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Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the

Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. And the situation with cryptocurrencies seems to be broadly similar: there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them. And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.

jongjong 3y ago
The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?! If my startup fails because I hired the wrong people, I take the full blame. Why should it be different if I invested in the wrong company or trusted the wrong company with my money? As someone who is trustworthy and providing a service, I am harmed by the SEC creating a false veneer or respectability for investors to invest in my biggest competitors. I'd rather investors be forced to do due diligence.
- zacmps 3y ago
  Because it causes preventable harm.
- nindalf 3y ago
  In the real world, we try to have government operate law enforcement. Doesn’t always work, but it works a lot better than outsourcing law enforcement on financial scams to retail investors.
- djur 3y ago
  The analogy isn't valid. If your startup fails because the people you hire steal from the company, you have legal recourse. If you lose money because you invest in companies that underperform, the SEC won't intervene. No markets operate with perfect information for all participants. That creates the opportunity for fraud, and governments regulate to prevent fraud. In principle this permits broader access to markets (whether this is actually true is a different subject).
- kaiokendev 3y ago
  > If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Most people can't do that, and even if they could, most people don't have the time nor the patience to do that
  - duskwuff 3y ago
    More to the point, you generally don't know a company is commingling (and/or trading using!) customer funds until it's already too late.
- pmulard 3y ago
  The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this for the population than spend every waking moment personally auditing companies for breaking the rules. Oh, and I have to set them too. No thanks.
  - clarkmoody 3y ago
    How many drugs had FDA approval that was later retracted after much harm was done?
    - bitvoid 3y ago
      If the FDA didn't exist, how many more harmful drugs would there be? Would those harmful drugs that had approval retracted still be out there being prescribed? Just because the FDA is not perfect does not mean that it's a net negative.
      - nateabele 3y ago
        That's the hypothetical half of the equation. The tangible, measurable half is how many people the FDA has killed by denying access to life-saving treatments. A number of studies[0] have been conducted on this topic. [0] https://www.fdareview.org/issues/theory-evidence-and-examples-of-fda-harm/ https://www.fdareview.org/issues/theory-evidence-and-example...
        IggleSniggle 3y ago
        Right, of course. Any preventative treatment is difficult to justify, as it's a risk waylaid, whereas treating symptoms has a visible direct impact on problems faced today; nevermind that it costs 500x as much and has worse outcomes.
      - 3y ago
- Loughla 3y ago
  If the company says it doesn't co-mingle funds, but does, why should I be punished as a retail investor?
  - heavyset_go 3y ago
    You're just acceptable collateral damage to someone who is ideologically opposed to regulations. At best, your legal recourse is to "sue" an entity that has already been dissolved and bankrupted.
- nvy 3y ago
  Regulators keep big fish from engaging in predatory behavior. Is the SEC flawed? Absolutely. But the SEC makes markets more free, not less.
  - throwawaymaths 3y ago
    Does it? Suppose you'd like to keep the fruits of your hard earned labor on an asset that isn't subjected to inflation at the hands of a capricious or warmongering country. And you'd rather not speculate on greedy capitalists. The SEC is effectively limiting your freedom to do so (whether or not that's a good personal choice)
    - nvy 3y ago
      In our society the concept of a "Free Market" is not one where participants are free to do entirely as they please without consequence. The use of the word Free in "Free Market" implies a freedom from restricted competition which definitionally requires a regulatory body to maintain a somewhat level playing field. Again, in order to ensure this healthy competition in markets, regulation is required. This is why we attempt to inhibit monopolists, and why antitrust laws in general exist. Absolute freedom in the personal sense is expressly not a goal of modern free market economics. You are free, subject to taxation of course, to hang onto your "hard earned labor" on your shitcoins but Kraken is not free to operate as a securities exchange unless it complies with the regulations in place so as to ensure an orderly and healthy market. DeFi people are constantly finding out[0] why some centralization and oversight is a good idea. [0] https://www.youtube.com/shorts/WntjAM2wqF8 https://www.youtube.com/shorts/WntjAM2wqF8
- ranger207 3y ago
  > The SEC has no place in a free market. You're right. This is why we don't want a completely _free_ market, we want a _competitive_ market that has actors to prevent and punish fraud and abuse.
- patmorgan23 3y ago
  You're assuming perfect information which does not exist in the real world. Regulators are good actually. Forcing companies to make truthful and accurate disclosures and forcing them to implement basic controls is important. It makes everyone better and protects investors and customers from unnecessary frauds and disruptions.
- NikolaNovak 3y ago
  But at its best, government agencies are exactly that. It's free people in a free market learning from their mistakes and saying "well THAT sucked! Let's not do THAT again!". But you know, more efficiently, as is the market's want - rather than re learning the same lesson over and over and over again, we write it down and codify it. Of course, that's regulations at their best. Regulations at their worst are pretty awful too! But given your post was about the very existence of regulations and their related agencies, I thought I'd offer a perspective :).
- RandomLensman 3y ago
  Because people are not islands? If you live in a non-society then that is fine, otherwise financial schemes can pretty much bring down countries (see Albania).
  - jowea 3y ago
    Even in the US, AFAIK the reason these securities regulations exist is that companies did not disclose information before they were forced through. An efficient theoretical free market requires public information, the SEC exists to enforce that.
deleted 3y ago
[deleted]
knlam 3y ago
At least in the case of Bernie Madoff, the SEC can say "no, it is illegal to run a ponzi scheme and in this case it should say what law the exchange broke to make it valid
- pseg134 3y ago
  They offered an unregistered security for sale. That is against the law.
  - fallingknife 3y ago
