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“We have no idea why the SEC intends to sue us! It is a complete mystery.” (Later in the post…) “All we’ve done is create a thing that people can trade which

“We have no idea why the SEC intends to sue us! It is a complete mystery.” (Later in the post…) “All we’ve done is create a thing that people can trade which we are moving towards selling to investors against specific SEC advice to the contrary, but it is definitely not a security and as a result it is completely fine even though we have not complied with SEC regulations in any way with respect to it.” A mystery indeed…

seibelj 5y ago
Coinbase wants to know the legal rationale as to why it's a security, but SEC is stonewalling them and goading them to get into a legal fight. The opposite of "talk to us, come in" that the SEC claims the crypto industry refuses to do.
- peterbonney 5y ago
  It is clear from their own blog post that they have communicated with the SEC in considerable detail, and the SEC has told them in no uncertain terms not to proceed. It sounds to me like the SEC welcomed the discussion, it’s just that Coinbase doesn’t like the answer they got.
  - seibelj 5y ago
    The blog post says they did not give a rationale. That is the entire essence of the post. Did you read the post?
    - peterbonney 5y ago
      They repeatedly refer to lengthy sets of questions they received from the SEC, both in person and in writing. If you don’t think that is the SEC communicating their “rationale” for a decision and offering insight into what acceptable alternatives might look like then you obviously haven’t dealt with the SEC, nor do you understand what it is that they do. (I actually do have some relevant experience here - I was a partner at an alternative investment manager for 12 years.)
      - seibelj 5y ago
        > Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem. Rather they have now told us that if we launch Lend they intend to sue. Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused. Plain as day! And as to experience, I was CTO of the first company to settle with the SEC for an ICO: https://www.sec.gov/litigation/admin/2018/33-10575.pdf https://www.sec.gov/litigation/admin/2018/33-10575.pdf Many years of experience in crypto at the highest levels, dealt with millions of dollars in attorney fees, etc. etc.
        peterbonney 5y ago
        > …all of the SEC’s questions in writing and then again in person… They asked for documents and written responses… Plain as day! And since you have so much experience dealing with the SEC, you surely understand that the specific questions they ask will typically reveal precisely their rationale for taking the (extraordinary) step of an enforcement action, just as a prosecutor’s investigatory questions reveals their legal theory of a crime. The SEC doesn’t go around issuing Wells notices every day, and they typically don’t issue them without giving recipients the opportunity to choose a different path. We’re only hearing one side of this story, and even that one side contains so many hints of willful obtuseness that you have to be a blind partisan to take Coinbase’s “shock” at face value.
        seibelj 5y ago
        The SEC can and does provide candid advice. I know entrepreneurs who have had lengthy calls with both state and federal SEC reps who will give straight talk. This is not that. This is preparation to make a court case to use as precedent to attack the industry. I feel the SEC is being a bad actor - stifling innovation rather than encouraging it. Over the last 10 years the HN chattering class has dismissed crypto endlessly. I laugh all the way to the bank and its rise has been inevitable to anyone who understands software and finance. I look forward to the court case.
        deleted 5y ago
- chitowneats 5y ago
  Presumably this has been explained. Threatening a lawsuit is not an action the SEC takes lightly. Coinbase will have plenty of opportunity to contest it in court.
  - deleted 5y ago
    [deleted]
- unyttigfjelltol 5y ago
  Tactically, the SEC is doing the right thing. The law is Howey, not whatever justification for prosecution the SEC offers. Coinbase is trying to solicit from the SEC a different legal standard from Howey that Coinbase then can then divide by half, quibble over, nitpick, or whatever, all for the purpose of undermining the regulator and hamstringing the prosecution. It's a silly lawyer trick to gain ... American football analogy ... a step in a footrace with the regulator ... which might allow Coinbase to delay or blunt the complete spectrum of consequences that would follow from a wilfull, knowing, and intentional violation of securities law. It's chess, and a version that lawyers generally don't play on such a large and open stage. The fact that Coinbase has chosen to do so looks like a 'caution' flag raising the question in my mind of why they would feel the need to do this. And to some extent I'm speculating.

