Cornell [0] has the definition available to us reproduced here for argument's sake:

> (1) The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

There's really nothing here in the US Code that covers crypto. Crypto is a currency first and foremost. If bitcoin for example can be called a security then so can the US dollar. You can imagine what kind of calamity this would cause: imagine paying taxes on deflation.

The argument here is important. Bitcoin was effectively securitized by the centralization of the market into the 2-3 or big players. Coinbase is one of them. There is no reason the IRS should need to know about my bitcoin just like there is no reason for them to know about the US dollars under my mattress. The crux of the argument here is securitization. If the argument is made that purchasing a bitcoin from an exchange is really a "piece of coinbase's bitcoin pie" then the argument can be made it's a security. However, if I go and mint a bitcoin, or a I buy a bitcoin from someone (via the exchange of fiat) this should be a non-issue. I do not pay taxes when I convert my US dollars into Pesos and back when I visit Mexico. I don't have to report my "total peso holdings" to the government. It's absurd just like the SEC's argument.

It comes completely down to the IRS being in bed with the SEC and the increased need to raise taxes to pay for rampant pathological government spending. Nothing more, nothing less. Like always, steppers gonna step. They want to make ALL crypto holdings subject to taxes. The law is very specific here. The purchase through an exchange makes it a security just like foreign exchange via a registered broker. IMO the way around this is relatively simple. Offer a "currency exchange service" no different than an airport.

[0] https://www.law.cornell.edu/uscode/text/15/77b

EDIT: Downvoters already lmao get bent