    But the only time that a judge has ruled on whether or not a crypto token is a security is in the XRP case, and it ruled that it was not (at least when it was sold on exchanges). This is not comparable to a ponzi scheme where the legality is not in question at all. And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by the SEC. So it's very clear that the SEC treated this as legal for a decade before suddenly changing their position. This seems incredibly dishonest to me.
    - xalava 3y ago
      The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1] On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2] That said, there would have been better course of action to protect consumers, such as establishing an appropriate regulatory framework, but I may be too European. [1] https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 [2] https://www.sec.gov/Archives/edgar/data/1679788/000000000020011705/filename1.pdf https://www.sec.gov/Archives/edgar/data/1679788/000000000020...
      - nostrademons 3y ago
        The SEC saying it is very different from a court saying it. The executive branch can say anything it wants to, but it's the judicial branch's job to interpret the law.
deleted 3y ago
[deleted]
Uptrenda 3y ago
[flagged]
- BlueTemplar 3y ago
  Didn't FTX also have "notable investors", which despite this, were so careless with their money that they didn't even think sending an accountant to check on the (nonexistent) FTX books ?
  - jabits 3y ago
    This is such a weak reply. If you have something to add, it should pertain to the broad market, like the comment you re responding to does...
YeBanKo 3y ago
> "don't commingle customer funds" This seems to be with accounting, not securities. > there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal What needs to be done to be fully legal?
- austhrow743 3y ago
  Shut down.
  - YeBanKo 3y ago
    Why? Call it a gamble and let operate under casino license. The issue is only when cryptocurrency masquerades as investment.
    - austhrow743 3y ago
      I would be shocked to learn that claiming "casino" is enough to get the SEC off of your back and I would expect to see a lot more casino licenses if it did.
legutierr 3y ago
> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here. There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law. Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege. Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers. Whether Kraken is breaking the law is something that will likely be decided by a court. The SEC asserts that Kraken has broken the law, but it is not up to the SEC to decide—it is up to the courts. It is not illegal to operate a spot commodities exchange without approval from the SEC, unless those commodities are also the kinds of securities the trading of which require SEC approval. It is also not illegal to operate as an unlicensed broker-dealer of non-security commodities, or as an unlicensed custodian of non-security commodities. The SEC only has jurisdiction over securities. It is not in the slightest bit clear yet that the crypto tokens for sale on Kraken are in fact securities of any kind. The SEC asserts that they are, but at this point it is just an assertion. The SEC will have to win in court.
- discodave 3y ago
  > For what its worth, banks don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. And that is why banks are regulated, must register, follow certain rules etc. > Kraken has been operating under the money transmitter licensing scheme for a decade Yeah, but that doesn't give them a license to operate a securities exchange, or a bank. How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?
  - 3y ago
AnthonyMouse 3y ago
> if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other. So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime. Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time. And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.
- kdwikzncba 3y ago
  This is a crazy way to operate, especially for a country that brands itself as the best for business.
- pavlov 3y ago
  > “Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.” And how would this process actually work in practice? Would making such a request be free? Probably not, since they would consume a lot of lawyer time at the relevant agencies. If it were free, people could file thousands of slightly different requests for all imaginable variations of their dubious business plan, hoping that something would slip by. If filing such a request costs money, then maybe the process would be more like applying for a patent. There would be some kind of guarantee about processing time, and some kind of legal promise that the response you received actually offers some level of protection when you do proceed with the thing you applied to do. This is clearly a big deal. There would maybe need to be a new profession of counterfactual judges who decide on the legality of things that haven’t happened. How much should such a process cost? Seems like $10k would only get you started. Who decides the fee structure? What if the case is very complicated and involves many different aspects of law? Overall, seems like a massive change from how legal systems work today.
robbywashere_ 3y ago
One is operating in good faith the other is by definition defrauding people. That’s not equivalent.
olalonde 3y ago
> there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them. Fighting the SEC isn't easy or cheap either, raising questions about the reluctance to pursue the pathway to compliance. If there truly exists a legal route for a company to become "above-the-board and legal", why hasn't this path been taken? My guess is that that route is just for show, it doesn't exist in practice.
- RandomLensman 3y ago
  Perhaps the market would then be too small and/or the costs too high?
- Nursie 3y ago
  Perhaps because the 'route' to compliant trading in unregistered securities is to not trade in them?
  - olalonde 3y ago
    That's kind of my point. The SEC does not have a mandate to evaluate the merits of transactions or determine whether a securities investment is "good" or "bad". However, it's possible that they are effectively doing so by making the securities registration process for crypto tokens so stringent, it becomes impossible to fulfill. If it was actually possible to register crypto token securities with the SEC, why doesn't anyone do so instead of battling the SEC in court?
    - davidgerard 3y ago
      > so stringent, the laws on penny stocks are extremely well established. Crypto is asking for a free ride just because.
      - olalonde 3y ago
        Perhaps the laws on penny stock registration don't translate well to crypto tokens? How do you explain that basically no one registers? Surely, "just because" is not it.
tim333 3y ago
A case for sympathy for companies like Kraken is they are the ones that do do the proper thing and are US based and regulated. If the SEC goes after them and shuts them down then the punters will move to non US companies like the Bahamas based FTX insead with the problems that we have seen there.

