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> This SEC action has nothing to do with Binance being a crypto exchange The SEC press release (https://www.sec.gov/news/press-release/2023-101 https://www.sec

> This SEC action has nothing to do with Binance being a crypto exchange The SEC press release (https://www.sec.gov/news/press-release/2023-101 https://www.sec.gov/news/press-release/2023-101) includes a section titled "UNREGISTERED OFFER AND SALE OF CRYPTO ASSETS". The SEC also filed https://www.sec.gov/news/press-release/2023-102 https://www.sec.gov/news/press-release/2023-102 against coinbase. The coinbase one makes it much more clear that yes, in fact, just being a crypto exchange is the same as being an illegal unregistered securities exchange, and no, the SEC will not let you actually register as one (coinbase has tried). > This is not a new crypto-related problem. Stockbrokers routinely go to jail for misuse of customer funds. It being illegal to run ponzi schemes and sell unlicensed securities is not new, but it very much is a crypto problem. The fact that there are currently zero crypto exchanges that are licensed with the SEC, and the SEC's filing against coinbase, together make it clear that it is not legal to operate a crypto exchange in the US. It is possible to legally operate a stock brokerage. It is not so for crypto. That's a notable difference.

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agentgumshoe 3y ago
What's your point, they're crypto so doing illegal stuff is ok because it's 'different?'
Animats 3y ago
There are legal crypto exchanges in the US. Gemini, for one.[1] They're a trust company, regulated as a bank by New York State.[2] [1] https://www.gemini.com/ https://www.gemini.com/ [2] https://dfs.ny.gov/apps_and_licensing/banks_and_trusts/commercial_banks_trusts https://dfs.ny.gov/apps_and_licensing/banks_and_trusts/comme...
- jhugo 3y ago
  You can be regulated as a bank by New York State meanwhile also be running an unregistered securities exchange. That is in fact what Gemini is doing, as the SEC has said.
- TheDong 3y ago
  The SEC certainly thinks gemini is running an illegal exchange, and said so quite clearly when charging them of that earlier this year: https://www.sec.gov/news/press-release/2023-7 https://www.sec.gov/news/press-release/2023-7 The case has not been dropped, and I think pretty clearly states the SEC's opinion, which is quite consistent with what I said above. It is not legal to run a crypto exchange in the US (under current security laws I should add).
  - colatkinson 3y ago
    That case appears to be specific to Gemini Earn, a "staking" product where users would loan Gemini money and in exchange would get returns on that money through Gemini/Genesis's investment of those funds. Under the Howey test (a security is "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party") this is pretty clearly an unregistered security IMO. Whereas e.g. using Gemini solely to exchange N USD for M BTC with the customer retaining ownership the whole time is probably not. So had the Winklevi stuck to being a traditional exchange, they could have avoided this specific issue. Of course, the SEC seems to believe that many shitcoins are also securities ("Buy this token for a % share in our company! Totally not equity!" is... not a convincing argument). But that's not what the complaint you linked is actually about.
    - Animats 3y ago
      > That case appears to be specific to Gemini Earn, a "staking" product where users would loan Gemini money and in exchange would get returns on that money through Gemini/Genesis's investment of those funds. Yes. You put money with them, they invest it, you get some return, maybe. That's unquestionably a security. Note that there's real staking, as with Etherium validators, where you lock up some Etherium in exchange for a cut of the gas fees. You're still exposed to Etherium going down, but the risk to the principal is low. Then there's fake staking, where you lend someone assets which they then control and invest. That's not "staking", it's an investment deal. A bad deal, because it has a capped upside and an unlimited downside. Someone else thinks that they can get a higher return than you can, but you take the risk if they fail. See Terra/Luna, BlockFi, etc.
ipv6ipv4 3y ago
And yet, customer money seems to be consistently disappearing into scammer's pockets. The SEC doesn't seem to have been wrong so far.
- jhugo 3y ago
  The person you're replying to doesn't claim that the SEC is wrong, nor that Binance isn't a scam. Maybe you meant to reply to someone else?

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agentgumshoe 3y ago

What's your point, they're crypto so doing illegal stuff is ok because it's 'different?'

Animats 3y ago

There are legal crypto exchanges in the US. Gemini, for one.[1] They're a trust company, regulated as a bank by New York State.[2] [1] https://www.gemini.com/ https://www.gemini.com/ [2] https://dfs.ny.gov/apps_and_licensing/banks_and_trusts/commercial_banks_trusts https://dfs.ny.gov/apps_and_licensing/banks_and_trusts/comme...

jhugo 3y ago
You can be regulated as a bank by New York State meanwhile also be running an unregistered securities exchange. That is in fact what Gemini is doing, as the SEC has said.
TheDong 3y ago
The SEC certainly thinks gemini is running an illegal exchange, and said so quite clearly when charging them of that earlier this year: https://www.sec.gov/news/press-release/2023-7 https://www.sec.gov/news/press-release/2023-7 The case has not been dropped, and I think pretty clearly states the SEC's opinion, which is quite consistent with what I said above. It is not legal to run a crypto exchange in the US (under current security laws I should add).
- colatkinson 3y ago
  That case appears to be specific to Gemini Earn, a "staking" product where users would loan Gemini money and in exchange would get returns on that money through Gemini/Genesis's investment of those funds. Under the Howey test (a security is "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party") this is pretty clearly an unregistered security IMO. Whereas e.g. using Gemini solely to exchange N USD for M BTC with the customer retaining ownership the whole time is probably not. So had the Winklevi stuck to being a traditional exchange, they could have avoided this specific issue. Of course, the SEC seems to believe that many shitcoins are also securities ("Buy this token for a % share in our company! Totally not equity!" is... not a convincing argument). But that's not what the complaint you linked is actually about.
  - Animats 3y ago
    > That case appears to be specific to Gemini Earn, a "staking" product where users would loan Gemini money and in exchange would get returns on that money through Gemini/Genesis's investment of those funds. Yes. You put money with them, they invest it, you get some return, maybe. That's unquestionably a security. Note that there's real staking, as with Etherium validators, where you lock up some Etherium in exchange for a cut of the gas fees. You're still exposed to Etherium going down, but the risk to the principal is low. Then there's fake staking, where you lend someone assets which they then control and invest. That's not "staking", it's an investment deal. A bad deal, because it has a capped upside and an unlimited downside. Someone else thinks that they can get a higher return than you can, but you take the risk if they fail. See Terra/Luna, BlockFi, etc.

ipv6ipv4 3y ago

And yet, customer money seems to be consistently disappearing into scammer's pockets. The SEC doesn't seem to have been wrong so far.

jhugo 3y ago
The person you're replying to doesn't claim that the SEC is wrong, nor that Binance isn't a scam. Maybe you meant to reply to someone else?