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When approving the S-1, the SEC was asked to review a business, not one selling filtration technology, but one selling illegal securities, well within their are

When approving the S-1, the SEC was asked to review a business, not one selling filtration technology, but one selling illegal securities, well within their area of expertise. I think Americans should fairly expect their regulators to be clear enough about the rules that the very securities regulator, whose job in large part it is to protect retail investors, not allow a company who is in the business of selling illegal securities to go public, and then take multiple years to file suit. Any crypto sceptic who does not see a problem with this is tainted by their priors.

q1w2 3y ago
Think about this in a more practical mindset. While crypto was growing and experimenting and not causing great harm, the regulators were happy to let it do its thing. The moment major losses occurred due to large scale fraud collapses, THAT is when the regulators decided to pay more attention and look for rules that might be getting broken. Moreover, with the increased use of crypto by nation states such as North Korea, Russia, Iran, Hamas, etc... to evade sanctions and launder money, and the general lack of any material crypto economy, then parts of the gov't, in general, are starting to think the show needs to end for crypto - and are talking to regulators to shut down exchanges. That is why there are no "productive conversations" between Coinbase and regulators. The regulators don't want to give them any valid methods of operating - because they NOW don't want them to operate at all.
itsoktocry 3y ago
>whose job in large part it is to protect retail investors, not allow a company who is in the business of selling illegal securities to go public, and then take multiple years to file suit First, it's not ideal, but an investigation takes time. Second, had the SEC said "we're not allowing you to go public because we think your business might be breaking ambiguous laws" it would have destroyed Coinbase with a combination of reputuational damage and the inability to raise money to operate. All for something that might be true but was unproven? That doesn't sound ideal, either. By the way, love the "anyone who thinks otherwise is tainted" bit at the end, it truly speaks to our political climate.
- Spivak 3y ago
  > because we think your business might be breaking ambiguous laws I think Coinbase and the their investors would have appreciated a real a priori ruling on whether their business is an illegal securities exchange before going public but we can't do that for some reason. Risks To Our Business: The SEC might shut us down for being an illegal securities exchange but has no way of telling us in advance if we're breaking any laws ¯\_(ツ)_/¯ I think there is very little room for this sequence of events to be considered fine. If there is any sense at all that the SEC's mission to protect retail investors "their whole publicly stated business model might be illegal and we might sue them out of business" is something you might say, "we're not sure if we're comfortable with you going public yet."
  - lolinder 3y ago
    They didn't use those words, but they basically did put that in the S-1 [0]: > We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition. > ... > A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected. > ... > The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. [0] https://www.sec.gov/Archives/edgar/data/1679788/000162828021003168/coinbaseglobalincs-1.htm https://www.sec.gov/Archives/edgar/data/1679788/000162828021...
linuxftw 3y ago
Well, not really. When they decided to file the S-1, they were likely in a very different business model, and the underlying cryptos (for the most part) were very much non-scams (as far as that can be applied to cryptos). It would be like going public as a company that looked like ebay, and then later most of your userbase is buying and selling heroin, and now your business totally revolves around the heroin, and you've taken certain steps to encourage and participate in this heroin market directly.
- pjc50 3y ago
  This is almost exactly what happened with Craigslist and FOSTA/SESTA.
  - linuxftw 3y ago
    Backpage is the more relevant example, at least in the US IMO. But, no as much drugs as the 'adult services.' I don't think they were publicly traded, either.
lolinder 3y ago
> Any crypto sceptic who does not see a problem with this is tainted by their priors. I'm not qualified to comment on the legal or financial aspects, but this is a hostile and aggressive statement that detracts from the conversation. You made a claim and offered reasons why you believe that claim. The correct thing to do from there is to allow other people to defend the other position, not end the discussion by saying "and if you disagree with me you're self-deluded".
- iHeartVLC 3y ago
  [dead]
amalcon 3y ago
"Any [person] who [disagrees with me] is [committing an error]" is a thought-terminating statement. Best to avoid using that kind of language -- it doesn't particularly hurt anyone else, but it will hurt the growth of one's own understanding.
- pjc50 3y ago
  On the other hand, sometimes people are just not correct, due to motivated reasoning, and keep asking the same question ("Is this an illegal security?" "Yes") over and over again hoping to get a different answer. Ultimately you have to terminate thought somewhere or you get bogged down in trivialities by people who are trying to exhaust you.
  - lolinder 3y ago
    On an internet forum you do that by deciding not to engage, not by issuing a drive-by top-level comment that preemptively cuts off any dissent.