jongjong 3y ago

The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?! If my startup fails because I hired the wrong people, I take the full blame. Why should it be different if I invested in the wrong company or trusted the wrong company with my money? As someone who is trustworthy and providing a service, I am harmed by the SEC creating a false veneer or respectability for investors to invest in my biggest competitors. I'd rather investors be forced to do due diligence.

zacmps 3y ago
Because it causes preventable harm.
nindalf 3y ago
In the real world, we try to have government operate law enforcement. Doesn’t always work, but it works a lot better than outsourcing law enforcement on financial scams to retail investors.
djur 3y ago
The analogy isn't valid. If your startup fails because the people you hire steal from the company, you have legal recourse. If you lose money because you invest in companies that underperform, the SEC won't intervene. No markets operate with perfect information for all participants. That creates the opportunity for fraud, and governments regulate to prevent fraud. In principle this permits broader access to markets (whether this is actually true is a different subject).
kaiokendev 3y ago
> If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Most people can't do that, and even if they could, most people don't have the time nor the patience to do that
- duskwuff 3y ago
  More to the point, you generally don't know a company is commingling (and/or trading using!) customer funds until it's already too late.
pmulard 3y ago
The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?! -- I'd much rather pool our money into a commission that does this for the population than spend every waking moment personally auditing companies for breaking the rules. Oh, and I have to set them too. No thanks.
- clarkmoody 3y ago
  How many drugs had FDA approval that was later retracted after much harm was done?
  - bitvoid 3y ago
    If the FDA didn't exist, how many more harmful drugs would there be? Would those harmful drugs that had approval retracted still be out there being prescribed? Just because the FDA is not perfect does not mean that it's a net negative.
    - nateabele 3y ago
      That's the hypothetical half of the equation. The tangible, measurable half is how many people the FDA has killed by denying access to life-saving treatments. A number of studies[0] have been conducted on this topic. [0] https://www.fdareview.org/issues/theory-evidence-and-examples-of-fda-harm/ https://www.fdareview.org/issues/theory-evidence-and-example...
      - IggleSniggle 3y ago
        Right, of course. Any preventative treatment is difficult to justify, as it's a risk waylaid, whereas treating symptoms has a visible direct impact on problems faced today; nevermind that it costs 500x as much and has worse outcomes.
    - 3y ago
Loughla 3y ago
If the company says it doesn't co-mingle funds, but does, why should I be punished as a retail investor?
- heavyset_go 3y ago
  You're just acceptable collateral damage to someone who is ideologically opposed to regulations. At best, your legal recourse is to "sue" an entity that has already been dissolved and bankrupted.
nvy 3y ago
Regulators keep big fish from engaging in predatory behavior. Is the SEC flawed? Absolutely. But the SEC makes markets more free, not less.
- throwawaymaths 3y ago
  Does it? Suppose you'd like to keep the fruits of your hard earned labor on an asset that isn't subjected to inflation at the hands of a capricious or warmongering country. And you'd rather not speculate on greedy capitalists. The SEC is effectively limiting your freedom to do so (whether or not that's a good personal choice)
  - nvy 3y ago
