[fallingknife]

Securities are legal and Coinbase is a licensed broker dealer which means they are allowed to sell securities if they are registered with the SEC. The SEC is saying that crypto is a security while simultaneously not allowing them to be registered as a security. So they are treating it like a security from an enforcement perspective, but not from a regulatory perspective. They can't have it both ways. It must either be a security, in which case the SEC can regulate it, and it can be legally sold by brokers, or it is not a security, in which case the SEC can fuck off because it isn't in their jurisdiction. They are trying to have it both ways, and that is clearly acting in bad faith.

[vkou]

The SEC isn't saying that crypto is a security.

It's saying that some crypto tokens are securities, and that Coinbase is trading at least one of those tokens.

It doesn't matter how much Coinbase wants a particular token to not be a security, or whether they had 30 meetings, or 300 meetings where they ask for that token to not be a security. If it passes the Howie test, it's a security.

[dgellow]

So, you’re saying that Coinbase knowingly offered unregistered security. And acknowledged that’s not legal. The fact the SEC refuses these securities to be registered doesn’t negate the illegal offering of unregistered securities.

[daedalus_f]

If you look at the recent SEC filing, they present evidence Coinbase likely knew what they were doing was illegal and coached companies wanting to list coins on the exchange on how to remove “problematic language” from their promotional material that might make it too obvious they were selling unregistered securities.

[dgellow]

Yeah, I cannot really see how they can defend their position here. That will be an interesting case to follow, Coinbase legal team will have to be _creative_.

[dlubarov]

Where is this filing? Not sure what that would be since the SEC hasn't brought charges yet.

I don't see an issue with advising companies on what language to use, given that language can absolutely affect whether a token is in fact a security, e.g. based on the "expectation of profit" prong of the Howey test.

[fallingknife]

Advising people that you do business with to not do certain things because you think they might violate the law is not the smoking gun that you think it is.

[daedalus_f]

If your coin meets the Howie test it’s a security and must be registered with the SEC. If you go to the SEC and say “hey, please register my security so I can scam some people”, and they say no, your security doesn’t stop being a security, it’s just not a registered security. Going on to cry about them then prosecuting you for operating an unregistered securities exchange is purile.

[fallingknife]

Your example is idiotic because nobody is claiming that Coinbase is a scam (if they were the FBI would handle it, not the SEC), and because they are a licensed broker dealer. If particular crypto token is a scam, then they can say "you can't register token X because it's a scam." But they aren't saying that. They are just saying you can't register any tokens at all. If they can't be registered as securities, then how can they be securities?

[arcticbull]

For what it's worth their license is inactive and they are not operating in the capacity of a broker-dealer. They acquired the license in 2018, probably as a hedge just in case, but they are not using it.

After all, they are making the case that nothing they list are securities, so if that's true, they wouldn't fall under their broker-dealer license in the first place.

Parent is correct, a broker-dealer may not facilitate the trade of unregistered securities except to accredited investors. So unless the IRS accepts the registration, they would be in violation anyways. Which is why they're pushing the argument nothing they facilitate the trade in is a security at all and therefore exempt from registration.

I didn't read the parent comment as saying that coinbase was operating a scam, but rather that just because ICO A tries to register and fails doesn't make it somehow 'not a security' but instead that it remains an unregistered security. This is true. And in that case it could only be sold (with or without coinbase) to accredited investors.

> If they can't be registered as securities, then how can they be securities?

Simple. Not all securities are suitable for registration. A security that cannot be registered remains a security, it simply cannot be sold to individuals who are not accredited investors. And selling it to the general public would be a violation of the Securities Exchange Act.

Is a car that cannot be registered because it's not street legal somehow not a car? The fact your car fails its emissions check doesn't change its fundamental character. But it does make it unlawful to put on a highway. The DMV isn't bound to accept the registration of 'anything deemed to be a car' and if they refuse, it somehow becomes something else.

Similarly, the SEC isn't bound to accept the registration of 'anything that passes the Howey test' - quite the opposite. After all that would mean any company whose initial S-1 application is rejected could claim that their shares are now somehow actually a commodity so yolo. But that's not how this works. At all.

> They are just saying you can't register any tokens at all.

Yep.

And if the DMV said I couldn't register electric tricycles as street legal vehicles, well, I can't just go ahead and start driving them around can I? No matter my personal opinion on the matter, I'm still going to get pulled over.

Like Brian.

[daedalus_f]

The SEC’s position is very clear - they could be registered as securities and are securities but the SEC is not going to register them because they would like crypto to go away.

Also a licence to operate as a broker does not permit you to operate as an exchange. They are very different things, separated in traditional finance to prevent the sort of shenanigans (like trading against your own customers) that crypto exchanges get up to.