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I think that the calls for SEC clarity are pretty disingenuous. From what I have gathered, the conversation typically goes like this: Industry: Please give us

I think that the calls for SEC clarity are pretty disingenuous. From what I have gathered, the conversation typically goes like this: Industry: Please give us more regulatory clarity SEC: everything not BTC/ETH is a security, please register them (read: and we'll throw it into the trash because we don't like it) Industry: but these are clearly not securities, please give us more clarity SEC: everything not BTC/ETH is a security, please register them Industry: that's not an answer, we would like to trade crypto SEC: everything not BTC/ETH is a security, please register them So the SEC is clear, it's just that the clear answer the SEC is giving is not up to the tastes of industry. But the SEC is also constrained by politics in the sense of external pressure making them not want to crack down, and by internal politics of hard-to-win cases about proving Howey tests that take forever. So we have the current situation where the SEC has been very clear that it doesn't like any of the crypto stuff, but the industry pushes the boundaries and sits in the legal grey area where the SEC says it's not kosher but courts may or may not agree. Hence sporadic enforcement actions where they think they have a good case, which then leads to complaining (please more clarity), with the same response (none of this is legal, just because we haven't filed enforcement actions doesn't mean it's kosher). Edit: ETH is kinda borderline; there is semi-widespread consensus that BTC is not a security, and no such consensus for pretty much anything else. Edit 2: I don't mean the conversation literally. As far as I know there is no official stance on BTC, but one gets the sense that trying to argue in court that BTC is a security is a losing proposition, whereas <insert governance token for newnotscamcoin> is much closer to a winning case.

nextaccountic 4y ago
> everything not BTC/ETH What's special about BTC and ETH that sets it apart from other cryptocurrencies?
- izzydata 4y ago
  Probably that they have been registered with the SEC.
  - Waterluvian 4y ago
    Regardless, the phrase indicates that they’re not securities. How are they not?
    - wmf 4y ago
      "If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract. Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise’s success, material information asymmetries recede. As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful. And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise." https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418
    - TimJRobinson 4y ago
      They are fully decentralized networks that no one controls. A security requires some issuing company or person. Almost every other cryptocurrency has one or a small group of person that can take control of the chain / app.
  - BLKNSLVR 4y ago
    I don't think that's how it works. A business registers with the SEC to gain a license to trade securities. Securities themselves don't register. Happy to be educated if above is wrong.
    - wmf 4y ago
      Securities do have to register using form S-1. This is required for IPOs, for example.
  - cdiddy2 4y ago
    they have not been registered with the SEC. both are leaderless and therefore lack the ability to register with the SEC
everfree 4y ago
> everything not BTC/ETH is a security, please register them Coinbase tried repeatedly to register them with the SEC and was turned away, which seems to be lost on your point. From the article: > The SEC will not let crypto companies “come in and register” – we tried. > The Wells notice comes out of the investigation that we disclosed last summer. Shortly after that investigation began, the SEC asked us if we would be interested in discussing a potential resolution that would include registering some portion of our business with the SEC. We said absolutely yes. Specifically, the SEC asked us to provide our views on what a registration path for Coinbase could look like – because there is no existing way for a crypto exchange to register. We developed and proposed two different registration models. We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none. We also reiterated that we stand by our listings process – we don’t list securities today – and repeatedly invited the SEC to raise any questions about any asset at all on our platform. They raised none.
- e63f67dd-065b 4y ago
  > Coinbase tried repeatedly to register them with the SEC and was turned away, which seems to be lost on your point My entire point is that the SEC doesn't like them, to them saying "please register" is the same as saying "get bent". I specifically mentioned that those registration papers are going straight into the trash.
  - mistercheph 4y ago
    "Please register" is disingenuous bureaucrat speak for "get bent" in the same way that calls for "clarifications on the SEC's policies" are disingenous bureaucrat speak for "get bent".
  - everfree 4y ago
    If that was your point, then wouldn't the correct conclusion be that calls for SEC clarity are genuine, not disingenuous? Saying "please register" when you really mean "get bent" doesn't count as SEC clarity in my book. The SEC stonewalled Coinbase at every attempt to submit a registration. It's not like Coinbase registered and was declined.
paddw 4y ago
From the linked page on the Howey Test > "The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities." So I guess they are arguing they are not securities since their is no "effort of others" even if there could be a reasonable expectation of profits? Similar to art I guess? This seems like a plausible case on a strictly by definition basis, regardless of the way people are actually acting. If the case is that the SEC just doesn't want to let them register the any of it, is there really no way they could be more straightforward? It seems like post FTX they would have a lot of leeway for this kind of thing. Unless maybe they think enforcement is a better path to lead to eventual regulation?
- e63f67dd-065b 4y ago
  > If the case is that the SEC just doesn't want to let them register the any of it, is there really no way they could be more straightforward? It seems like post FTX they would have a lot of leeway for this kind of thing. Unless maybe they think enforcement is a better path to lead to eventual regulation? Part of it is political capital imo: when crypto was going up, saying "none of this is legal" costs political capital and nobody wants to listen; when it's going down and FTX is collapsing, saying "none of this is legal" is free and suddenly Congress/courts are much more partial to the message. It's the nature of such regulatory agencies. The path to career advancement is often shouting "this is bad, we should regulate" after a disaster occurs, not before. Before the disaster, <thing> made money, and putting a stop to it is hard; after the disaster, <thing> lost people money, people are angry, so putting a stop to it is much easier.
junofan 4y ago
I don’t think your guess is correct. Working with regulators means you fill out a form, then 3–6 months later they send some questions. You spend one day to answer them and ask a few of your own, then send it back. 3–6 months later you get another list of questions. Some of those questions are identical to the last pass. You spend one day answering and… rinse and repeat for a few years. From what I gather the SEC just ignored Coinbase’s questions in this back-and-forth.
olalonde 4y ago
No, it's not like that unfortunately. They won't say which cryptocurrencies are securities and are very deliberately vague.
medellin 4y ago
Do you have anything pointing to the SEC giving actual guidance around BTC and ETH because i have never seen it. Seems strange kraken would stop supporting the ability to stake ETH if your claim was true. Thats a ton of money for them to throw away just for fun. SEC rarely does it’s job until it’s too late and only after someone else has done all the work for them.
- wmf 4y ago
  Spot ETH trading is not a security, but staking ETH may be.
  - yokem55 4y ago
    The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. There are pretty decent arguments why the other prongs fail as well. What can be a security, is if a provider offered a managed yield service promising a certian return and guaranteed instant liquidity and then used staking in the background to generate that yield. This is what got Kraken in trouble. And why they settled so easily. Where Coinbase falls is going to heavily depend on the specific facts of their service.
    - polygamous_bat 4y ago
      > The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. Validating by running your own node is a-ok. Sending your tokens to Coinbase, a registered public company, who is pinky-promising you they will give you 8% returns every year, without registering this product with SEC, is not a-ok. How is that hard to understand?
- yieldcrv 4y ago
cratermoon 4y ago
It's farcically absurd that the crypto industry built its brand on avoiding government rules and now they are asking for regulation to protect their interests.
- jsutton 4y ago
  There's nothing absurd about a company seeking to legitimize a component of their business. The crypto industry is not built around avoiding government rules, that's a myth propagated by its many detractors. It was born to address a failure of the banking system that hurt regular people the most.

