It operates on Bitstamp's exchange to buy/sell when orders can't be satisfied with existing assets.

It relies on Andreessen Horowitz's connections to former regulators, such as William Haraf, the former Commissioner of the California Department of Financial Institutions, now employed by Promontory Financial Group, to convince the DFI (now DBO) look the other way while Silicon Valley Bank pretends that what it's doing doesn't pose any legal problems.

Coinbase knows exactly what's going on with the money transmission laws it chooses to ignore. See:

http://www.dfs.ny.gov/insurance/hearing/vchearing/ehrsam.pdf

Are you saying that a "former" regulator is capable of "looking the other way"?

Fixed.

To be more specific, three Andreessen companies (Dwolla, Coinbase, and Ripple) were supposed to be on a panel in San Francisco in October, 2013:

http://financialwomensf.org/virtual-currencies-are-they-the-...

Dwolla pulled out at the last minute, likely due to regulatory pressure from New York DFS, which had issued subpoenas in August, and less than two weeks later Dwolla renounced and stopped its involvement with Bitcoin. The moderator of the panel was none other than William Haraf of Promontory, the former Commissioner, but he wasn't the only one there. I met one of Promontory's former partners, who had just resigned to go work for one of the three companies. (I'm being intentionally vague.)

Robert Venchiarutti, the Deputy Commissioner of Money Transmission for California under Haraf is the same individual who is still the Deputy Commissioner of Money Transmission now, and has been for fourteen years. Connections matter in this world.