    In our society the concept of a "Free Market" is not one where participants are free to do entirely as they please without consequence. The use of the word Free in "Free Market" implies a freedom from restricted competition which definitionally requires a regulatory body to maintain a somewhat level playing field. Again, in order to ensure this healthy competition in markets, regulation is required. This is why we attempt to inhibit monopolists, and why antitrust laws in general exist. Absolute freedom in the personal sense is expressly not a goal of modern free market economics. You are free, subject to taxation of course, to hang onto your "hard earned labor" on your shitcoins but Kraken is not free to operate as a securities exchange unless it complies with the regulations in place so as to ensure an orderly and healthy market. DeFi people are constantly finding out[0] why some centralization and oversight is a good idea. [0] https://www.youtube.com/shorts/WntjAM2wqF8 https://www.youtube.com/shorts/WntjAM2wqF8
ranger207 3y ago
> The SEC has no place in a free market. You're right. This is why we don't want a completely _free_ market, we want a _competitive_ market that has actors to prevent and punish fraud and abuse.
patmorgan23 3y ago
You're assuming perfect information which does not exist in the real world. Regulators are good actually. Forcing companies to make truthful and accurate disclosures and forcing them to implement basic controls is important. It makes everyone better and protects investors and customers from unnecessary frauds and disruptions.
NikolaNovak 3y ago
But at its best, government agencies are exactly that. It's free people in a free market learning from their mistakes and saying "well THAT sucked! Let's not do THAT again!". But you know, more efficiently, as is the market's want - rather than re learning the same lesson over and over and over again, we write it down and codify it. Of course, that's regulations at their best. Regulations at their worst are pretty awful too! But given your post was about the very existence of regulations and their related agencies, I thought I'd offer a perspective :).
RandomLensman 3y ago
Because people are not islands? If you live in a non-society then that is fine, otherwise financial schemes can pretty much bring down countries (see Albania).
- jowea 3y ago
  Even in the US, AFAIK the reason these securities regulations exist is that companies did not disclose information before they were forced through. An efficient theoretical free market requires public information, the SEC exists to enforce that.

deleted 3y ago

[deleted]

knlam 3y ago

At least in the case of Bernie Madoff, the SEC can say "no, it is illegal to run a ponzi scheme and in this case it should say what law the exchange broke to make it valid

pseg134 3y ago
They offered an unregistered security for sale. That is against the law.
- fallingknife 3y ago
  But the only time that a judge has ruled on whether or not a crypto token is a security is in the XRP case, and it ruled that it was not (at least when it was sold on exchanges). This is not comparable to a ponzi scheme where the legality is not in question at all. And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by the SEC. So it's very clear that the SEC treated this as legal for a decade before suddenly changing their position. This seems incredibly dishonest to me.
  - xalava 3y ago
    The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1] On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2] That said, there would have been better course of action to protect consumers, such as establishing an appropriate regulatory framework, but I may be too European. [1] https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 [2] https://www.sec.gov/Archives/edgar/data/1679788/000000000020011705/filename1.pdf https://www.sec.gov/Archives/edgar/data/1679788/000000000020...
    - nostrademons 3y ago
      The SEC saying it is very different from a court saying it. The executive branch can say anything it wants to, but it's the judicial branch's job to interpret the law.

deleted 3y ago

[deleted]

Uptrenda 3y ago

[flagged]

BlueTemplar 3y ago
Didn't FTX also have "notable investors", which despite this, were so careless with their money that they didn't even think sending an accountant to check on the (nonexistent) FTX books ?
- jabits 3y ago
  This is such a weak reply. If you have something to add, it should pertain to the broad market, like the comment you re responding to does...