nextaccountic 4y ago

> everything not BTC/ETH What's special about BTC and ETH that sets it apart from other cryptocurrencies?

izzydata 4y ago
Probably that they have been registered with the SEC.
- Waterluvian 4y ago
  Regardless, the phrase indicates that they’re not securities. How are they not?
  - wmf 4y ago
    "If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract. Moreover, when the efforts of the third party are no longer a key factor for determining the enterprise’s success, material information asymmetries recede. As a network becomes truly decentralized, the ability to identify an issuer or promoter to make the requisite disclosures becomes difficult, and less meaningful. And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise." https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418
  - TimJRobinson 4y ago
    They are fully decentralized networks that no one controls. A security requires some issuing company or person. Almost every other cryptocurrency has one or a small group of person that can take control of the chain / app.
- BLKNSLVR 4y ago
  I don't think that's how it works. A business registers with the SEC to gain a license to trade securities. Securities themselves don't register. Happy to be educated if above is wrong.
  - wmf 4y ago
    Securities do have to register using form S-1. This is required for IPOs, for example.
- cdiddy2 4y ago
  they have not been registered with the SEC. both are leaderless and therefore lack the ability to register with the SEC

everfree 4y ago

> everything not BTC/ETH is a security, please register them Coinbase tried repeatedly to register them with the SEC and was turned away, which seems to be lost on your point. From the article: > The SEC will not let crypto companies “come in and register” – we tried. > The Wells notice comes out of the investigation that we disclosed last summer. Shortly after that investigation began, the SEC asked us if we would be interested in discussing a potential resolution that would include registering some portion of our business with the SEC. We said absolutely yes. Specifically, the SEC asked us to provide our views on what a registration path for Coinbase could look like – because there is no existing way for a crypto exchange to register. We developed and proposed two different registration models. We spent millions of dollars on legal support to build these proposals and repeatedly asked for the SEC’s feedback. We got none. We also reiterated that we stand by our listings process – we don’t list securities today – and repeatedly invited the SEC to raise any questions about any asset at all on our platform. They raised none.

e63f67dd-065b 4y ago
> Coinbase tried repeatedly to register them with the SEC and was turned away, which seems to be lost on your point My entire point is that the SEC doesn't like them, to them saying "please register" is the same as saying "get bent". I specifically mentioned that those registration papers are going straight into the trash.
- mistercheph 4y ago
  "Please register" is disingenuous bureaucrat speak for "get bent" in the same way that calls for "clarifications on the SEC's policies" are disingenous bureaucrat speak for "get bent".
- everfree 4y ago
  If that was your point, then wouldn't the correct conclusion be that calls for SEC clarity are genuine, not disingenuous? Saying "please register" when you really mean "get bent" doesn't count as SEC clarity in my book. The SEC stonewalled Coinbase at every attempt to submit a registration. It's not like Coinbase registered and was declined.

paddw 4y ago

From the linked page on the Howey Test > "The U.S. Supreme Court's Howey case and subsequent case law have found that an "investment contract" exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.[5] The so-called "Howey test" applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities." So I guess they are arguing they are not securities since their is no "effort of others" even if there could be a reasonable expectation of profits? Similar to art I guess? This seems like a plausible case on a strictly by definition basis, regardless of the way people are actually acting. If the case is that the SEC just doesn't want to let them register the any of it, is there really no way they could be more straightforward? It seems like post FTX they would have a lot of leeway for this kind of thing. Unless maybe they think enforcement is a better path to lead to eventual regulation?

e63f67dd-065b 4y ago
> If the case is that the SEC just doesn't want to let them register the any of it, is there really no way they could be more straightforward? It seems like post FTX they would have a lot of leeway for this kind of thing. Unless maybe they think enforcement is a better path to lead to eventual regulation? Part of it is political capital imo: when crypto was going up, saying "none of this is legal" costs political capital and nobody wants to listen; when it's going down and FTX is collapsing, saying "none of this is legal" is free and suddenly Congress/courts are much more partial to the message. It's the nature of such regulatory agencies. The path to career advancement is often shouting "this is bad, we should regulate" after a disaster occurs, not before. Before the disaster, <thing> made money, and putting a stop to it is hard; after the disaster, <thing> lost people money, people are angry, so putting a stop to it is much easier.

junofan 4y ago

I don’t think your guess is correct. Working with regulators means you fill out a form, then 3–6 months later they send some questions. You spend one day to answer them and ask a few of your own, then send it back. 3–6 months later you get another list of questions. Some of those questions are identical to the last pass. You spend one day answering and… rinse and repeat for a few years. From what I gather the SEC just ignored Coinbase’s questions in this back-and-forth.

olalonde 4y ago

No, it's not like that unfortunately. They won't say which cryptocurrencies are securities and are very deliberately vague.

medellin 4y ago

Do you have anything pointing to the SEC giving actual guidance around BTC and ETH because i have never seen it. Seems strange kraken would stop supporting the ability to stake ETH if your claim was true. Thats a ton of money for them to throw away just for fun. SEC rarely does it’s job until it’s too late and only after someone else has done all the work for them.

wmf 4y ago
Spot ETH trading is not a security, but staking ETH may be.
- yokem55 4y ago
  The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. There are pretty decent arguments why the other prongs fail as well. What can be a security, is if a provider offered a managed yield service promising a certian return and guaranteed instant liquidity and then used staking in the background to generate that yield. This is what got Kraken in trouble. And why they settled so easily. Where Coinbase falls is going to heavily depend on the specific facts of their service.
  - polygamous_bat 4y ago
    > The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. Validating by running your own node is a-ok. Sending your tokens to Coinbase, a registered public company, who is pinky-promising you they will give you 8% returns every year, without registering this product with SEC, is not a-ok. How is that hard to understand?
yieldcrv 4y ago

cratermoon 4y ago

It's farcically absurd that the crypto industry built its brand on avoiding government rules and now they are asking for regulation to protect their interests.

jsutton 4y ago
There's nothing absurd about a company seeking to legitimize a component of their business. The crypto industry is not built around avoiding government rules, that's a myth propagated by its many detractors. It was born to address a failure of the banking system that hurt regular people the most.