It's kind of your obligation to understand the law as it is today and obey it.

Especially when your primary product and money maker is regulatory arbitrage, you better hire an army of lawyers to defend yourself against situations like this.

Do you? You are likely in violation a lot more than you realize.

They also haven't been clear or consistent.

Laws are written and passed by legislators, not the SEC.

It's not that weird, its there job is to enforce not teach. The FDA, EPA, etc set the rules and enforce those rules. They do not hold a company's hand following those rules.

I mean, the US federal government doesn’t have an internally consistent stance on cryptocurrency regulation, with different agencies in conflict as to whether a securities or commodities regulatory framework applies. And no consistent clear determination has been made. It’s currently effectively impossible to get actionable legal advice about how to follow the rules, which is different to the situation with the FDA, EPA, et al.

You could say that the conclusion is then that it’s all illegal full stop and that all cryptocurrency related businesses in the US should cease operations immediately. But if that’s the case, you’d hope that would be clearly expressed somewhere. Right now, the rules (or rather, the probabilities of facing adverse legal action) are being inferred after the fact by analysing patterns of enforcement action.

Crypto isn't some completely new thing that needs a new set of regulatory rules. The tech behind it is new, but it's really just another currency for the most part. Are there some differences? Yes! But it is not so different that most of the rules either don't apply or it's hard to see how they apply.

A crime isn't not a crime just because you do it with a bunch of math!

So maybe they should align within themselves before going after others?

Just because we decided it that way arbitrarily, right? It's not some natural law that this is how it should be, that the rule makers can't possibly explain rules, only enforce them. I mean, you could make the same argument about the IRS and Congress with respect to taxes: it's not their job to make it easy on us, just to punish us when we make a mistake on our tax returns. I mean, I guess... But just because we wrote the law that way. Plenty of other places have put 2 and 2 together and figured out that if the goal is to collect taxes and not to enrich TurboTax, then they can make the process dramatically simpler.

Similarly, if your actual goal is to reduce the occurrences of "bad behaviors" (which is presumably the whole point of creating these rules to begin with), then it doesn't seem that unreasonable to have someone try to lay it out clearly, right? If for no other reason than maybe a bunch of people negatively affected by these behaviors would have been spared since there wouldn't have been this grey area to operate in for so long? That's who we're ultimately doing this for, right? The public that is hurt by securities that are misrepresented? Now, if your goal is to punish people, then yes, the current system makes more sense.

There are, regardless of regulation, from aerspace over drugs to finance, tonsbof law firms, counsultants and experts out there explaining the rules and how to follow them.

The problem is that a whole generation of wannabe start-up bros, starting with Uber the latest, just cannot be bother with learning and respecting rules it seems. Most of those flog to crypto lately.

Not that I have a ton of experience on this, but from what I've seen, lawyers do not generally have a unified opinion on stuff like this (stuff that has never been litigated on in general). A lot of them will tell you "this is what I think, but look, this is untested."

To separate this from the emotionally-charged subject for a second: just look at Google vs. Oracle. It took over a decade to decide whether APIs are covered by copyright or not. And the reality is that that was closer to a coin toss than any of us would like to admit, since it was trying to apply a law that in no way imagined something like APIs to APIs, and relied heavily on the judge/etc being able to wrap their heads around it. The verdict could have easily gone the other way. When it comes to how regulations apply to new technologies, the uncomfortable truth is that there is no "objective truth" to the law, and unfortunately comes down more to how much money the parties throw at the problem and legal process. I am sure on the Oracle side there were plenty of people talking just like you: "these people don't respect copyright and flagrantly copy APIs that are obviously protected IP and they think just because they're in hippy open source land the law doesn't apply to them". The reality is that until the verdict, there effectively was no rule around copyright and APIs.

For an opposite example: look at the famous case of Diamond v. Chakrabarty (1980). The patent agency rejected an application for a genetically engineered bacteria that could break down oil, saying you can't patent living organisms. It went to the Supreme Court, that decided 5-4 that they could. Are you going to sit here and tell me this was obvious from the beginning? Given that the patent agency had the opposite opinion than the Supreme Court, and that the Supreme Court was basically split 50/50 on the decision? Do we think they made the right decision given no background in biology? Do we think Chakrabarty was a wannabe biology bro that didn't care about the law, given that almost every lawyer at the time would have told you was commonly accepted did not allow patenting living organisms?

* > tonsbof law firms, counsultants and experts out there explaining the rules and how to follow them.*

Hopefully you see now that a ton of those law firms are out there telling you "I think we can win on this, it has happened many times before, and the reality is that law really isn't written until we make our case".

If your compliance plan is based on "my lawyer told me will win this", you are already 90% screwed.