hluska 3y ago
You made a good comment and then absolutely ruined it with your last sentence. Blanket statements like that are not only disrespectful but they’re useless. This isn’t Fox News…it is Hacker News. Second, you’re arguing they were involved in illegal activities since before going public. How do you know that for sure?
- miracle2k 3y ago
  > You made a good comment and then absolutely ruined it with your last sentence. Blanket statements like that are not only disrespectful but they’re useless. This isn’t Fox News…it is Hacker News. I appreciate this feedback. I like how another commenter put it: "I think there is very little room for this sequence of events to be considered fine" - from a non-crypto-partisan, rule-of-law perspective. > Second, you’re arguing they were involved in illegal activities since before going public. How do you know that for sure? Because that is what the SEC is alleging in their lawsuit.
  - lolinder 3y ago
    > I like how another commenter put it: "I think there is very little room for this sequence of events to be considered fine" - from a non-crypto-partisan, rule-of-law perspective. I would encourage you to consider your own priors and read the feedback that you're getting on this idea as well. In spite of your attempts to cut off opposition, there are a lot of very well-reasoned arguments for the SEC's approach.
    - miracle2k 3y ago
      > In spite of your attempts to cut off opposition, there are a lot of very well-reasoned arguments for the SEC's approach. Which ones do you find convincing?
      - lolinder 3y ago
        Take your pick. You've so far only replied to the people calling you out for trying to cut off discussion, not to the people who are actually taking on the claims you consider to be so ironclad. I'm personally not invested enough (or knowledgeable enough) in this topic to debate you on it, but if you're so sure of your position you'd do well to get out there and defend it.
tim333 3y ago
> I think Americans should fairly expect their regulators to be clear enough about the rules that... The trouble is that there aren't really clear existing rules - they are getting made at the moment by court judgement. If he had the power Ginsler would probably ban cryptocurrency but he doesn't.
- FabHK 3y ago
  Ginsler would definitely ban Etherium.
purpleflame1257 3y ago
By analogy FDA would never let an intentionally tainted drug go to market. Shouldn't we expect the SEC to behave similarly?
jmull 3y ago
This is a losing argument, IMO. Reviewing the S1 is not a complete review of the legitimacy of a business model, and, of course, cannot predict whether a company will comply with regulations in the future. It’s notable your argument doesn’t address the fact that the S1 disclosures seemed accurate, e.g.: > [W]e could be subject to legal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a supported crypto asset currently offered, sold, or traded on our platform is a “security” under applicable laws… [W]e could be subject to judicial or administrative sanctions for failing to offer or sell the crypto asset in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration. It seems coinbase knew there was a substantial risk and proceeded anyway. > Any crypto sceptic who does not see a problem with this is tainted by their priors Someone shoulda stopped me is never a good defense. Perhaps they should have. But if it was so clear to them, it should have been even more clear to you, and you have the primary responsibility for your actions and decisions. It’s up to coinbase and the others to figure out how to create a legal business model around crypto, not the SEC.
dogleash 3y ago
> When approving the S-1, the SEC was asked to review a business, not one selling filtration technology, but one selling illegal securities, well within their area of expertise. > Any crypto sceptic who does not see a problem with this is tainted by their priors. My priors include the idea federal agencies operate within a scoped statutory authority, and the scope of that authority can even vary from function to function. It's a very "swim in your own lane" kind of partitioning. It can lead to counterintuitive interactions, but on the whole makes sense if you step back and look at the system of congressional delegation to agencies they legislatively invent.
JeremyNT 3y ago
> Any crypto sceptic who does not see a problem with this is tainted by their priors. Who is this addressed at? I think most (any?) crypto skeptic would see the problems here and suggest that these exchanges should have been shut down much earlier. The fact that they were allowed to operate so long gave them the veneer of respectability which just brought in more suckers. Coinbase et al knew (or should have known) exactly what they were doing, they were making hey before the regulators caught up to them. Nobody's claiming that the US legal system is perfect, but here we are. The wheels of justice grind away slowly. At least they're finally regulating these things.
- miracle2k 3y ago
  > Who is this addressed at? People who want to ridicule complaints of a lack of 'regulatory clarity'. You can hold the view that crypto should have been aggressively regulated against much earlier, while also recognizing that regulators / the state have a due process obligations. The state should not be allowed to take away your residency permit even if it was issued incorrectly 10y ago due to an oversight on their part. Similarly, it is reasonable to argue that the state should not be allowed to punish a business for behaviour it has tacitly approved of by doing nothing for a decode. It's not like Coinbase was doing this under the radar and the SEC just noticed recently.

