Still don't understand how the analogy applies to cryptocurrency.
>The company could decide the FDA was wrong...
But why would they decide this? Since Heroin is, again, illegal.
The style of argument is akin to Reductio ad Absurdum, taking an absurd position to it's logical conclusion. The "absurd position" here is a company wanting to sell heroin on the open market, and she takes that to the logical conclusion.
She could have said "meth", "nuclear weapons", or "dead infants", or whatever instead of heroin to make her point. If you read that as a comparison to Coinbase being a heroin dealer than you're the one editorializing her effort.
Here's another reductio ad absurdum argument:
Let's assume the earth is flat. Either the surface of the earth must go to infinity or people must be walking off the edge of it somewhere.
Same goes for weapons in some of the countries with the most restrictions on gun sales and ownership, it is still perfectly legal to sell military grade weapons to the military in those countries.
Funny, how HN seems to qctively failing to understand how regulations and compliance works as soon as they themselves, or one of theirs, is negatively affected by them...
Coinbase also writes in great detail in the S-1 about
the risk that the SEC might bring a lawsuit exactly like
the one they just have:
[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.
[T]here is regulatory uncertainty regarding the status of our staking activities under the U.S.
federal securities laws.
Imagine if a company was selling "ground human meat" (see the movie "Soylent Green"). And they did it, well, because the market for ground human meat was suddenly exploding! I mean, in their S1 they might say "Sure this might be illegal, the FDA might take regulatory action against us." But also "Ground human meat is one hot market right now, you don't want to be left out on this rocket that's going straight to the moon!"
For example, police officers will regularly sit by the side of the road with a speed gun. They'll make no attempt to stop you driving at 150mph on the motorway but, in the UK, you'll receive a court summons through your door after the fact (and probably lose your license).
Statements like this create a pretty clear case that you haven’t read or shown any real interest in the SEC investigation and litigation related to crypto.
However:
> Even with a favorable ruling, a taxpayer has no absolute guarantee of the tax consequences, since the IRS can modify or revoke a previously issued private letter ruling if it is later determined that the ruling was incorrect or inconsistent with the current position of the IRS.
So even with a PLR, you have no guarantees.
1. Firstly, if the law isn't settled, then no they wouldn't.
2. The SEC weren't being asked by Congress, they were being asked by Coinbase.
So no, your attempt to torture the analogy doesn't work at all.
I don't understand how anyone can believe these people act in good faith.
> The head of the SEC was asked by congress if Eth was a security, and true to form he refused to answer.
So what you're saying is that the Head of the SEC refused to answer a question they're not qualified to. Because it's an unsettled area of law that they're now challenging through enforcement action.
> I don't understand how anyone can believe these people act in good faith.
I could ask the same of you.
Opiates! Prescribed opiates!
Honestly this should be a core mission of all regulatory agencies and the fact that it isn't is a disgrace.
I don't want to press too far, because I don't think you actually meant it, but...it's like you're advocating for socialized lawyers. Which is definitely an interesting idea!
Isn't this the exact same burden it would be for that person to hire a lawyer? All it would do is require the government to internalize the cost of regulatory compliance, which would increase efficiency by aligning the incentives of the government with reducing compliance costs.
> If you're not sure how to follow the law, get an expert in the law! That's why there's a regulated profession that explicitly provides expert advice on following the law.
Except that they don't actually have the authority to tell you if you're following the law. If you hire a lawyer and they tell you that the law is ambiguous and there isn't any relevant caselaw yet, you still have no idea if you're following the law or not. Meanwhile no one with the authority to make a binding determination will give you an answer.
Generally so, if a company works in, or close, to a highly regulated industry it is up to that company to do so in a compliant way. Or generally compliant, there isba tendency of start-ups in Germany complaining about how taxes apply to them as well. If said company is not comoliant, it is on them. And does happen all over the place, to all companies, all the time. For stuff ranging from export, to taxes, to anti-trust and corruption. Only that, say, Lockheed isn't getting any slack when it comes to creative sales techniques.
And compliance costs are costs of doing business. If you cheap out on that, well, ypu deserve what ever is coming your way.
Authorities are the ones who create the rules. If they tell you what the rule means, that's what the rule means, because it's their rule. That's the point of having them be the one to tell you.
Some people defend themselves by saying they didn't take the action they're accused of, others can cop to the action they took, and argue that the law doesn't apply because x, y, z.
So, like, that's why case law is a whole thing, it extends "the rules" to "here's how the rules have been interpreted in these situations"
The Securities Act of '33, Exchange Act of '34 and Howey Test were not created by the SEC.
Then you have a couple of choices with various outcomes. One of which is exactly what is happening to Coinbase right now. You can either 100% unambiguously follow the law, or you can push your luck and adhere to what you think either is or should be the law. In the latter case you may become said case law, whether you are able to continue your current ambiguously legal business practices or not!
That's how it's been done for the past two centuries. Why change now?
Because the public through its government is what created the grey area, so it should cover the cost of its lack of clarity, as a disincentive for causing it.
> Why can't it be part of Coinbase's business strategy to remain on the correct side of the law and then lobby congress for changes to those laws?
The entire point is that nobody will say whether they're allowed to do this, so they can't even know if they're on the correct side of the law. How dumb is it that the only way to find out if you can legally do something is to do it without knowing whether you're allowed to?
> That's how it's been done for the past two centuries. Why change now?
The best time to change a bad rule is two centuries ago. The second best time is immediately.
Isn't that the point of hiring an attorney, or if you're Coinbase, a large team of lawyers? We don't know what Coinbase's lawyers said to them (attorney client privilege). But this could just be a legal ruse, right? Raise doubt? Even though Coinbase knew they were in a shady area and raised it in their S1 filing?
Or do you think Coinbase was really this stupid and naive?
You want to turn corporate law to the public sector?
About time that reality checks happen.
> These three functions — bringing together securities orders for buyers and sellers, trading securities on behalf of others, and intermediating trades — are typically required to be separate due to conflicts of interest that emerge when one entity controls all of them.
She is saying it is like Heroin.
>> >The company could decide the FDA was wrong...
> But why would they decide this? Since Heroin is, again, illegal.
She is pointing out how absurb it is that Coinbase has decided the SEC is wrong (about the separation of roles) since - as you point out - not having the separation of roles is illegal.
Let's find out how the Ripple lawsuit is going to end, there is good chance to win it.
The woke up one day and they "hey this crypto is a threat to our dollar'. Gensler said "we don't need any more digital currencies, we have USD, EUR, YEN". And that for centuries there was no need to transfer value through more than one medium. That can explain their views clearly.
No, this is specifically addressed by securities law. It's not impossible, but you have to do it properly.
Inconceivable!
Reading the comment, you'd think the comparison was on harm or lethality.
Which is damn smart given we let regulated persons manufacture and distribute opiates. In this analogy, Coinbase is upset its heroin sales are illegal when a licensed pharmacist can sell a similar product.
If someone is having a strong emotional reaction, substitute any regulated product—jumbo jets, vodka, legal advice—and move on.
In this analogy Coinbase' story seems to be that they asked how to apply to become a licensed pharmacist, but never got an answer. While the SEC suggests they never tried.
This gets confusing when the crime is phrased as unregistered heroin sales.
They got an answer they didn't like: they'd have to change how they did business. (Also, what they list. The SEC issued The DAO Report in 2017.) We enacted the '34 Exchange Act in part to segregate the broker, exchange and custodial functions of securities trading. Coinbase was asking how to become a licensed pharmacist without having to check prescriptions.
> gets confusing when the crime is phrased as unregistered heroin sales
Try "opiate." Coinbase thought they found something new, and asked if it was okay. They didn't think they got a clear answer and proceeded. Now they're crying foul at the lack of prior guidance, or that someone else does have a license. The author's point is that these arguments don't make sense. There may be other arguments that do, but these aren't among them.
Using a much more extreme example to make the point (that companies don't automatically have a right to a path to compliance) obvious.
A: You say “Z is true of X”, and I respond “Z is false for thing-like-X”, implying “Z is likely false for X”.
B: You say “Z is true”, and I respond “Z is false for Y”, implying not “Y is like X therefore Z is likely false”, but “Z is sometimes false, so we need to actually evaluate whether it’s true of X”.
I think people who use this reasoning would do well to make it more explicit.
(Here, Z is “there must be a path to compliance”, X is Coinbase, and Y – not, I believe, thing-like-X – is heroin.)
Coinbase doing an IPO (and them using this argument against SEC) is not being compared to heroin.
The comparison is that Coinbase would go to SEC and ask "hey we want to sell these bitcoin futures and securities, is it okay?" and SEC says "nope it isn't" and Coinbase just says "okay we'll sell it anyways", which is exactly what they did.
They knew the law existed and applied to crypto, yet they decided to go against it anyways because they thought they could get away with interpretation shenaningans.
The Coinbase S1 admits this explicitly: they explicitly list the risk of their business model being contested by the SEC later in the document that the SEC approved.
The SEC doesn't approve IPOs. In bold among Coinbase's S-1's cover pages: "Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense."
https://investor.coinbase.com/financials/sec-filings/sec-fil...