I feel like this won't end up going well for the SEC. This whole methodology of telling exchanges "I don't know, you figure it out" when they ask for clarity and then turning around and suing them for not figuring it out is extremely shaky legal ground.
Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. And the situation with cryptocurrencies seems to be broadly similar: there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them.
And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.
> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.
There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law.
Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege.
Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.
Whether Kraken is breaking the law is something that will likely be decided by a court. The SEC asserts that Kraken has broken the law, but it is not up to the SEC to decide—it is up to the courts.
It is not illegal to operate a spot commodities exchange without approval from the SEC, unless those commodities are also the kinds of securities the trading of which require SEC approval. It is also not illegal to operate as an unlicensed broker-dealer of non-security commodities, or as an unlicensed custodian of non-security commodities. The SEC only has jurisdiction over securities.
It is not in the slightest bit clear yet that the crypto tokens for sale on Kraken are in fact securities of any kind. The SEC asserts that they are, but at this point it is just an assertion. The SEC will have to win in court.
At least in the case of Bernie Madoff, the SEC can say "no, it is illegal to run a ponzi scheme and in this case it should say what law the exchange broke to make it valid
> if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse.
The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other.
So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime.
Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.
And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.
> there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them.
Fighting the SEC isn't easy or cheap either, raising questions about the reluctance to pursue the pathway to compliance. If there truly exists a legal route for a company to become "above-the-board and legal", why hasn't this path been taken? My guess is that that route is just for show, it doesn't exist in practice.
A case for sympathy for companies like Kraken is they are the ones that do do the proper thing and are US based and regulated. If the SEC goes after them and shuts them down then the punters will move to non US companies like the Bahamas based FTX insead with the problems that we have seen there.
The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?!
If my startup fails because I hired the wrong people, I take the full blame. Why should it be different if I invested in the wrong company or trusted the wrong company with my money?
As someone who is trustworthy and providing a service, I am harmed by the SEC creating a false veneer or respectability for investors to invest in my biggest competitors. I'd rather investors be forced to do due diligence.
I also don't think this will work for them in the context of the Ripple case they just lost - and decided to not appeal - as this will be referenced as part of Kraken's defense.
It'd be very different if the SEC maintained a list of even examples of tokens that are/aren't compliant and a straightforward registration process with active registrants.
The fact that neither of these exist but the SEC likes to pretend they do isn't working in their favour.
There is no such thing as a 'registered securities exchange' for cryptocurrency, so how can they be at fault (note its unregistered, not illegal is the allegation).
There are at least hundreds of thousands (probably millions) of securities that have been properly registered in the USA: stocks, corporate bonds, private offerings, and many other kinds of financing structures. It’s not that hard since obviously all kinds of issuers can figure it out.
The crypto people want to pretend their tokens are something completely different, so they’re not willing to use the existing process and instead cry out for SEC to come up with something just for them.
> The SEC’s complaint also alleges that Kraken’s business practices, deficient internal controls, and poor recordkeeping practices present a range of risks for its customers. As alleged in the complaint, Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash. Kraken also allegedly commingles its customers’ crypto assets with its own, creating what its own auditor had identified as “a significant risk of loss” to its customers.
Basically, the rules for whether a retirement plan meets the qualifications for favorable tax treatment are highly complex, so a plan sponsor can ask the IRS to determine if the structure of the plan fits the rules by asking for a "Favorable Determination Letter". This seems to me highly analogous to what crypto exchanges wanted from the SEC.
Law enforcement has no obligation to explain the laws to you.
One aspect of common-law, is that it is law that is equally applied to all. The logic is, if Bob did thing $x, and Sally did thing $x, both should expect a similar outcome.
This is because a person has a right to know how specific acts are interpreted by courts, for whatever legislation is being tried against. A person has a literal right in common-law, pre-dating most modern democracies, to know how a thing they do will be interpreted.
And this is why most descendants of common-law legal systems, such as the US, put such strong strictures on prior judgements. It's vital. It's missed by many, but this is how people know how the law will be interpreted.
And my point in all of this is, yes, 100%, under common-law, someone has to give you an idea of how your actions will be interpreted. It's core to common-law, and US law, is predicated upon common-law, criminal or civil.
"Ignorance of the law is no excuse", however, that does not remove the right to be informed of the law when asked!
(Let's not dive into the few places that have napoleonic civil code in the US, and stick to federal law at least)
At some point someone has to explain to you what law you broke and how you broke it. We'll see how this goes for the SEC. I'm not convinced they're going to end up on the winning side with these vague enforcement lawsuits substituting for policy/law from the legislative branch.
Morally they do. Secret laws and secret courts are widely recognised as inimical to democracy; laws that are too complex for regular people to understand are too, for the same reasons.
What if your lawyers say one thing, but one of your possible regulators say something else? Or rather, doesn’t say anything, just allude?
It’s for the courts to decide then. That’s what they’re literally for.
You could argue that a more productive approach would be to come up with something at the lawmaker level. Even if it’s so restrictive that it drives most exchanges out, such as Canada has done.
Regulators are not required to consult businesses. That's what McKinsey, and Ernst & Young are for. In fact, I would like it very much that regulators would stay hostile to business as they are meant to. Not coddle with industry in events to have a chat and a coffee. Keeps the revolving door shut.
They did lose against Ripple. That’s one case law precedent right there for determining what is a security. There’s also a non-negligible chance that they are going to either lose or have a dismissed case against Coinbase. Given that this case is basically a copy-paste of that one, it’s a possible outcome.
There’s a reason why the lawmaking, executive, and judicial powers are separated in a democracy.
"Investigators tracked the money through many layers of bank accounts to Binance and another exchange, U.S.-based Kraken, police said. By the time Binance and Kraken provided account records, the police said the funds had been withdrawn or sent to a "mixer," a service which anonymises crypto transactions by breaking them up and mixing them with other funds. The personal information held by both exchanges on the accounts was often fake or stolen from victims, the officers said.
Kraken told Reuters it has "bank-grade" customer checks and robust tools to prevent fraud. Kraken disputed that customer information provided to Braunschweig police was fake, saying "every indicator we have suggests these accounts were used by legitimate clients.""
> The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty. It includes big dollar amounts but does not allege a single one of those dollars is missing or misused – no ponzi scheme, no failure to maintain adequate reserves, and no failure to preserve the identity of client funds 1:1. Indeed, none of these things would be true.
> Instead, the complaint makes a technical argument: that Kraken’s business requires special securities licenses to operate because the digital assets we support are really “investment contracts.” This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.
...
> The SEC already tried this theory and a court rejected it outright. The SEC argued in that case that digital assets bought and sold on trading platforms were really securities transactions. The Federal Court for the Southern District of New York disagreed, ruling that the SEC failed entirely to satisfy the relevant legal test. The court held that the SEC’s unprecedented legal theory was contrary to the “economic reality” of such transactions. The SEC’s case against Kraken will fail, too, and for the same reasons.
> The SEC alleges that Kraken “commingled” its own funds with its clients’. This is a similar allegation already made of other crypto trading platforms. The SEC cannot and does not allege that any customer funds are missing, or any loss has occurred. Nor does it allege that any loss will occur. The complaint itself concedes that this so-called “commingling” is no more than Kraken spending fees it has already earned.
> The SEC famously argues that digital asset trading platforms like Kraken can simply “come in and register” with the agency. As most securities law experts know, there is not a single law on the books supporting this position. The SEC has promulgated no rule describing how an order in a digital asset should be matched, no guidance on how a trade should be cleared, and articulated no standards for how to broker a digital asset transaction. The allegation is hollow; there is no such thing as an exchange, broker dealer, or clearing agency for investment contracts. The SEC is demanding compliance with a regime that doesn’t exist.
> Meanwhile, groups of lawmakers from both sides of the aisle have questioned what they call SEC’s “regulation via enforcement” approach. They have asked why the agency’s actions against crypto firms seem less focused on “compliance and customer protection,” but were instead “calculated for maximum publicity and political impact.” Others have observed that the SEC’s strategy “does not protect the public.” Indeed, this suit does nothing to protect the public. Like those in complaints that have come before, its allegations are factually incorrect, contrary to law, and the wrong way to create policy in the United States.
To me the SEC and Gary Gensler are going to get their arses handed to themselves once again.
> “calculated for maximum publicity and political impact.”
I'm not a fan of crypto currency, but a big part of my dislike for it is how difficult it is to actually use it. I don't mean technically though. I mean legally.
In Canada, all crypto transactions are considered taxable events. Did you sell a couch on Facebook Marketplace using Bitcoin? Time to calculate your capital gain or loss from a vaguely worded set of guidelines.
It's all political IMO. The real value in crypto is having a currency that isn't subjected to the whims of governments and the people that control monetary policy alongside the massive payment networks like Visa and MasterCard. Controlling the flow of money allows pseudo bans on things the people that control those systems don't like.
My hot take on the whole thing is that half the goal is to make it well known that all the remaining exchanges perform strict KYC and that crypto transactions are trivially easy to track while being extra complicated to report on your taxes (at least in Canada). Once that's done crypto currency doesn't have much value to anyone.
The SEC seems to bring about 2 or 3 crypto enforcement actions per month.[1]
They're still working down the ICO backlog. Mostly they've been going after issuers and out and out theft.
After FTX, political support for crypto deregulation dropped to near zero. FTX, remember, was lobbying for a bill that would allow all the things for which Kraken is now in trouble. That is going absolutely nowhere now.
Also, the SEC, CFTC, and Main Justice now have their act together on cooperating to deal with crypto scams. There used to be jurisdictional issues. Now, it's just treated as crime.
You're not wrong (and I upvoted you because your comment doesn't deserve to be so negative), but I don't think the previous regime was all that friendly toward crypto either...
Because the of political agenda of Elizabeth Warren and other Democrats who want to protect Wall Street establishment. Prior to this political agenda, the SEC did not care. Now is good time, because the SEC has the required political backing.
Well, Kraken was the conduit through which payments were going to be made. Japan is … fastidious … to the law. I think they wanted to deal with an actual entity.
Uhh, what? I've always considered Kraken to be the most rules-abiding exchange - more so than Coinbase. They're quite shrewd in what they're willing to list.
Well, Gary Gensler is on record in 2023 saying Bitcoin is not a security. So, I don't think it's accurate to say "probably all." In previous years Ethereum had also been described as not a security, but that opinion seems to have shifted with time.
It's still not super clear to me why he says Bitcoin is not a security, but that Ethereum would be a security. I'm fine with whatever ruling as long as I can understand how it's being applied. I feel pretty good about considering stable coins securities. I'm less certain about NFTs since there is receipt of a (semi)tangible product.
I wonder if the recent introduction of ordinals to Bitcoin will result in his opinion on BTC shifting soon, too?
The SEC’s first strategy was to go after the companies creating the crypto. Most that are targeted settled and exchanges delisted those crypto assets that were ruled to be securities - registered or not - then the SEC went after well funded, more professional and less risk averse ones and have been losing in court.
So this is a war of attrition so the SEC then just went with blanket statements and goes after the exchanges, without telling them which ones are securities. The SEC also has not been winning at this second strategy.
All anybody has been asking is for the SEC to tell them the difference between the assets. How can a crypto asset be issued compliantly as only a product, and when does it transition into not being a security if so?
The SEC has fumbled over its words as if trained on 10 years of HN crypto comments, and the courts say its arbitrary and capracious.
> The SEC alleges that Kraken intertwines the traditional services of an exchange, broker, dealer, and clearing agency without having registered any of those functions with the Commission as required by law.
> As alleged in the complaint, Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash.
What's interesting this time around is Kraken has fully bought into audits and cryptographic proof of reserves (complete with sample Python code to verify your account balance is included in the proof tree).
If there's any crypto company out there that "gets it" and is doing things right, it's them. The SEC is going after the big one this time. I can't wait to see how it shakes out.
> The SEC alleges that Kraken “commingled” its own funds with its clients’. This is a similar allegation already made of other crypto trading platforms. The SEC cannot and does not allege that any customer funds are missing, or any loss has occurred. Nor does it allege that any loss will occur. *The complaint itself concedes that this so-called “commingling” is no more than Kraken spending fees it has already earned.*
The main issue I see now is that the SEC should charge himself for not bringing clarity in the space beyond all the scams and frauds.
It is ironic that now when you try to use some of the crypto services it asks you if you are in Iran, North Korea, US, etc... I don't think all they were in the same list before.
(I realize kraken is not a publicly traded company, but...) I want a reverse ETF of companies that sponsor Formula 1 teams, as they seem to attract lots of bottom feeders.
Readit News
And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.
There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law.
Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege.
Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.
Whether Kraken is breaking the law is something that will likely be decided by a court. The SEC asserts that Kraken has broken the law, but it is not up to the SEC to decide—it is up to the courts.
It is not illegal to operate a spot commodities exchange without approval from the SEC, unless those commodities are also the kinds of securities the trading of which require SEC approval. It is also not illegal to operate as an unlicensed broker-dealer of non-security commodities, or as an unlicensed custodian of non-security commodities. The SEC only has jurisdiction over securities.
It is not in the slightest bit clear yet that the crypto tokens for sale on Kraken are in fact securities of any kind. The SEC asserts that they are, but at this point it is just an assertion. The SEC will have to win in court.
The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other.
So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime.
Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.
And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.
Fighting the SEC isn't easy or cheap either, raising questions about the reluctance to pursue the pathway to compliance. If there truly exists a legal route for a company to become "above-the-board and legal", why hasn't this path been taken? My guess is that that route is just for show, it doesn't exist in practice.
Deleted Comment
Deleted Comment
Dead Comment
This seems to be with accounting, not securities.
> there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal
What needs to be done to be fully legal?
If my startup fails because I hired the wrong people, I take the full blame. Why should it be different if I invested in the wrong company or trusted the wrong company with my money?
As someone who is trustworthy and providing a service, I am harmed by the SEC creating a false veneer or respectability for investors to invest in my biggest competitors. I'd rather investors be forced to do due diligence.
The crypto people want to pretend their tokens are something completely different, so they’re not willing to use the existing process and instead cry out for SEC to come up with something just for them.
Sounds clear enough to me...
Basically, the rules for whether a retirement plan meets the qualifications for favorable tax treatment are highly complex, so a plan sponsor can ask the IRS to determine if the structure of the plan fits the rules by asking for a "Favorable Determination Letter". This seems to me highly analogous to what crypto exchanges wanted from the SEC.
One aspect of common-law, is that it is law that is equally applied to all. The logic is, if Bob did thing $x, and Sally did thing $x, both should expect a similar outcome.
This is because a person has a right to know how specific acts are interpreted by courts, for whatever legislation is being tried against. A person has a literal right in common-law, pre-dating most modern democracies, to know how a thing they do will be interpreted.
And this is why most descendants of common-law legal systems, such as the US, put such strong strictures on prior judgements. It's vital. It's missed by many, but this is how people know how the law will be interpreted.
And my point in all of this is, yes, 100%, under common-law, someone has to give you an idea of how your actions will be interpreted. It's core to common-law, and US law, is predicated upon common-law, criminal or civil.
"Ignorance of the law is no excuse", however, that does not remove the right to be informed of the law when asked!
(Let's not dive into the few places that have napoleonic civil code in the US, and stick to federal law at least)
IANAL, but I would think it'd be the job of the business in question to hire lawyers, who would then offer their opinion on the matter.
It’s for the courts to decide then. That’s what they’re literally for.
You could argue that a more productive approach would be to come up with something at the lawmaker level. Even if it’s so restrictive that it drives most exchanges out, such as Canada has done.
There’s a reason why the lawmaking, executive, and judicial powers are separated in a democracy.
"Investigators tracked the money through many layers of bank accounts to Binance and another exchange, U.S.-based Kraken, police said. By the time Binance and Kraken provided account records, the police said the funds had been withdrawn or sent to a "mixer," a service which anonymises crypto transactions by breaking them up and mixing them with other funds. The personal information held by both exchanges on the accounts was often fake or stolen from victims, the officers said.
Kraken told Reuters it has "bank-grade" customer checks and robust tools to prevent fraud. