6 ms·

It was obvious to a lot of people who were wondering what was taking regulators so long.

whimsicalism 3y ago
Interesting, maybe you should let Gensler know that the law is much more obvious than he appears to realize [0] [0]: https://youtu.be/VhA1dZXeao0?t=58 https://youtu.be/VhA1dZXeao0?t=58
- mrcode007 3y ago
  Under the Howey test, the rules are clear. "The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value." I think it is plausible that all pure staking initiatives will go. I don’t think you have much of an argument here but I could be wrong. It will definitely be an interesting case to watch.
  - CuriousCosmic 3y ago
    > investment of money in a common enterprise with profits to come solely from the efforts of others This is where I see the "staking makes a cryptocurrency a security" fall apart. There are a handful of definitions for "staking" and some of them definitely meet the criteria of "a common enterprise with profits to come solely from the efforts of others" however many do not. 1. Ethereum's staking at a protocol level requires you to run a staking node and you are paid for what is basically an SLA between you and the network and you only get paid if your node maintains a certain uptime, is kept up to date, and operates correctly. That I don't believe meets the criteria as it requires direct, sustained effort from you the operator (even if it's generally low effort). 2. Cardano's (or Tezos') staking is similar. Stake pool operators are effectively the same as Ethereum's stake node operators. But even delegators (who aren't required to stay online) still provide a service in that they are picking the stake pools who then fill the SLAs. If they pick pools that can't meet the requirements then the delegators don't get paid until they can find one that does. 3. Meanwhile you have networks like Algorand where participation in consensus does not effect staking rewards and you never have to perform a service to get paid out by the network. Those would meet the criteria by my understanding. 4. And then you have all the DeFi "staking" which is better described as lending or liquidity pooling. You aren't doing anything proof of stake related but are just lending out capital as an investment. I can't speak on other networks but generally I found that networks fell into one of those 4 categories. The first two only pay people who provide a service back to the network while with those like the third, even if you can provide a service back to the network, you aren't required to to be able to get paid. And then the fourth category is just a security outright. Edit (because I forgot to mention it): With regards to Coinbase's staking program, it's in a weird spot. With those you aren't directly staking but you are outsourcing the responsibility to a 3rd part (coinbase) to stake for you. I wouldn't be opposed to considering this type of custodial staking as meeting the criteria to be a security but I don't think proof of stake at a protocol level constitutes "a common enterprise with profits to come solely from the efforts of others" as they require work on behalf of the participants to get paid out.
    - qeternity 3y ago
      You’re ignoring all the ICOs which are almost certainly unregistered security offerings. Ethereum was funded as a public ICO.
      - xorcist 3y ago
        That doesn't even seem to be the issue here. Which is weird. In my humble layman's opinion, an ICO looks an awful lot like a security offering, while a staking protocol doesn't. Compare the simplified statements "Buy my token! It's going to be great in the future!" with "Let's pool our money and execute an agreed-upon protocol where those who have the most get more". Why is the SEC wasting time by going after all the weird ones before the easy pickings?
      - CuriousCosmic 3y ago
        It was however an ICO does not make it inherently a security. Per the SEC: ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws. And I think it's ultimately up to the courts (unless the SEC eventually gives a definitive answer) to determine what specific qualities make an token offered via ICO into a security, especially because what qualifies as an ICO really kinda varies and how they are structured also really widely varies. https://www.sec.gov/securities-topics/ICO https://www.sec.gov/securities-topics/ICO
    - skybrian 3y ago
      Yes, I think a reasonable position would be that if you perform staking by self-hosting then you're providing a service. An example is getting paid for running a machine on the Ethereum network. If you pay money in now and get more money out later, and someone else runs the machines, then it's just a loan. Then there's a question of where to draw the line with cloud hosting, and I have no opinion about that. Someone will sell a service that's barely on the right side of that line, wherever it is.
    - deleted 3y ago
      [deleted]
- earnesti 3y ago
  Crypto people constantly point to this video as some kind of evidence that the SEC is clueless. Maybe it just doesn't make sense for them to give clear answers in that kind of hearings,or answers related to specific crypto token. Just normal for government officials to cover their own asses primarily and giving specific guidance related to a specific issue at a hearing doesn't just serve them well.
  - whimsicalism 3y ago
    I don't own any crypto [outside of very small curiosity amounts when I was playing with it to figure out how it works years ago] nor do I consider myself a 'crypto person' (only, perhaps, compared to the backdrop of extreme HN negativity around the topic). I just think that people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology. > Just normal for government officials to cover their own asses primarily I agree - I just disagree with people suggesting that the same logic doesn't apply to regulators and their actions. They want to keep it unclear precisely so they have the ability to maneuver in the future and regulate if they want. That is the exact opposite of the 'super clear' regulations & guidance that GP was suggesting currently exists.