If that's what you took away from this, you must have not read it. I have given specific examples from case law that show that the law often just isn't defined in these new areas, and there is actually nothing better than "I think we can win this". The law is not a secret ledger that has the true rules that account for all future scenarios, that you try to guess from the outside, and can get right or wrong. The law often just comes down to making your case. I know that's not unsatisfying, but for it is the way it is.

Coinbase hired those people though, and they didn't get anywhere.

In an ideal world, regulatory agencies would also spend significant resources on education. Unfortunately many of them don't have enough resources for rule making and enforcement, their primary mandate. However, there are plenty of educational resources outside the agencies. There are lawyers, accountants, professors, consultants, etc who are experts that you can hire. There are classes available, in some cases entire degrees.

The regulations are designed to protected the general public from companies doing the wrong thing in the name of profit even when the intentions of the people running those companies are good. It's a check on the dark side of capitalism. Are sometimes those rules too complicated or too overbearing? Yes! Are there also people out there just to improve that? Yes, and some of them work in the regulatory agencies!

It's a messy, frustrating process that on the whole seems to be doing a decent job. Most people in US have access to clean water, generally don't have to worry about tainted Advil, or worry their life savings are going to evaporate by just storing it in a bank.

I don't know enough about the specifics of the Coinbase suit yet, but the crypto industry in general seems an awful like the banking industry of the 1800s and early 1900s in the US. During that time there were plenty of companies and people doing the right thing, but there were enough bad actors that something needed to be done. The SEC was born.

This is very likely fallout from FTX, but not because of some nefarious plot against crypto but rather the SEC realized there is a financial sector they need to focus on more closely. A SEC lawsuit is also a starting point for a serious discussion, not a criminal indictment. If the SEC believes there has been criminal behavior, they refer that to the DoJ. The likely outcome if Coinbase has been trying to do the right thing is some sort of settlement (fine) + direction on what to do differently. Then Coinbase will continue on like normal with whatever changes the SEC wanted.

No argument about that, but Coinbase has been begging for a clear set of rules to follow for ages. Now SEC is suing Coinbase for not registering with SEC as a broker/exchange, but the SEC itself wouldn't let them register because they(the SEC) couldn't decide if crypto is a currency or security. The whole thing is a political fallout of the FTX crisis.

They have set clear rules, just not ones that Coinbase likes.

Can you explain what those rules are wrt crypto?

in order to learn more about them, the term to look for is "securities law"

I assume you aren't asking that person to "explain" all of securities law in a HN comment

But SEC refused to categorize crypto as securities

I'm sorry, I'm not familiar with the history, did they explicitly say that crypto were not securities?

explicitly saying they are is not necessary for them to be.

No, they haven't, they've put out Press Releases to that effect.

But when it actually comes time for court filings, which are what really matter, they instead acknowledge that they know exactly what the rules are, but that they "disagree". And why do they disagree? "because for numerous tokens, regulation would require undue effort or not be financially viable [for Coinbase]".

"Your rules are not profitable for us", essentially.

FDA is actually pretty collaborative with pharma companies. But also pharma companies’ business models aren’t entirely dependent on circumventing regulation and they aren’t openly combative with regulators.

Only because they found it much more effective to "collaborate" on the regulations such that they'd be allowed to label opioids however they'd like and addict millions of people in one of the biggest health crises in the history of our country.

"Only because?" Strongly disagree. I think it's actually because there are human beings who work at FDA who, like all human beings, have had loved ones suffer, get sick, or die. Everyone (presumably) wants safer and more effective treatments for sources of suffering, and e.g. interpreting drug trial data is really fucking hard, even for the people who create the drugs.

Separately, yes, there are also instances of straight-up corruption. It's totally divorced from reality to suggest that collaboration is "only because" of corruption though.

I believe people at the FDA and NIH are allowed to have financial interests in the drugs they regulate[0]. I'd bet the SEC doesn't permit that. That would probably explain the difference.

[0]https://www.ncbi.nlm.nih.gov/pmc/articles/PMC545012/

I don’t believe that’s true of FDA and it actually should be true of NIH. NIH isn’t a regulatory body, it’s a research institution.

NIH researchers (and their funders, US taxpayers) should be getting paid more in royalties from commercialized research.

The "only because" relates to why they don't fight the regulators. As in "why fight them when you can have a revolving door agreement where they get cushy jobs in your company after they leave the FDA". In other words, I am not implying that there aren't other reasons for collaboration with the FDA, I am implying that there isn't a culture of "fighting regulations" because there is instead a culture of manipulating regulations. This in no way implies that there doesn't also good collaboration.

enforce what exactly? The rules are made up. Gensler is truly a clown, he doesn't have a clue what he is talking about. Look at this, that was just one month ago, about Ethereum, the second largest and he cannot give a clear answer https://twitter.com/sassal0x/status/1648338351832064003

So again, what shall the SEC enforce exactly? If you don't see the endgame here ...