seibelj 5y ago

Coinbase wants to know the legal rationale as to why it's a security, but SEC is stonewalling them and goading them to get into a legal fight. The opposite of "talk to us, come in" that the SEC claims the crypto industry refuses to do.

peterbonney 5y ago
It is clear from their own blog post that they have communicated with the SEC in considerable detail, and the SEC has told them in no uncertain terms not to proceed. It sounds to me like the SEC welcomed the discussion, it’s just that Coinbase doesn’t like the answer they got.
- seibelj 5y ago
  The blog post says they did not give a rationale. That is the entire essence of the post. Did you read the post?
  - peterbonney 5y ago
    They repeatedly refer to lengthy sets of questions they received from the SEC, both in person and in writing. If you don’t think that is the SEC communicating their “rationale” for a decision and offering insight into what acceptable alternatives might look like then you obviously haven’t dealt with the SEC, nor do you understand what it is that they do. (I actually do have some relevant experience here - I was a partner at an alternative investment manager for 12 years.)
    - seibelj 5y ago
      > Despite Coinbase keeping Lend off the market and providing detailed information, the SEC still won’t explain why they see a problem. Rather they have now told us that if we launch Lend they intend to sue. Yet again, we asked if the SEC would share their reasoning with us, and yet again they refused. Plain as day! And as to experience, I was CTO of the first company to settle with the SEC for an ICO: https://www.sec.gov/litigation/admin/2018/33-10575.pdf https://www.sec.gov/litigation/admin/2018/33-10575.pdf Many years of experience in crypto at the highest levels, dealt with millions of dollars in attorney fees, etc. etc.
      - peterbonney 5y ago
        > …all of the SEC’s questions in writing and then again in person… They asked for documents and written responses… Plain as day! And since you have so much experience dealing with the SEC, you surely understand that the specific questions they ask will typically reveal precisely their rationale for taking the (extraordinary) step of an enforcement action, just as a prosecutor’s investigatory questions reveals their legal theory of a crime. The SEC doesn’t go around issuing Wells notices every day, and they typically don’t issue them without giving recipients the opportunity to choose a different path. We’re only hearing one side of this story, and even that one side contains so many hints of willful obtuseness that you have to be a blind partisan to take Coinbase’s “shock” at face value.
        seibelj 5y ago
        The SEC can and does provide candid advice. I know entrepreneurs who have had lengthy calls with both state and federal SEC reps who will give straight talk. This is not that. This is preparation to make a court case to use as precedent to attack the industry. I feel the SEC is being a bad actor - stifling innovation rather than encouraging it. Over the last 10 years the HN chattering class has dismissed crypto endlessly. I laugh all the way to the bank and its rise has been inevitable to anyone who understands software and finance. I look forward to the court case.
        deleted 5y ago
chitowneats 5y ago
Presumably this has been explained. Threatening a lawsuit is not an action the SEC takes lightly. Coinbase will have plenty of opportunity to contest it in court.
- deleted 5y ago
  [deleted]
unyttigfjelltol 5y ago
Tactically, the SEC is doing the right thing. The law is Howey, not whatever justification for prosecution the SEC offers. Coinbase is trying to solicit from the SEC a different legal standard from Howey that Coinbase then can then divide by half, quibble over, nitpick, or whatever, all for the purpose of undermining the regulator and hamstringing the prosecution. It's a silly lawyer trick to gain ... American football analogy ... a step in a footrace with the regulator ... which might allow Coinbase to delay or blunt the complete spectrum of consequences that would follow from a wilfull, knowing, and intentional violation of securities law. It's chess, and a version that lawyers generally don't play on such a large and open stage. The fact that Coinbase has chosen to do so looks like a 'caution' flag raising the question in my mind of why they would feel the need to do this. And to some extent I'm speculating.