    - JumpCrisscross 3y ago
      > people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology I work in a regulated industry. I have my criticisms of Gensler. And I’ve (separately) profited off crypto. The regulations for non-Bitcoin exchanges were clear from the start. Nobody liked that clarity. And the regulators spent a few years navel gazing. But the legal advice I got at the start has remained consistent: the operators are putting themselves in jeopardy.
      - unyttigfjelltol 3y ago
        One way to look at it is a generation of boiler room operators moved their pump'n-dump schemes from central securities clearinghouse to crypto ledgers, because they realized what a loophole the Bitcoin exception was. And they brought in enough politicians and celebrities to slow walk promises of updated regulations, and regulators cautiously warned and waited, and here we are, with some bowtied man criticizing the SEC for doing its job precisely in the manner politicians demanded.
- sealeck 3y ago
  Is it really surprising that the chair of the SEC cannot just dispense SEC positions without consulting with lawyers?
  - whimsicalism 3y ago
    Has Gensler never consulted lawyers on the status of ethereum prior to this hearing? It should be easy yes or no from the lawyers, I'm hearing that the law is incredibly clear and not really prone to misinterpretation so it shouldn't be an issue. Or maybe Gensler's lawyers are "extremely inexperienced" if they couldn't figure out such an obvious issue?
    - arcticbull 3y ago
      You're not answering the question. Why do you think Gensler in official capacity should just dispense one-off soundbite determinations at the request of some clown grilling him? > It should be easy yes or no from the lawyers... When has that ever been the case, and why should it be the case now? [edit] The law is not just what's written but the entirely of case law. The SEC has provided a framework for analysis of securities in the context of crypto. It's here. [1] And it builds on the DAO report, here. [2] [1] https://www.sec.gov/files/dlt-framework.pdf https://www.sec.gov/files/dlt-framework.pdf [2] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf
      - whimsicalism 3y ago
        It is not at all surprising to me that he would refuse to answer the question, but the precise reason he is doing that is so that the SEC has freedom of movement to regulate without being pinned down by public statements he has made in front of congress. But that entire notion belies the idea that the regulations are super clear or predictable. The whole reason for this kind of maneuver is because the regulations are not clear or predictable. I have no doubt he has discussed the status of ethereum with SEC lawyers before.
        3y ago
- deleted 3y ago
  [deleted]

Interesting, maybe you should let Gensler know that the law is much more obvious than he appears to realize [0] [0]: https://youtu.be/VhA1dZXeao0?t=58 https://youtu.be/VhA1dZXeao0?t=58

mrcode007 3y ago
Under the Howey test, the rules are clear. "The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value." I think it is plausible that all pure staking initiatives will go. I don’t think you have much of an argument here but I could be wrong. It will definitely be an interesting case to watch.
- CuriousCosmic 3y ago
  > investment of money in a common enterprise with profits to come solely from the efforts of others This is where I see the "staking makes a cryptocurrency a security" fall apart. There are a handful of definitions for "staking" and some of them definitely meet the criteria of "a common enterprise with profits to come solely from the efforts of others" however many do not. 1. Ethereum's staking at a protocol level requires you to run a staking node and you are paid for what is basically an SLA between you and the network and you only get paid if your node maintains a certain uptime, is kept up to date, and operates correctly. That I don't believe meets the criteria as it requires direct, sustained effort from you the operator (even if it's generally low effort). 2. Cardano's (or Tezos') staking is similar. Stake pool operators are effectively the same as Ethereum's stake node operators. But even delegators (who aren't required to stay online) still provide a service in that they are picking the stake pools who then fill the SLAs. If they pick pools that can't meet the requirements then the delegators don't get paid until they can find one that does. 3. Meanwhile you have networks like Algorand where participation in consensus does not effect staking rewards and you never have to perform a service to get paid out by the network. Those would meet the criteria by my understanding. 4. And then you have all the DeFi "staking" which is better described as lending or liquidity pooling. You aren't doing anything proof of stake related but are just lending out capital as an investment. I can't speak on other networks but generally I found that networks fell into one of those 4 categories. The first two only pay people who provide a service back to the network while with those like the third, even if you can provide a service back to the network, you aren't required to to be able to get paid. And then the fourth category is just a security outright. Edit (because I forgot to mention it): With regards to Coinbase's staking program, it's in a weird spot. With those you aren't directly staking but you are outsourcing the responsibility to a 3rd part (coinbase) to stake for you. I wouldn't be opposed to considering this type of custodial staking as meeting the criteria to be a security but I don't think proof of stake at a protocol level constitutes "a common enterprise with profits to come solely from the efforts of others" as they require work on behalf of the participants to get paid out.
  - qeternity 3y ago
    You’re ignoring all the ICOs which are almost certainly unregistered security offerings. Ethereum was funded as a public ICO.
