Coinbase Sued by SEC for Breaking US Securities Rules

There's no reason to believe banks and governments haven't been stacking crypto. The argument is that it wouldn't go unnoticed and large buys would drive up the price, but a well-run purchasing project could easily handle "small" purchases over a long-term, especially if the goal is control and not price speculation.

That’s absurd. American markets are preferred by most of the planet. You may choose to keep your money out based on principal, but it won’t be a financially driven choice. It’s like buying a car based on the cars’ color. It’s one aspect but not one of the more important aspects. For most people, the criteria would be returns vs risk. American markets are relatively low risk and high return, even if we aren’t very democratic lately.

In many countries, gambling is heavily regulated. Not everybody can gamble, not everybody can offer gambling services, and there are rules and disclaimers on tickets/entries/whatever.

Similarly, yes you can ski anywhere, but some companies included waivers and disclaimers if e.g. you want to use their lifts or slopes or services.

Point is, even the best examples you came up with aren't actually a clear-cut case of "you can do whatever you want, it's on you, with no regulations or warning or protections".

At their best, regulations are a collective "We tried this, it sucked/harmed people, ouchie, let's not do it again". They ARE a "Let's learn the hard way" but on a societal scale. It is, to me, insane to take an unpragmatic, extreme, libertarian way of "everybody should learn from their own mistakes only".

(at their worst, of course, regulations are oppressive, ridiculous, overly complicated, serve limited or counter purpose, ambiguous, overbearing, and growing ad infinitum:)

Look at Telegram. They tried to use Reg D to sell the initial SAFTs, and restricted it only to millionaires, so clearly they were the type of “accredited investor” the SEC wanted.

Well, Rule 144 says after a year of holding, these millionaires could sell to anyone. Read section 4a(1) of the Securities and Exchange Act. But, somehow, the SEC got Telegram to abandon its plans and return all the money. Because the SEC argued that TON itself was a security, not a commodity, they said that it cannot be sold to the public.

What if the investors were the ones selling, and not TON? If they are not AFFILIATES of TON, purchased without a view to resell, held them for a year, then why can’t they resell a few here and there? They are not considered underwriters under Section 4(a)1. Even most states allow such sales. Not to mention that the new Reg D after the JOBS Act pre-empts state laws for the primary sales, so I am not sure the states could easily win a case.

I followed that case and it was never really clear what securities laws Telegram broke by making a Reg D filing and a SAFT. Maybe someone here can explain, if you actually read the case also.

Now the decentralized TON community is building it instead.

https://www.coindesk.com/markets/2020/04/12/making-sense-of-...

It isn't that the SEC "isn't allowing you to register." It's that crypto exchanges can't/won't properly register.

To put it more abstractly, it makes perfect sense for not all securities to be capable of becoming registered securities.

You would also get into serious trouble if you would sell a drug without approval from the FDA, and they might deny your application because it isn't fit for purpose. Same with the SEC just because you want to register your crypto security does not mean that they have to be allowed on the US market.

Because they don't have a market cap over a trillion dollars.

That is not a common enterprise. Where is the role of the "investor" (purchaser of the cards) in this enterprise?

The idea that they need “guidance” is another way of saying if we follow the clear law what we want to do is impossible so can you help us with that.

The SEC answer has been yeah no we can’t solve that problem for you.

It’s all on the first few pages of the linked complaint, they didn’t register as a dealer, broker, clearing house, and so on, because the would instantly be on the wrong side of all sorts of regulations for what those institutions are allowed to do.

They don’t want clarity. They wanted waivers. They wanted the SEC to say crypto is different so you don’t have to do XYZ.

The SEC said no.

The problem is that a whole generation of wannabe start-up bros, starting with Uber the latest, just cannot be bother with learning and respecting rules it seems. Most of those flog to crypto lately.

The regulations are designed to protected the general public from companies doing the wrong thing in the name of profit even when the intentions of the people running those companies are good. It's a check on the dark side of capitalism. Are sometimes those rules too complicated or too overbearing? Yes! Are there also people out there just to improve that? Yes, and some of them work in the regulatory agencies!

It's a messy, frustrating process that on the whole seems to be doing a decent job. Most people in US have access to clean water, generally don't have to worry about tainted Advil, or worry their life savings are going to evaporate by just storing it in a bank.

I don't know enough about the specifics of the Coinbase suit yet, but the crypto industry in general seems an awful like the banking industry of the 1800s and early 1900s in the US. During that time there were plenty of companies and people doing the right thing, but there were enough bad actors that something needed to be done. The SEC was born.

This is very likely fallout from FTX, but not because of some nefarious plot against crypto but rather the SEC realized there is a financial sector they need to focus on more closely. A SEC lawsuit is also a starting point for a serious discussion, not a criminal indictment. If the SEC believes there has been criminal behavior, they refer that to the DoJ. The likely outcome if Coinbase has been trying to do the right thing is some sort of settlement (fine) + direction on what to do differently. Then Coinbase will continue on like normal with whatever changes the SEC wanted.

But when it actually comes time for court filings, which are what really matter, they instead acknowledge that they know exactly what the rules are, but that they "disagree". And why do they disagree? "because for numerous tokens, regulation would require undue effort or not be financially viable [for Coinbase]".

"Your rules are not profitable for us", essentially.

It acts like a security, smells like a security, trades like a security, but it's NOT A SECURITY, so give me new laws for this thing I won't define!

Do you think, perhaps, that the SEC not providing answers is just allowing more time (rope) for the crypto co's to hang themselves with?

This is all hypothetical, since the SEC has given clear guidance for years. Coinbase ignored this guidance because they didn't like it.

The CFTC and SEC don't actually have to agree about something for you to be found guilty of a crime.

This is not a new problem, nor a difficult one.

The lawsuit under discussion is literally making the case that it's illegal.