially lose all of our non-military options for intervening in geopolitical situations. Keeping crypto down is sort of in the US's interest.

> Keeping crypto down is sort of in the US's interest.

The opposite is true (think of USDC). Eventually politicians will get it.

You’re implying the government doesn’t regulate any of those other activities?

Gee wiz, it’s not like “rug pulls” exist. That’s definitely not a thing that would ever happen and no way would there ever need to be regulation to prevent gullible people from being scammed.

I don't know, why is it? Are you sincerely confused and do you think any of the things you listed prior to buying crypto are at all the same thing?

It protects you from investing in private companies like SpaceX IF YOU ARE POOR too, you are welcome!

Almost everything you listed is heavily regulated. Why shouldn’t crypto be regulated as well?

Can you link me to the regulatory body that oversees sneaker markets and sneaker exchanges? My teenage kids will be very interested in reading this.

I did say “almost”. But in general in the US, the FTC regulates interstate commerce. IANAL, but for an overview of e-commerce regulations (assuming you’re talking about online sneaker exchanges), check out https://iclg.com/practice-areas/digital-business-laws-and-re....

The slot machine is regulated so that it has fixed odds and isn’t rigged against specific players

The SEC's position is that some crypto coins are securities. Gambling, hookers, political donations, and non-profit donations are all regulated.

Securities are regulated even more tightly because it's *really* easy to commit fraud and fleece people of their money by lying about investments. Capitalism works because most people trust that they can make investments without being defrauded.

With hookers, non-profit donations, political donations, drugs, overpriced art, etc., the consumer knows more or less what they're getting. Lots of crypto coins are scams, and it's reasonable for the government to regulate them

That said, as Coinbase complains, the SEC is doing a really bad job of regulating crypto securities in a usable way.

That isn't what the argument is about. Neither does Coinbase argue the SEC is in charge of regulating what isn't a security, nor do even other branches of the government agree. The CFTC says they're in charge of regulating most cryptocurrencies.

Are sneakers, pokemon cards, and art collections regulated?

What if I buy some sneakers thinking I'm going to flip them and then I lose money?

No. They aren't investment contracts. They're just sneakers.

The SEC regulates the market for investment contracts (securities). The CFTC regulates the market for commodities. The legal point is that the SEC says Coinbase is a securities market, but haven't made a specific accusation, and Coinbase disagrees. But if some digital assets are securities, then the SEC definitely has jurisdiction.

Nobody regulates the pokemon card market or sneaker market. I suppose congress could decide that it's super important to regulate sneakers, and set up the Sneakers and Exchange Comission. But they haven't yet

The securities/commodities division is so strange, I find it hard to parse. Like, I understand "shares of stock" are different from "corn". Sure. But then you get into strange things and it's unclear which they are.

You can wear them?

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