    - xorcist 3y ago
      That doesn't even seem to be the issue here. Which is weird. In my humble layman's opinion, an ICO looks an awful lot like a security offering, while a staking protocol doesn't. Compare the simplified statements "Buy my token! It's going to be great in the future!" with "Let's pool our money and execute an agreed-upon protocol where those who have the most get more". Why is the SEC wasting time by going after all the weird ones before the easy pickings?
    - CuriousCosmic 3y ago
      It was however an ICO does not make it inherently a security. Per the SEC: ICOs, based on specific facts, may be securities offerings, and fall under the SEC’s jurisdiction of enforcing federal securities laws. And I think it's ultimately up to the courts (unless the SEC eventually gives a definitive answer) to determine what specific qualities make an token offered via ICO into a security, especially because what qualifies as an ICO really kinda varies and how they are structured also really widely varies. https://www.sec.gov/securities-topics/ICO https://www.sec.gov/securities-topics/ICO
  - skybrian 3y ago
    Yes, I think a reasonable position would be that if you perform staking by self-hosting then you're providing a service. An example is getting paid for running a machine on the Ethereum network. If you pay money in now and get more money out later, and someone else runs the machines, then it's just a loan. Then there's a question of where to draw the line with cloud hosting, and I have no opinion about that. Someone will sell a service that's barely on the right side of that line, wherever it is.
  - deleted 3y ago
    [deleted]
earnesti 3y ago
Crypto people constantly point to this video as some kind of evidence that the SEC is clueless. Maybe it just doesn't make sense for them to give clear answers in that kind of hearings,or answers related to specific crypto token. Just normal for government officials to cover their own asses primarily and giving specific guidance related to a specific issue at a hearing doesn't just serve them well.
- whimsicalism 3y ago
  I don't own any crypto [outside of very small curiosity amounts when I was playing with it to figure out how it works years ago] nor do I consider myself a 'crypto person' (only, perhaps, compared to the backdrop of extreme HN negativity around the topic). I just think that people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology. > Just normal for government officials to cover their own asses primarily I agree - I just disagree with people suggesting that the same logic doesn't apply to regulators and their actions. They want to keep it unclear precisely so they have the ability to maneuver in the future and regulate if they want. That is the exact opposite of the 'super clear' regulations & guidance that GP was suggesting currently exists.
  - JumpCrisscross 3y ago
    > people saying 'regulations are perfectly clear' on this issue have not spent that much time dealing with regulators in emerging technology I work in a regulated industry. I have my criticisms of Gensler. And I’ve (separately) profited off crypto. The regulations for non-Bitcoin exchanges were clear from the start. Nobody liked that clarity. And the regulators spent a few years navel gazing. But the legal advice I got at the start has remained consistent: the operators are putting themselves in jeopardy.
    - unyttigfjelltol 3y ago
      One way to look at it is a generation of boiler room operators moved their pump'n-dump schemes from central securities clearinghouse to crypto ledgers, because they realized what a loophole the Bitcoin exception was. And they brought in enough politicians and celebrities to slow walk promises of updated regulations, and regulators cautiously warned and waited, and here we are, with some bowtied man criticizing the SEC for doing its job precisely in the manner politicians demanded.
sealeck 3y ago
Is it really surprising that the chair of the SEC cannot just dispense SEC positions without consulting with lawyers?
- whimsicalism 3y ago
  Has Gensler never consulted lawyers on the status of ethereum prior to this hearing? It should be easy yes or no from the lawyers, I'm hearing that the law is incredibly clear and not really prone to misinterpretation so it shouldn't be an issue. Or maybe Gensler's lawyers are "extremely inexperienced" if they couldn't figure out such an obvious issue?
  - arcticbull 3y ago
    You're not answering the question. Why do you think Gensler in official capacity should just dispense one-off soundbite determinations at the request of some clown grilling him? > It should be easy yes or no from the lawyers... When has that ever been the case, and why should it be the case now? [edit] The law is not just what's written but the entirely of case law. The SEC has provided a framework for analysis of securities in the context of crypto. It's here. [1] And it builds on the DAO report, here. [2] [1] https://www.sec.gov/files/dlt-framework.pdf https://www.sec.gov/files/dlt-framework.pdf [2] https://www.sec.gov/litigation/investreport/34-81207.pdf https://www.sec.gov/litigation/investreport/34-81207.pdf
    - whimsicalism 3y ago
      It is not at all surprising to me that he would refuse to answer the question, but the precise reason he is doing that is so that the SEC has freedom of movement to regulate without being pinned down by public statements he has made in front of congress. But that entire notion belies the idea that the regulations are super clear or predictable. The whole reason for this kind of maneuver is because the regulations are not clear or predictable. I have no doubt he has discussed the status of ethereum with SEC lawyers before.
      - 3y ago
deleted 3y ago
[deleted]