Coinbase Sues the SEC | Hacker News Reader

Coinbase Sues the SEC

theblock.co

Here's the Petition for Mandamus: https://assets.ctfassets.net/c5bd0wqjc7v0/5PWsXaPsqQ61gA9wlF... [PDF]

Key quote:

Coinbase brings this mandamus action to seek modest, but meaningful and time-sensitive, relief: a writ requiring the Securities and Exchange Commission (SEC or Commission) to act on Coinbase’s pending rulemaking petition to provide clarity for the crypto industry. Coinbase does not ask the Court to instruct the agency how to respond. It simply requests that the Court order the SEC to respond at all. The Commission has repeatedly demonstrated that its mind is made up to deny the petition. But the Commission’s delay in formally announcing that decision has enabled it to improperly delay judicial review at a critical moment for the industry.

(As an aside, I consider it journalistic malpractice to publish a news story about a court filing without including a link to the filing itself.)

> (As an aside, I consider it journalistic malpractice to publish a news story about a court filing without including a link to the filing itself.)

Likewise for legislation and for scientic research (when its open access). It can just be a footnote, if they're worried about sending the reader off down a rabbit hole.

I see we're still dancing this same stupid dance. Step 1: Invent something that looks exactly identical to something that is regulated. Step 2: Claim it should be regulated differently. Step 3: Act like the victim when the SEC doesn't play your dumb game.

This whole thing has been silly, coinbase has been making this disingenuous argument for years now that they want "regulatory clarity" around crypto, but when that clarity turns out to be "We already have rules maybe you should follow them" they act all surprised. At the end of the day it's very simple, crypto that complies with the law isn't really a thing anyone needs.

Bitcoin has been created to avoid regulations and intermediaries when exchanging value. Smart contracts allow you to have tokens tradable 24/24 7/7 with no government oversight whatsoever and complex interactions with users.

It's not “identical”, just as trading coconuts for pearls is not the same with options trading, executed by an OTC dark pool in the US market.

Also, the regulator doesn't agree with you : Gensler refuses to say if ETH is a security or not. Following your line of thought this should be a no-brainer. Maybe there's a political reason behind this unprofessional behavior from the American regulator?

Anyway, crypto leaving the US is a net positive for the world, as it will further free itself from imperialistic domination.

Yes, Bitcoin was made so that you don't need AML and KYC. That doesn't mean they're not still laws. Gensler refuses to say ETH is a security because he doesn't want to bar the CFTC from also suing the hell out of them. It's not unprofessional, it's pretty standard.

Yes, it's great that Bitcoin will move away from free and open democracies to banana republics and despotic regimes- the true bastions of freedom.

The fact that you think the CFTC wouldn’t sue anyway and that the SEC is employing some sort of professional courtesy exposes how much you actually know of whats been happening with the SEC and crypto. Also that you imply him saying something is a security would automatically make it so is even more so telling.

The CFTC is not happy with Gensler’s blatant power grab either https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstateme...

How about firearms? US Constitution said you had the right to own one, so the law should be the same for muskets and RPGs? I know it's an ongoing debate in the US ;-)

Also, Bitcoin was made to be an alternative to cash, not an alternative to banks. So it can be discussed that KYC/AML should apply.

If it's clear, why hasn't SEC actually enforced? It's been over a decade.

Because it's a small niche no one really cares about? The SEC worries about structural problems and protecting retail. Crypto is neither, the second it threatened to become either it got absolutely blasted.

That doesn't make any sense. Retail is heavily exposed to retail. Did you watch the recent congress interview of the SEC? It was all crypto focused. Crypto is probably the #1 topic for the SEC. They just haven't enforced because they don't have any authority.

SilverBirch doesn't respond once you bring logic in because they don't actually know what they're talking about. Look at their other comments on crypto and some of the responses. They're just a bandwagoner

Can someone comment on whether or not this is a reasonable thing for them to do? What is the potential good outcome or bad outcome?

The SEC / current administration declared war on crypto, and Coinbase in particular, for unclear reasons. This is one of the few ways Coinbase can fight back a little.

[Some speculate the reason is the FTX debacle, and the political donations of its founder, and the politicos wanting to be seen "taking care of that crypto problem"].

