I do sympathize with anyone trying to get clear requirements in black and white terms of what is and isn’t acceptable .
I think this is more of a systemic failure.
Congress explicitly delegated these authorities to these agencies as part of the administrative state overhaul in the beginning of the 20th century. The reason was to help become more responsive, and less beholden to daily politics by putting neutral experts in charge, and by and large it works. Safety and security shouldn't be party politics.
The legal profession writ large (including legislators) consider this a feature, not a bug. The reason this is the legal profession's opinion essentially three points:
1. You can't write "bug free" laws and regulations
2. Fixing mistakes in laws and regulations is slow
3. The amount of damage someone can do with unintended legal cover can be catastrophic (imagine if I found a legal loophole to take possession of your home!)
So this has been chosen as the "least bad" solution. My personal opinion is that the SEC is acting within the spirit of the law which is what we should expect and if congress wanted to change things they should pass a new law.
I understand the spirit of the law, but I do not feel like that can override an analytical interpretation.
You may feel so, but our entire legal tradition is based on the idea that this is not the case. In fact, no active legal tradition I'm aware of nation holds strictly to analytical interpretations of its laws. This is one aspect of the world it's better to accept as a fact of life, I believe there's good reason it's what everyone has settled on.
I believe that this situation may be a failure of that way of working.
> clear requirements in black and white terms of what is and isn’t acceptable.
This document dates from 2019 and lays out in detail what constitutes a security wrt cryptocurrency from the SEC’s perspective. They’ve been quite clear about this for a long time. The relevant case law has been settled for 70 years.
https://www.sec.gov/corpfin/framework-investment-contract-an...
The SEC has repeatedly and publicly stated in no uncertain terms, what the definition of a security is and also identified specific coins traded on coinbase that they believe to be securities. Here’s an example from last year from an insider trading case.
https://www.sec.gov/litigation/complaints/2022/comp-pr2022-1...
> For example, on November 12, 2021, Ishan learned that Coinbase would soon announce the listing of the crypto asset POWR. As alleged further below, POWR was a crypto asset security
> A digital token or crypto asset is a crypto asset security if it meets the definition of a security, which the Securities Act defines to include “investment contract,” i.e., if it constitutes an investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.
> Coinbase planned to announce the listing of crypto asset AMP on its platform. As alleged further below, AMP was a crypto asset security.
> Coinbase intended to announce on July 14 that the RLY token would be listed on its platform. As alleged further below, RLY was a crypto asset security.
The real issue is that cryptocurrency companies hoped they had found a loophole —they wish the law and SEC guidance weren’t what it is, and they keep dishonestly claiming a lack of clarity exists in the hope that doing so will change things.
It's a security. Just because you called it something else doesn't mean there aren't laws or guidance on how to register it. They just don't want to.
Everyone into crypto parrots the "they won't give us guidance" line without even doing 5 minutes of research.
The head of the SEC was asked point blank multiple times if a little thing called "Etherium" was a security.
He refused over and over the opportunity to be clear and certain.
If your company wants to know what is and isn't a security, that's up to your legal department to put together a working theory, one you think could win in court if the SEC sues you. Judges are the only people who get to clarify law without writing new law.
Gensler could be fired tomorrow and the only change would be the case getting dropped, but that wouldn't make Coinbase and others compliant, any different than states with legal marijuana are compliant with the law.
He literally does.
Hence the "SEC Rulemaking Process." [1]
[1] https://www.sec.gov/oig/reportspubs/aboutoigaudit347finhtm
This is just the reality of operating in a grey area. If you believe you are in compliance with the law, and the regulators disagree or otherwise are giving you a hard time, then the matter WILL be settled by the courts or congress. Importantly, if Gensler comes out tomorrow and says "No tokens are securities, trade anything you want, we won't go after anyone", that isn't binding, and it doesn't change the law, and the next head of the SEC is still free to take you to court for being in violation of the law.
True, administrative laws are not permanent, but when they want to change things, they need to follow a certain process under the APA. Particularly relevant to the case at hand, where Coinbase argues that the APA process needs to be followed - https://assets.ctfassets.net/c5bd0wqjc7v0/5PWsXaPsqQ61gA9wlF...
