That’s a good point.

Look at Telegram. They tried to use Reg D to sell the initial SAFTs, and restricted it only to millionaires, so clearly they were the type of “accredited investor” the SEC wanted.

Well, Rule 144 says after a year of holding, these millionaires could sell to anyone. Read section 4a(1) of the Securities and Exchange Act. But, somehow, the SEC got Telegram to abandon its plans and return all the money. I followed that case and it was never really clear what securities laws they broke. Maybe someone here can explain, if you actually read the case also.

Now the decentralized TON community is building it instead.

https://www.coindesk.com/markets/2020/04/12/making-sense-of-...

It's not a catch 22 though. There's coherent logic to it.

It isn't that the SEC "isn't allowing you to register." It's that crypto exchanges can't/won't properly register.

To put it more abstractly, it makes perfect sense for not all securities to be capable of becoming registered securities.

Please take a moment to look at anything that Coinbase legal has put out in the past few years. They have desperately been trying to figure out how to register, to the point of suing the SEC to get information, and the SEC has time and time again refused to provide any information about how to do that.

Coinbase was founded, from day one, to be the most compliant cryptocurrency exchange in the US. They have hired massive teams of former lawmakers and regulators to try to navigate the path to get cleared by the SEC. If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it?

I expect that when Coinbase eventually responds to this, likely in the next few minutes, the response will contain the full timeline of everything they've done to try and register. I've been listening to their lawyers get interviewed on podcasts and seen the countless blog posts they've posted about trying to get anything from the SEC, which has been entirely ignored. It's pretty infuriating. The SEC needs to label Coinbase as some lawless entity that refuses to follow the rules, when nothing could be farther from the truth.

> If Coinbase hasn't been able to do it, how could any other company reasonably expect to do it?

Perhaps the answer is "it can't be done"?

If I tried to start "Uber for Hitmen", and I couldn't find a legal path past regulators, that's because the business model itself is illegal, not because regulators meanly refuse to tell me how to legally murder people.

And most importantly, it doesn't matter what your lawyers say, it's still illegal.

Great analogy! Well done.

The problem is that, if cryptocurrency tokens are securities, Coinbase's business model is illegal under current securities law.

> ... if various crypto assets are deemed securities, Coinbase would therefore need to register as a securities exchange, in order to keep offering trading in those assets. ... Furthermore, under current securities law, securities exchanges are not permitted to offer services directly to retail customers, and Coinbase could theoretically be forced to separate the exchange and broker portions of the business.

https://www.cnbc.com/2023/04/18/coinbase-ceo-says-it-is-prep...

Well if you're going to be a regulated securities broker-dealer you can't very well trade in illegal unregistered securities now can you?

You mean Coinbase's press releases?

> They have desperately been trying to figure out how to register, to the point of suing the SEC to get information, and the SEC has time and time again refused to provide any information about how to do that.

And yet, despite how they spin it in press releases, their _filing_, which is where the rubber meets the road, says nothing about "figuring out how to register", but rather says that "for many tokens, registering is not possible due to effort involved, or not economically viable" (surprise, surprise, Coinbase doesn't want to absorb the cost of registering securities when it comes to the Shitcoin of the day).

In other words, "we know how to register these tokens as securities - but our business model doesn't make it possible to do so profitably".

Sure, I can found a drug marketplace selling all drugs and try to be the most compliant of those. Those intentions in no way require that the government just change the rules to allow me to do whatever otherwise illegal thing my business requires.

>Saying you haven’t done it and not letting you do it is a bit of a catch 22.

You would also get into serious trouble if you would sell a drug without approval from the FDA, and they might deny your application because it isn't fit for purpose. Same with the SEC just because you want to register your crypto security does not mean that they have to be allowed on the US market.

If someone invented a new thing that was possibly but not definitely a drug requiring FDA approval, and the FDA refused to make an explicit judgement on it for years as it grew to a huge industry, then eventually brought down the hammer, that would be a bad process. The courts may agree with the SEC that Coinbase sold unregistered securities, but they had the opportunity to clarify the law years ago, and Coinbase has been earnestly seeking clarification.

Which the FDA in fact have a pattern of doing with various supplements. https://en.wikipedia.org/wiki/Biomedical_Research_%26_Longev...

And the ATF with pistol braces.

It's a standard regulatory tactic at this point.

The NFA rules making no sense not withstanding, the pistol brace one is particularly egregious as they explicitly said it’s legal in a prior determination and there’s millions of them in circulation.

Approval and registration sound like two different things.

A better analogy is that you would get in serious trouble selling a drug without approval from the FDA at the same time the FDA has never approved any drugs. It is clear to anyone who understands what is happening that the US government and our faltering financial system is desperate to eliminate crypto all together, and will throw up so many legal and regulatory hurdles that even if crypto technically remains legal it won't be worth the risk or the cost.