It's not reasonable - the SEC has already provided clarity on crypto to Coinbase however they don't like the answer, because the answer potentially involves them being regulated out of existence.

No they have not. Gary Gensler still won't give a simple "yes" or "no" to whether ETH is a security, even when under oath in a hearing.

>SEC has already provided clarity on crypto

oof, so...is Ether a security?

Is this tweet an exchange? https://twitter.com/hoffmang/status/1515797969802436608

I’m confused. Doesn’t the lawsuit claim that the SEC has, in fact, not responded to Coinbase’s petition?

The SEC has made it clear which parts of securities law Coinbase is violating in a Wells notice issued in March https://assets.ctfassets.net/c5bd0wqjc7v0/6G5AjtDvRqRdiwlijK....

I've heard some people express the view that the SEC is currently willfully undermining due process by continuing to posture but without taking formal action which would entitle the targets to gain access to judicial review. (With an implication that they're doing this because they know their position is likely to be found unlawful.)

It's a similar accusation that I've heard lobbed against the executive branch in recent years: announce a forthcoming executive order, which would be plainly unlawful and ripe for a court to halt but then don't actually formally issue the order -- denying anyone standing to bring action over it. This achieves the intended, unlawful, effect via parties that comply out of ignorance, in preparation, or out of fear that it might suddenly take effect and leave them in the wrong.

I haven't looked into the details -- and don't even know if enough are available-- to figure out if this position is well founded.

Putting aside the due process angle, there is also a parity consideration. The market benefits from clear, enforced rules because absent them the parties most willing to violate the rules while pretending to comply have a competitive advantage. The more clear and the better enforced the rule is, the more level the playing field. It may well be better for coinbase to end up with a decision which significantly restricts their business so long as its clear enough to have the effect of restricting their competition as well -- while it's in the grey competitors with less to lose will be in a better position.

> This achieves the intended, unlawful, effect via parties that comply out of ignorance, in preparation, or out of fear that it might suddenly take effect and leave them in the wrong.

Though only on a fraction of parties, right?

The remaining folks would ask a much higher price in exchange for the increased risk, but they would remain.

Indeed, but almost no policy has 100% effect due to the limitations of enforcement.

It feels a lot like "We perform illegal searches against pedestrians that look poor, because we know they can't sue to defend their rights." -- impacts only a portion of the public! The law should be the law for everyone, the fact that it applies so some more than others is not generally a virtue. Sure less people hit by an unlawful rule is better, but NO people should be subject to unlawful rules.

More specifically for cryptocurrency there are bad selection effects: Alice and Bob each consider running an exchange. Bob is careful, realizes the law is unclear and departs the space. Alice is a cowboy and rushes in, does a much worse job than Bob would have done.

Worse, Alice may realize that uncomfortable litigation is for sure in her future no matter what she does in the space (except exiting entirely) and so she decides that she should scam big or go home: if she takes in billions from the public on a bunch of baseless hype she can pay a 2% settlement to the SEC to get free of it. ... or she can be conservative, raise a tiny amount and get ruined by any SEC action yet save countless people from a dubious investment.

Unclear rules and unequal enforcement is like taking only half the bottle of antibiotics, it breeds superbugs and still poisons the helpful bacteria.

Not even within the SEC they seem to agree with this view. As shown by the plenty dissent letters SEC Commissioner Hester Pierce has sent.

https://www.forbes.com/sites/digital-assets/2023/04/19/i-dis...

https://www.sec.gov/news/statement/peirce-statement-kraken-0...

https://www.sec.gov/news/statement/peirce-rendering-inovatio...

"Not even" isn't really the right way to put it. The democratic commissioners are consistently anti-crypto and the republicans are relatively pro-crypto.

It is "not even" because Gary speaks for the SEC as the head (even though he keeps trying to say he doesn't while throwing lawsuits everywhere), while within his agency there are people that are strongly against his actions. So yes, not even the SEC agrees with what the SEC is saying

It's pretty clear you haven't actually looked at the parts of the Securities Act they're referencing in the Wells Notice. They all refer to selling securities as an unregistered broker. The part that everyone is trying to argue is whether certain cryptos are securities or not.

You're being disingenuous by saying "the SEC is totally clear!", when in fact, they can't even give a straight answer as to whether ETH (top 3 crypto and probably most used for development) is a security.

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