Coinbase is not being sued for being an Ethereum exchange, they're being sued for
- operating an exchange, broker, and clearing agency for specific tokens that easily fail Howey (which their internal rating framework unambiguously found to be securities)
- offering and selling their own securities via their Staking program
* Coinbase is deliberately doing things that are against the law.
* The SEC is being deliberately vague/unhelpful.
There should just be a letter of the law , analytical meaning branch of government.
> There should just be a letter of the law , analytical meaning branch of government.
I don't think that's a thing that is possible. You can't write laws to cover every possible case, and writing them to be "self-interpreting" would be an extraordinarily difficult thing. Interpretation will always be required.
> The fact that the sec let Coinbase last this long is proof the system is over complicated and cannot be maintained efficiently.
There are numerous other possible reasons it took this long for the SEC to take action, other than the system being overly complicated or inefficient (lack of workers, bigger fish to fry [prioritization], the evolution of Coinbase into less of a commodities trader and more of a securities trader). Complications and inefficiencies usually require additional time and effort, but additional time and effort is not an absolute indication that something is complicated or inefficient.
I disagree with this assessment, but reasonable people can hold differing opinions on this.
Is it reasonable to have them be completely unambiguous in every circumstances? No.
Is it reasonable to have them be unambiguous in the vast majority of circumstances? Yes.
People who push that kind of system know this, and want the system to be hamstrung by exactly that situation. They want a system that can only outlaw their new, explicitly harmful scheme after an entire game of politics in congress, such that they could prevent something becoming law by encouraging the already bad stonewalling in congress. They want government agencies to be so bound up by poorly written law that they cannot administrate at all.
We both have to work in reality.
This is called "a court".
(There is a particular phrase for "the law is unclear so I'm going to sue the regulator in advance to determine if something is legal", but I've forgotten it. It's linked to judicial review)
> The SEC is not part of the executive branch.
> It is an independent agency
https://en.m.wikipedia.org/wiki/Independent_agencies_of_the_...
Not according to the government, and they're the horse's mouth on this.
> SEC commissioners are nominated by POTUS and confirmed by the senate
This is correct, but not really to the point.
> Not according to the government, and they're the horse's mouth on this.
I'm guessing that you are confused about the phrase "independent agency". Or possibly you're remembering cases like Lucia v. SEC where certain SEC staff were (unsuccessfully) challenged as not conforming with the Article II appointments clause. The insulation of these sort of agencies from direct presidential oversight continues to be a source of debate in conservative legal circles, but where these agencies sit in the constitutional order is not remotely controversial. They're not part of the judiciary and they're not part of Congress so they can only be part of the executive.
> The executive branch also includes executive departments, independent agencies, and other boards, commissions, and committees.
> The SEC is an independent federal agency
QED.
More to the point, congress lacks the ability under the constitution to create government structures outside the three branches. The language establishing the SEC makes very clear that its structure conforms with how Article II defines the executive branch:
> There is hereby established a Securities and Exchange Commission (hereinafter referred to as the ‘Commission’) to be composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate.
> he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law:
The SEC is established and appropriated by congress, staffed by people who receive government paychecks, led by presidential appointees, etc etc. I'd be interested to know whether you think it's either
- not part of the US government
- part of a different branch
- part of the US government outside a branch that the constitution specifiesThe legislative branch can demand particular action from the SEC, albeit indirectly, by altering, passing, or revoking the laws that the SEC is tasked with enforcing.
"Independent agencies exist outside of the federal executive branch. More specifically, the term is used to describe agencies that, while constitutionally part of the executive branch, are independent of presidential control, usually because the president's power to dismiss the agency head or a member is limited."
And note: Congress has the opportunity to reject rules passed by an agency that it determines conflicts with the intent of the governing law(s).
I don't doubt that the process could be improved, but insulating decisions about how to protect investors from political interference sounds like a fine idea.
In this situation, there exists a law that was passed by Congress. Coinbase is breaking that law. Is it not the executive branch's role to enforce that law?