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Are there any examples of the SEC allowing anyone to register a crypto security? Saying you haven’t done it and not letting you do it is a bit of a catch 22.

by koolba 3y ago

Are there any examples of the SEC allowing anyone to register a crypto security? Saying you haven’t done it and not letting you do it is a bit of a catch 22. And none of this addresses the defi ecosystem either. As an end user, can I access a defi app deployed by a non-US entity?

EGreg 3y ago
That’s a good point. 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-the-secs-case-against-telegram/ https://www.coindesk.com/markets/2020/04/12/making-sense-of-...
whateveracct 3y ago
It's not a catch 22 though. There's coherent logic to it. 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.
- px43 3y ago
  Please take a moment to look at anything that Coinbase legal has put out in the past few years. They have desperately been trying to figure out how to register, to the point of suing the SEC to get information, and the SEC has time and time again refused to provide any information about how to do that. Coinbase was founded, from day one, to be the most compliant cryptocurrency exchange in the US. They have hired massive teams of former lawmakers and regulators to try to navigate the path to get cleared by the SEC. If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it? I expect that when Coinbase eventually responds to this, likely in the next few minutes, the response will contain the full timeline of everything they've done to try and register. I've been listening to their lawyers get interviewed on podcasts and seen the countless blog posts they've posted about trying to get anything from the SEC, which has been entirely ignored. It's pretty infuriating. The SEC needs to label Coinbase as some lawless entity that refuses to follow the rules, when nothing could be farther from the truth.
  - ceejayoz 3y ago
    > If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it? Perhaps the answer is "it can't be done"? If I tried to start "Uber for Hitmen", and I couldn't find a legal path past regulators, that's because the business model itself is illegal, not because regulators meanly refuse to tell me how to legally murder people.
    - mrguyorama 3y ago
      And most importantly, it doesn't matter what your lawyers say, it's still illegal.
    - hem777 3y ago
      Great analogy! Well done.
  - hef19898 3y ago
    You mean Coinbase's press releases?
  - 3y ago
Lariscus 3y ago
>Saying you haven’t done it and not letting you do it is a bit of a catch 22. 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.
- junofan 3y ago
  Approval and registration sound like two different things.
- StanislavPetrov 3y ago
  A better analogy is that you would get in serious trouble selling a drug without approval from the FDA at the same time the FDA has never approved any drugs. It is clear to anyone who understands what is happening that the US government and our faltering financial system is desperate to eliminate crypto all together, and will throw up so many legal and regulatory hurdles that even if crypto technically remains legal it won't be worth the risk or the cost.
- yellowstuff 3y ago
  If someone invented a new thing that was possibly but not definitely a drug requiring FDA approval, and the FDA refused to make an explicit judgement on it for years as it grew to a huge industry, then eventually brought down the hammer, that would be a bad process. The courts may agree with the SEC that Coinbase sold unregistered securities, but they had the opportunity to clarify the law years ago, and Coinbase has been earnestly seeking clarification.
  - yttribium 3y ago
    Which the FDA in fact have a pattern of doing with various supplements. https://en.wikipedia.org/wiki/Biomedical_Research_%26_Longevity_Society https://en.wikipedia.org/wiki/Biomedical_Research_%26_Longev... And the ATF with pistol braces. It's a standard regulatory tactic at this point.

by koolba 3y ago

EGreg 3y ago

That’s a good point. 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-the-secs-case-against-telegram/ https://www.coindesk.com/markets/2020/04/12/making-sense-of-...

whateveracct 3y ago

It's not a catch 22 though. There's coherent logic to it. 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.

px43 3y ago
Please take a moment to look at anything that Coinbase legal has put out in the past few years. They have desperately been trying to figure out how to register, to the point of suing the SEC to get information, and the SEC has time and time again refused to provide any information about how to do that. Coinbase was founded, from day one, to be the most compliant cryptocurrency exchange in the US. They have hired massive teams of former lawmakers and regulators to try to navigate the path to get cleared by the SEC. If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it? I expect that when Coinbase eventually responds to this, likely in the next few minutes, the response will contain the full timeline of everything they've done to try and register. I've been listening to their lawyers get interviewed on podcasts and seen the countless blog posts they've posted about trying to get anything from the SEC, which has been entirely ignored. It's pretty infuriating. The SEC needs to label Coinbase as some lawless entity that refuses to follow the rules, when nothing could be farther from the truth.
- ceejayoz 3y ago
  > If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it? Perhaps the answer is "it can't be done"? If I tried to start "Uber for Hitmen", and I couldn't find a legal path past regulators, that's because the business model itself is illegal, not because regulators meanly refuse to tell me how to legally murder people.
  - mrguyorama 3y ago
    And most importantly, it doesn't matter what your lawyers say, it's still illegal.
  - hem777 3y ago
    Great analogy! Well done.
- hef19898 3y ago
  You mean Coinbase's press releases?
- 3y ago

Lariscus 3y ago

>Saying you haven’t done it and not letting you do it is a bit of a catch 22. 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.

junofan 3y ago
Approval and registration sound like two different things.
StanislavPetrov 3y ago
A better analogy is that you would get in serious trouble selling a drug without approval from the FDA at the same time the FDA has never approved any drugs. It is clear to anyone who understands what is happening that the US government and our faltering financial system is desperate to eliminate crypto all together, and will throw up so many legal and regulatory hurdles that even if crypto technically remains legal it won't be worth the risk or the cost.
yellowstuff 3y ago
If someone invented a new thing that was possibly but not definitely a drug requiring FDA approval, and the FDA refused to make an explicit judgement on it for years as it grew to a huge industry, then eventually brought down the hammer, that would be a bad process. The courts may agree with the SEC that Coinbase sold unregistered securities, but they had the opportunity to clarify the law years ago, and Coinbase has been earnestly seeking clarification.
- yttribium 3y ago
  Which the FDA in fact have a pattern of doing with various supplements. https://en.wikipedia.org/wiki/Biomedical_Research_%26_Longevity_Society https://en.wikipedia.org/wiki/Biomedical_Research_%26_Longev... And the ATF with pistol braces. It's a standard regulatory tactic at this point.