q1w2 3y ago

Think about this in a more practical mindset. While crypto was growing and experimenting and not causing great harm, the regulators were happy to let it do its thing. The moment major losses occurred due to large scale fraud collapses, THAT is when the regulators decided to pay more attention and look for rules that might be getting broken. Moreover, with the increased use of crypto by nation states such as North Korea, Russia, Iran, Hamas, etc... to evade sanctions and launder money, and the general lack of any material crypto economy, then parts of the gov't, in general, are starting to think the show needs to end for crypto - and are talking to regulators to shut down exchanges. That is why there are no "productive conversations" between Coinbase and regulators. The regulators don't want to give them any valid methods of operating - because they NOW don't want them to operate at all.

itsoktocry 3y ago

>whose job in large part it is to protect retail investors, not allow a company who is in the business of selling illegal securities to go public, and then take multiple years to file suit First, it's not ideal, but an investigation takes time. Second, had the SEC said "we're not allowing you to go public because we think your business might be breaking ambiguous laws" it would have destroyed Coinbase with a combination of reputuational damage and the inability to raise money to operate. All for something that might be true but was unproven? That doesn't sound ideal, either. By the way, love the "anyone who thinks otherwise is tainted" bit at the end, it truly speaks to our political climate.

Spivak 3y ago
> because we think your business might be breaking ambiguous laws I think Coinbase and the their investors would have appreciated a real a priori ruling on whether their business is an illegal securities exchange before going public but we can't do that for some reason. Risks To Our Business: The SEC might shut us down for being an illegal securities exchange but has no way of telling us in advance if we're breaking any laws ¯\_(ツ)_/¯ I think there is very little room for this sequence of events to be considered fine. If there is any sense at all that the SEC's mission to protect retail investors "their whole publicly stated business model might be illegal and we might sue them out of business" is something you might say, "we're not sure if we're comfortable with you going public yet."
- lolinder 3y ago
  They didn't use those words, but they basically did put that in the S-1 [0]: > We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition. > ... > A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected. > ... > The SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC generally does not provide advance guidance or confirmation on the status of any particular crypto asset as a security. [0] https://www.sec.gov/Archives/edgar/data/1679788/000162828021003168/coinbaseglobalincs-1.htm https://www.sec.gov/Archives/edgar/data/1679788/000162828021...

linuxftw 3y ago

Well, not really. When they decided to file the S-1, they were likely in a very different business model, and the underlying cryptos (for the most part) were very much non-scams (as far as that can be applied to cryptos). It would be like going public as a company that looked like ebay, and then later most of your userbase is buying and selling heroin, and now your business totally revolves around the heroin, and you've taken certain steps to encourage and participate in this heroin market directly.

pjc50 3y ago
This is almost exactly what happened with Craigslist and FOSTA/SESTA.
- linuxftw 3y ago
  Backpage is the more relevant example, at least in the US IMO. But, no as much drugs as the 'adult services.' I don't think they were publicly traded, either.

lolinder 3y ago

> Any crypto sceptic who does not see a problem with this is tainted by their priors. I'm not qualified to comment on the legal or financial aspects, but this is a hostile and aggressive statement that detracts from the conversation. You made a claim and offered reasons why you believe that claim. The correct thing to do from there is to allow other people to defend the other position, not end the discussion by saying "and if you disagree with me you're self-deluded".

iHeartVLC 3y ago
[dead]

amalcon 3y ago

"Any [person] who [disagrees with me] is [committing an error]" is a thought-terminating statement. Best to avoid using that kind of language -- it doesn't particularly hurt anyone else, but it will hurt the growth of one's own understanding.

pjc50 3y ago
On the other hand, sometimes people are just not correct, due to motivated reasoning, and keep asking the same question ("Is this an illegal security?" "Yes") over and over again hoping to get a different answer. Ultimately you have to terminate thought somewhere or you get bogged down in trivialities by people who are trying to exhaust you.
- lolinder 3y ago
  On an internet forum you do that by deciding not to engage, not by issuing a drive-by top-level comment that preemptively cuts off any dissent.

hluska 3y ago

You made a good comment and then absolutely ruined it with your last sentence. Blanket statements like that are not only disrespectful but they’re useless. This isn’t Fox News…it is Hacker News. Second, you’re arguing they were involved in illegal activities since before going public. How do you know that for sure?

