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The SEC does not block such things because it thinks those are overpriced. The SEC does not care about the price. The SEC did not, and should not have blocked W

The SEC does not block such things because it thinks those are overpriced. The SEC does not care about the price. The SEC did not, and should not have blocked WeWork, to take an example. What the SEC requires is a registration of the security with the form S-1/F-1. Nothing more, nothing less. If the paperwork is complete they will greenlight this offering. I don't know why wouldn't they just register. Cut a very tiny percentage of the amount, pay someone to do the paperwork, you can go ahead. But do it with cards on the table, as the securities registration form requires (it's quite extensive and requires, for example, a clear statement of all risks involved in the offering).

wmf 7y ago
The time and cost to do an S-1 is massive and it can reveal embarrassing facts that lower the company's valuation, as in the case of WeWork.
- Animats 7y ago
  It's the "embarrassing facts that lower the company's valuation" that matters for a billion dollar offering. The few hundred thousand dollars of legal costs aren't the issue here.
- edraferi 7y ago
  Which is, of course, exactly what you want. These rules exist because charlatans bilked a lot of consumers out of a lot of money. The financial industry will do this consistently because the incentives are obvious. There has to be some external force slowing down the fraud.
  - thefounder 7y ago
    >> These rules exist because charlatans bilked a lot of consumers out of a lot of money The rules are made by the "deep state" to serve the establishment. On a more serious note these rules/regulations/processes also deny access to capital to startups. It's not really that easy or cheap to go public on a stock exchange. People should do their due diligence before to invest in stocks anyway, right?
    - indymike 7y ago
      How exactly does one do due diligence without a substantial amount of disclosure to study?
matthewdgreen 7y ago
My (admittedly limited) understanding is that registered securities can only be traded on specific exchanges with a special license. Most cryptocurrency exchanges don’t have this licensing, so becoming a properly registered security fundamentally locks you out of this exchange infrastructure.
- spurdoman77 7y ago
  Not sure if thats actually required, but for sure it makes it easier for SEC to approve a security if it has been already given greenlight by NASDAQ. I would believe the law doesnt dictate marketplaces but in practice the marketplaces enforce more regulation than the actual regulator.
  - H8crilA 7y ago
    It's the other way around - once SEC blesses something then NASDAQ or NYSE or any other exchange can list it. NASDAQ is a private, for-profit corporation, not a regulator. I doubt they frequently reject listings, at least in the short term it's in their interest to have as many listings as possible. In addition - NASDAQ, like all other exchanges, is subject to its own regulatory oversight from the SEC. With all of that please remember that playing by the rules is not a pure loss. It opens you up to professional/institutional investors. These guys know and trust what the SEC says, far more so than what any random company says. Also, remember why was the SEC created in the first place - it was after the 1929 crash (which was far more severe than the 2008 crash, see for yourself on a log() chart) and after the great depression that followed.
rolltiide 7y ago
Tradable security: wash sale restriction Tradable product or commodity: no wash sale restriction Entire trading strategies change with securities designation, so thats one example above. Entire free speech restrictions are created with securities designation Entire accounting restrictions are created with securities designation And the list goes on There is no such thing as “just register bro!” It is a designation that carries a lot more baggage than just disclosing some internal company financial statements
- cortesoft 7y ago
  Except these are very clearly securities? How could they possibly be a product or a commodity?
  - LiquidSky 7y ago
    You're right, but some people seem to think cryptocurrency is magically exempt from securities laws because they really want them to be.
    - rolltiide 7y ago
      > magically exempt from securities laws because they really want them to be. Well when the law gets changed that's exactly why and how it gets changed Last year, Wyoming has recategorized crypto assets into their own asset classes that is exempts them from state level securities law and others. Because it was obvious to the legislature and governor there that debating commodities, currency or securities status was ignorant. This year, Montana representatives have also reached the same conclusion. This year, Colorado's representatives have also reached the same conclusion. US Congress has a bill in committee mirroring these. It isn't a priority for the House as you might imagine. Holistic US re-imagining of these assets isn't relevant until the Federal legislature reaches consensus. A week ago Liechtenstein's legislature unanimously reached the same conclusion, which inherits limited consensus amongst all European Union/EEA/EFTA member states. So yes, people seem to think cryptocurrency is magically exempt from securities laws except the securities regulators that do not mirror the will of the people and are being steered by their legislatures, as designed. Courts lack latitude to lean any other way as well, until the legislature changes the law, which is happening.

wmf 7y ago

The time and cost to do an S-1 is massive and it can reveal embarrassing facts that lower the company's valuation, as in the case of WeWork.

Animats 7y ago
It's the "embarrassing facts that lower the company's valuation" that matters for a billion dollar offering. The few hundred thousand dollars of legal costs aren't the issue here.
edraferi 7y ago
Which is, of course, exactly what you want. These rules exist because charlatans bilked a lot of consumers out of a lot of money. The financial industry will do this consistently because the incentives are obvious. There has to be some external force slowing down the fraud.
- thefounder 7y ago
  >> These rules exist because charlatans bilked a lot of consumers out of a lot of money The rules are made by the "deep state" to serve the establishment. On a more serious note these rules/regulations/processes also deny access to capital to startups. It's not really that easy or cheap to go public on a stock exchange. People should do their due diligence before to invest in stocks anyway, right?
  - indymike 7y ago
    How exactly does one do due diligence without a substantial amount of disclosure to study?

matthewdgreen 7y ago

My (admittedly limited) understanding is that registered securities can only be traded on specific exchanges with a special license. Most cryptocurrency exchanges don’t have this licensing, so becoming a properly registered security fundamentally locks you out of this exchange infrastructure.

spurdoman77 7y ago
Not sure if thats actually required, but for sure it makes it easier for SEC to approve a security if it has been already given greenlight by NASDAQ. I would believe the law doesnt dictate marketplaces but in practice the marketplaces enforce more regulation than the actual regulator.
- H8crilA 7y ago
  It's the other way around - once SEC blesses something then NASDAQ or NYSE or any other exchange can list it. NASDAQ is a private, for-profit corporation, not a regulator. I doubt they frequently reject listings, at least in the short term it's in their interest to have as many listings as possible. In addition - NASDAQ, like all other exchanges, is subject to its own regulatory oversight from the SEC. With all of that please remember that playing by the rules is not a pure loss. It opens you up to professional/institutional investors. These guys know and trust what the SEC says, far more so than what any random company says. Also, remember why was the SEC created in the first place - it was after the 1929 crash (which was far more severe than the 2008 crash, see for yourself on a log() chart) and after the great depression that followed.

rolltiide 7y ago

Tradable security: wash sale restriction Tradable product or commodity: no wash sale restriction Entire trading strategies change with securities designation, so thats one example above. Entire free speech restrictions are created with securities designation Entire accounting restrictions are created with securities designation And the list goes on There is no such thing as “just register bro!” It is a designation that carries a lot more baggage than just disclosing some internal company financial statements

cortesoft 7y ago
Except these are very clearly securities? How could they possibly be a product or a commodity?
- LiquidSky 7y ago
  You're right, but some people seem to think cryptocurrency is magically exempt from securities laws because they really want them to be.
  - rolltiide 7y ago
    > magically exempt from securities laws because they really want them to be. Well when the law gets changed that's exactly why and how it gets changed Last year, Wyoming has recategorized crypto assets into their own asset classes that is exempts them from state level securities law and others. Because it was obvious to the legislature and governor there that debating commodities, currency or securities status was ignorant. This year, Montana representatives have also reached the same conclusion. This year, Colorado's representatives have also reached the same conclusion. US Congress has a bill in committee mirroring these. It isn't a priority for the House as you might imagine. Holistic US re-imagining of these assets isn't relevant until the Federal legislature reaches consensus. A week ago Liechtenstein's legislature unanimously reached the same conclusion, which inherits limited consensus amongst all European Union/EEA/EFTA member states. So yes, people seem to think cryptocurrency is magically exempt from securities laws except the securities regulators that do not mirror the will of the people and are being steered by their legislatures, as designed. Courts lack latitude to lean any other way as well, until the legislature changes the law, which is happening.