Crypto Companies Made 'Calculated' Decision To Flout Rules, Says SEC Chair (reuters.com) 26
The chair of the U.S. Securities and Exchange Commission on Thursday strongly rebutted criticism that the agency is trying to crush the crypto industry, and said many companies in the space had made a "calculated economic decision" to flout its rules. From a report: Speaking at a Piper Sandler conference in New York, Gary Gensler also reiterated his view that the "vast majority" of crypto tokens meet the test for being a security and should be registered with the SEC. That means most crypto exchanges have to comply with the securities laws too, he added. "When crypto asset market participants go on Twitter or TV and say they lacked 'fair notice' that their conduct could be illegal, don't believe it," he said. "They may have made a calculated economic decision to take the risk of enforcement as the cost of doing business." The crypto industry has attacked Gensler in recent days after the SEC sued two of the world's largest crypto exchanges, Coinbase and Binance, for allegedly breaking securities laws by failing to register their operations with the agency.
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This might well be true (though no evidence was offered) but trying to push the SEC by not following the same general rules as anyone else selling securities is not a good business plan.
Re:They were not allowed to register (Score:5, Informative)
Except they were allowed. And quite a few of them have and are. Blockchain of Things, Paragon, Engima, Salt Blockchain, Carrier EQ, INX, Hiro Systems, Ceres, all of them registered with the SEC along with the coins they issue.
In any case securities is only part of it. The the companies have a long history of flaunting various rules, e.g. not registering ICOs with the SEC. Presumably that's why Paragon and Carrier EQ registered their coins as securities, they didn't want to get fined AGAIN.
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Tech Bros will be tech bros (Score:1)
We don't need no stinking (SEC) badges! (Score:2)
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Well, funny thing about consumer protection laws: they are to apply even if buyers are inprudent or felt the need or desire to take risks.
You cannot have a mutual agreement to bypass laws designed to protect one of the parties, and the one that promoted the product is 100% responsible.
Of course the consumer does still lose in the end - The fines issued to companies go to the government and pay for more enforcement of the laws. Not only do the buyers of unregistered securities NOT gain from these fines,
long standing rule? (Score:2)
Isn't it a long standing rule that if the fine/penalty for doing something is less than the extra profit made or cost of doing it the Right Way it is just a cost of doing business?
Re: long standing rule? (Score:2)
What rules? (Score:2)
The leaks from the Hinman Documents in the case SEC vs Ripple paint a picture of a SEC that was very much uncertain of its authority until Gensler stepped in in 2021 and decided everything was Day 0 with SEC and crypto. The fact is that the SEC was not only aware of the crypto industry for a decade plus before that, but there are leaks from the SEC vs Ripple case that paint a picture of a SEC full of staffers and previous appointees who DO NOT think they have authority over crypto.
Crypto news has started to [cryptopotato.com]
Bonanza time for the lawyers. (Score:2)
There will be one set of lawyers arguing that crypto tokens are unique manufactured items. After all they have to be made explicitly unlike most securities which are simply issued. The other side will be arguing that they are still a traded financial instrument, and even if they aren't listed on any SEC regulations yet they should still be regulated.
In the end the government will probably have to step in and create some new rules, but only after the lawyers have had their snouts in the trough for a year or
SEC has internal issues it needs to fix (Score:2)
https://nclalegal.org/2023/06/... [nclalegal.org]
The U.S. Securities and Exchange Commission (SEC) dismissed dozens of enforcement cases Friday, including two involving current NCLA clients (Michelle Cochran, Marian Young) and one of a former client (Christopher Gibson). The agency revealed on June 2, 2023, that members of its enforcement staff had gained illicit access to confidential adjudicative documents and downloaded them in far more cases than originally reported, exposing rot in a hopelessly compromised in-house ad
What!?! (Score:5, Insightful)
What?!? You mean businesses dealing in quasi-currencies specifically designed to dodge government regulation weren't complying with government regulations?
I'm shocked! Shocked I tell you! There's no way I could have known!
How do you flout rules is there aren't any? (Score:2)
In SEC, the rules follows you.
Of course it's conscious decisionmaking (Score:2)
Their business model involves weaving in between the ill-defined rules of an immature regulatory landscape. I don't want to paint everybody with the same brush, but I'm going to anyway. What they do is couched firmly in weasel language - the kind of thing dream teams of attorneys specialize in - circumventing the spirit by meandering through the letter. Like two children in the back seat of a car arguing about where their territory starts and ends.
To rip off Justice Stewart Potter, ""I shall not today attem
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Their business model involves weaving in between the ill-defined rules of an immature regulatory landscape.
The fix is to define the rules and mature the landscape, not pretend the regulations apply where they don't.
The loopholes are already embedded in the law. It doesn't go away just because it's inconvenient.
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That's fine, but if you take that view then you should never - EVER - argue that the regulations, the tax code, or the criminal code are too complex. They have to account for every single case of weasel-like behaviour and guard against it.
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What are you even talking about? The regulations always applied, it was just dishonesty that attempted to portray cryptocurrencies as non-securities. Adding "... on the internet" to something doesn't make it wholly different. It's a transferrable financial instrument/asset, that makes it a security.
I swear to you, the fact that cryptography is involved just breaks peoples' brains and seemingly causes them to forget how to reason. You don't need to understand the cryptography aspects to understand why th
Nonsensical (Score:2)
Why would they be considered securities if they donâ(TM)t grant you shares in anything, no control over any organization, no ownership of a piece of a company, no voting rights.. these smell like commodities to me.
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Securities are
>fungible and tradable financial instruments used to raise capital in public and private markets.
The most common kinds are trading equity (shares) or debt, but that's not part of the definition.
Meanwhile a commodity is a
>a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price
Considering that the "brand name" of a cryptocurrency is the *only* thing that gives it value, it's clearly n
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Exactly! No one buys crypto as a commodity, that would imply that the cheapest coin is the most desirable.
They buy it as a security to raise capital: they hope it's value will go up.
Surprise to No One (Score:2)
Taylor Swift understood what they were (Score:2)
I'm not a Swift-ite or whatever they're called but I was struck by the fact that she asked these questions when approached about promoting FTX/etc.
We've become far too accepting of people using incompetence as a cover for bad faith.
So essentially criminal enterprises? (Score:2)
Because that is what "calculated decision" and "illegal activity" combines to.