YeBanKo 3y ago

> "don't commingle customer funds" This seems to be with accounting, not securities. > there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal What needs to be done to be fully legal?

austhrow743 3y ago
Shut down.
- YeBanKo 3y ago
  Why? Call it a gamble and let operate under casino license. The issue is only when cryptocurrency masquerades as investment.
  - austhrow743 3y ago
    I would be shocked to learn that claiming "casino" is enough to get the SEC off of your back and I would expect to see a lot more casino licenses if it did.

legutierr 3y ago

> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here. There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law. Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege. Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers. Whether Kraken is breaking the law is something that will likely be decided by a court. The SEC asserts that Kraken has broken the law, but it is not up to the SEC to decide—it is up to the courts. It is not illegal to operate a spot commodities exchange without approval from the SEC, unless those commodities are also the kinds of securities the trading of which require SEC approval. It is also not illegal to operate as an unlicensed broker-dealer of non-security commodities, or as an unlicensed custodian of non-security commodities. The SEC only has jurisdiction over securities. It is not in the slightest bit clear yet that the crypto tokens for sale on Kraken are in fact securities of any kind. The SEC asserts that they are, but at this point it is just an assertion. The SEC will have to win in court.

discodave 3y ago
> For what its worth, banks don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. And that is why banks are regulated, must register, follow certain rules etc. > Kraken has been operating under the money transmitter licensing scheme for a decade Yeah, but that doesn't give them a license to operate a securities exchange, or a bank. How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?
- 3y ago

AnthonyMouse 3y ago

> if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other. So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime. Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time. And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.

kdwikzncba 3y ago
This is a crazy way to operate, especially for a country that brands itself as the best for business.
pavlov 3y ago
> “Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.” And how would this process actually work in practice? Would making such a request be free? Probably not, since they would consume a lot of lawyer time at the relevant agencies. If it were free, people could file thousands of slightly different requests for all imaginable variations of their dubious business plan, hoping that something would slip by. If filing such a request costs money, then maybe the process would be more like applying for a patent. There would be some kind of guarantee about processing time, and some kind of legal promise that the response you received actually offers some level of protection when you do proceed with the thing you applied to do. This is clearly a big deal. There would maybe need to be a new profession of counterfactual judges who decide on the legality of things that haven’t happened. How much should such a process cost? Seems like $10k would only get you started. Who decides the fee structure? What if the case is very complicated and involves many different aspects of law? Overall, seems like a massive change from how legal systems work today.

robbywashere_ 3y ago

One is operating in good faith the other is by definition defrauding people. That’s not equivalent.

olalonde 3y ago

> there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them. Fighting the SEC isn't easy or cheap either, raising questions about the reluctance to pursue the pathway to compliance. If there truly exists a legal route for a company to become "above-the-board and legal", why hasn't this path been taken? My guess is that that route is just for show, it doesn't exist in practice.

RandomLensman 3y ago
Perhaps the market would then be too small and/or the costs too high?
Nursie 3y ago
Perhaps because the 'route' to compliant trading in unregistered securities is to not trade in them?
- olalonde 3y ago
  That's kind of my point. The SEC does not have a mandate to evaluate the merits of transactions or determine whether a securities investment is "good" or "bad". However, it's possible that they are effectively doing so by making the securities registration process for crypto tokens so stringent, it becomes impossible to fulfill. If it was actually possible to register crypto token securities with the SEC, why doesn't anyone do so instead of battling the SEC in court?
  - davidgerard 3y ago
    > so stringent, the laws on penny stocks are extremely well established. Crypto is asking for a free ride just because.
    - olalonde 3y ago
      Perhaps the laws on penny stock registration don't translate well to crypto tokens? How do you explain that basically no one registers? Surely, "just because" is not it.

tim333 3y ago

A case for sympathy for companies like Kraken is they are the ones that do do the proper thing and are US based and regulated. If the SEC goes after them and shuts them down then the punters will move to non US companies like the Bahamas based FTX insead with the problems that we have seen there.