miracle2k 3y ago
> You made a good comment and then absolutely ruined it with your last sentence. Blanket statements like that are not only disrespectful but they’re useless. This isn’t Fox News…it is Hacker News. I appreciate this feedback. I like how another commenter put it: "I think there is very little room for this sequence of events to be considered fine" - from a non-crypto-partisan, rule-of-law perspective. > Second, you’re arguing they were involved in illegal activities since before going public. How do you know that for sure? Because that is what the SEC is alleging in their lawsuit.
- lolinder 3y ago
  > I like how another commenter put it: "I think there is very little room for this sequence of events to be considered fine" - from a non-crypto-partisan, rule-of-law perspective. I would encourage you to consider your own priors and read the feedback that you're getting on this idea as well. In spite of your attempts to cut off opposition, there are a lot of very well-reasoned arguments for the SEC's approach.
  - miracle2k 3y ago
    > In spite of your attempts to cut off opposition, there are a lot of very well-reasoned arguments for the SEC's approach. Which ones do you find convincing?
    - lolinder 3y ago
      Take your pick. You've so far only replied to the people calling you out for trying to cut off discussion, not to the people who are actually taking on the claims you consider to be so ironclad. I'm personally not invested enough (or knowledgeable enough) in this topic to debate you on it, but if you're so sure of your position you'd do well to get out there and defend it.

tim333 3y ago

> I think Americans should fairly expect their regulators to be clear enough about the rules that... The trouble is that there aren't really clear existing rules - they are getting made at the moment by court judgement. If he had the power Ginsler would probably ban cryptocurrency but he doesn't.

FabHK 3y ago
Ginsler would definitely ban Etherium.

purpleflame1257 3y ago

By analogy FDA would never let an intentionally tainted drug go to market. Shouldn't we expect the SEC to behave similarly?

jmull 3y ago

This is a losing argument, IMO. Reviewing the S1 is not a complete review of the legitimacy of a business model, and, of course, cannot predict whether a company will comply with regulations in the future. It’s notable your argument doesn’t address the fact that the S1 disclosures seemed accurate, e.g.: > [W]e could be subject to legal or regulatory action in the event the SEC, a foreign regulatory authority, or a court were to determine that a supported crypto asset currently offered, sold, or traded on our platform is a “security” under applicable laws… [W]e could be subject to judicial or administrative sanctions for failing to offer or sell the crypto asset in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration. It seems coinbase knew there was a substantial risk and proceeded anyway. > Any crypto sceptic who does not see a problem with this is tainted by their priors Someone shoulda stopped me is never a good defense. Perhaps they should have. But if it was so clear to them, it should have been even more clear to you, and you have the primary responsibility for your actions and decisions. It’s up to coinbase and the others to figure out how to create a legal business model around crypto, not the SEC.

dogleash 3y ago

> When approving the S-1, the SEC was asked to review a business, not one selling filtration technology, but one selling illegal securities, well within their area of expertise. > Any crypto sceptic who does not see a problem with this is tainted by their priors. My priors include the idea federal agencies operate within a scoped statutory authority, and the scope of that authority can even vary from function to function. It's a very "swim in your own lane" kind of partitioning. It can lead to counterintuitive interactions, but on the whole makes sense if you step back and look at the system of congressional delegation to agencies they legislatively invent.

JeremyNT 3y ago

> Any crypto sceptic who does not see a problem with this is tainted by their priors. Who is this addressed at? I think most (any?) crypto skeptic would see the problems here and suggest that these exchanges should have been shut down much earlier. The fact that they were allowed to operate so long gave them the veneer of respectability which just brought in more suckers. Coinbase et al knew (or should have known) exactly what they were doing, they were making hey before the regulators caught up to them. Nobody's claiming that the US legal system is perfect, but here we are. The wheels of justice grind away slowly. At least they're finally regulating these things.

miracle2k 3y ago
> Who is this addressed at? People who want to ridicule complaints of a lack of 'regulatory clarity'. You can hold the view that crypto should have been aggressively regulated against much earlier, while also recognizing that regulators / the state have a due process obligations. The state should not be allowed to take away your residency permit even if it was issued incorrectly 10y ago due to an oversight on their part. Similarly, it is reasonable to argue that the state should not be allowed to punish a business for behaviour it has tacitly approved of by doing nothing for a decode. It's not like Coinbase was doing this under the radar and the SEC just noticed recently.