But how can they enforce what they don't know? Coinbase and others asked several times, what should they do. Then get no answer. Then get attacked?

The lack of clarity was deliberate. The aim was to obey Elizabeth Warren and kill the Crypto industry in the US.

Hopefully since it's been an endless source of money laundering and scams.

Why not outright prohibit it then? Lack of clarity on its legal status is the matter being discussed here.

This is accurate and folks who believe otherwise have blinders on.

You mean like where they say "you broke the law" and crypto bros respond that the laws don't apply and new ones need to be made up?

It's a bit like that, except if the law is incredibly vague and not written by elected officials.

They are, all SEC rules are based on properly passed legislation...

We can hope that SCOTUS tears Chevron apart this term. Then Congress will be forced to actually do its job, something it hates doing because it puts responsibility for decisions in its box.

Ah yes, because the body that can barely get through a few laws every month surely will handle the utter deluge of work when they have to write all the petty little details of any recommendation by any portion of the federal government on any little issue.

The point of overturning Chevron is entirely to handicap the government in it's ability to regulate anything.

The fewer the laws they get through the better, especially when every bill they pass seems to be a conglomeration of 10-20 other bills which should be considered, written, and voted on separately. The point of overturning Chevron is to get rid of a current bias toward accepting the even-nonsensical interpretations of law by unelected officials over clear reason and sense.

And Coinbase has sued the SEC for failing to follow this "properly passed legislation."

So, I guess, courts will answer that question as well.

And like all court cases, everything must be followed with the words "In my opinion", until a judge rules.

The term "based on" is doing an enormous amount of work in that sentence.

It’s more like asking a cop if you can sit somewhere and they give you a look and won’t tell you, but 3 years after you sit down they book you for trespassing.

https://www.reuters.com/legal/sorry-crypto-world-sec-isnt-ba...

FYI, that is 100% something a cop can do in the US. They have no obligation to warn you not to commit a crime, and are legally allowed to even encourage you to do a crime. They can provide all the means and motivation to do a crime, and if a jury can be convinced that you would have crimed anyway if you had those resources through other means, it's not entrapment.

I think a reasonable person would agree that if you ask a cop if you can do something and they won't answer but then take enforcement action against you later on, that would be bullshit.

Of course that all depends on your belief that the cop didn't give you an earlier answer that you ignored.

It acts like a security, smells like a security, trades like a security, but it's NOT A SECURITY, so give me new laws for this thing I won't define!

No I mean they ask "what should we do and what IS THE LAW?" and SEC say "we don't know"

No, again. The SEC has told them the law, then they keep ignoring that and saying "no what is the law we want," to which the SEC say "I don't know"

Do you think, perhaps, that the SEC not providing answers is just allowing more time (rope) for the crypto co's to hang themselves with?

“I’m trying to interface my sewage pipes with the municipal drinking water supply, but for some reason the water company are being real dicks about it”

lol.

I'm pretty pro-crypto and think this is a bullshit lawsuit, but I gotta admit, that's a funny and clever analogy. Well done.

They have given very clear guidance for years: basically all cryptocurrencies are securities. Conbase just didn't like what they said.

Besides, it's not the SEC's job to give free legal consultation. Nowhere in our legal system does the government have an obligation to send experts to consult with violators to help them stop violating the law. These companies have lawyers who are supposed to keep them in compliance.

(Conbase was a typo, but I'll leave it.)

>Besides, it's not the SEC's job to give free legal consultation.

"Free"? They are literally funded with tax money. They work for citizens and companies. It's their literal job.

It's like saying "you can not ask a policeman about if you can use this kind of trailer on your car, he is not paid for that advice"

It’s like having that policeman warn you that something you’re doing is illegal, but he won’t tell you what - just that if you keep driving he’s going to pull you over and give you a ticket.

From what I heard SEC didn't tell Coinbase what was illegal or not or what they should do though?

Coinbase has actually sued them for failure to follow the law in this regard. The lawsuit is still open.

Ignorance of the law is not an excuse.

Tell me which law saying crypto is a security

You can hear it straight from the horse's mouth:

>Rather than initiate new rulemaking, Chair Gensler has repeatedly stated through speeches and testimony that the vast majority of digital tokens are securities, and has asked issuers and exchanges that offer, sell, and trade them to come in and register. We disagree that the majority of digital assets are securities. For those digital assets that are securities, registration under the current rules is, for many market participants, either not possible or not economically viable given the associated and unnecessary compliance burdens. Additionally, when existing regulations are unworkable, some market participants may be less willing to invest the resources necessary to follow the rules. Failure to resolve these shortcomings leaves investors unprotected due to a lack of regulatory clarity, prevents market participants from leveraging the efficiencies new technology can offer, and materially impairs capital formation in the blockchain technologies that underlie digital assets. This is wholly inconsistent with the SEC’s mission.

https://assets.ctfassets.net/c5bd0wqjc7v0/5NRidtW8lvwVEfSHpn...

The SEC has been clear that most cryptocurrencies are securities. Coinbase is well aware of this. There is no confusion and no lack of clarity. Coinbase just doesn't like the rules.

They have no obligation to give free legal advice. It is the job of a company to keep in compliance, not the job of the SEC to be their outside counsel. If you think this should change, write to your senator.

This is all hypothetical, since the SEC has given clear guidance for years. Coinbase ignored this guidance because they didn't like it.

you seem very stuck up on legal words I think. ANy normal thinking human realize the one enforcing rules, must obviously also tell what rules are ok or not

How should this "outside council" learn the rules, if they can not ask the ones making or ruling with them? You are just shifting the problem down one notch

>since the SEC has given clear guidance for years

So Coinbase is lying about no guidance?

> ANy normal thinking human realize the one enforcing rules, must obviously also tell what rules are ok or not

I do agree that things should be this way. In some countries, it is much more clear. In the US, it is very much not like this. Nobody can list everything that is unlawful. You can only pay for opinions.

It sucks, but it's not some unique quirk or the SEC or whatever.

> Nobody can list everything that is unlawful.

Whats the law book for then?

But, a policeman’s job is not to provide such advice.

It literal is yes. At least part of it. How else can he judge what is legal or not?

A policeman's job isn't to distinguish definitely legal from questionably legal.

Their job is to find some portion of things that are definitely illegal. They don't need to have comprehensive knowledge of the law, just enough to know that the things they are enforcing against are definitely illegal.

If you're asking the police whether something you're doing is definitely legal, you're asking the wrong person.

It's part of his job, otherwise how can he do it?

In this case, from what I've seen, SEC can not even say what is "definietly illegal" like you say. So they can not be trusted

In the US, the police have no requirement, legally or otherwise, to hold your hand in avoiding a crime. Police can literally advise you how to commit a crime, and it is on you to not do so. The onus is on you to not be a criminal. Sometimes that means being extra careful. Sometimes that means hiring an expert lawyer and getting them to come up with a regime, and in fact that's like their whole job other than litigation. But your expert lawyer can be wrong.

Coinbase hired expensive lawyers who told them "we think if you do it this way it's not a crime", the SEC disagrees, and it's up to the courts who is correct.

Arguably the SEC doesn't actually make the rules, and is only tasked with enforcing them, and thus they can't actually give advice on the law because their interpretation of the law might not be correct!

You are mixing up the general moral of someone making a law vs some specific country though.

anyhow, then they can of course give you advice what NOT to do, and will do. Otherwise, as i said, how can they enforce something unless they know about it? I don't even get your point, it honestly sound quite stupid ?

>Arguably the SEC doesn't actually make the rules,

Sure, but they should at least tell which rules they follow? I don't get how so many people on HN seem to favour SEC here, a community of programmers who use logic at work

I understand your logic, and some officers try their best to know the law, and some are very familiar with the law, but they are most definitely not accountable to knowing the law and they are most definitely not responsible for educating you on it. Further, they have authority to lie to you about the law.

The policeman doesn't have to answer, and can literally lie to you.

So how do you know which laws to follow then? Sounds utterly stupid

And what are you to do, as an exchange trying to maintain compliance, when the CFTC says assets determined to be securities by the SEC are, in fact, commodities.

You pick whatever suites your business best and register either with the SEC or CFTC. Way safer than saying, to hell with it, I do what I want.

You go to court and hope your lawyers are more convincing than the governments.

The CFTC and SEC don't actually have to agree about something for you to be found guilty of a crime.

The easiest solution is to avoid trading any futures and then ignore the CFTC as they only have jurisdiction over futures trading.

This is not a new problem, nor a difficult one.

> They have given very clear guidance for years: basically all cryptocurrencies are securities.

Please point out a single time where Gensler makes a claim even remotely similar to this. The SEC does literally everything else except for giving guidance on which cryptocurrencies are securities.

https://www.youtube.com/watch?v=h_oAr4wn7M4

If I call the cops and ask them to define shoplifting to help me with my "free stuff from the store" business, they have no obligation to do so.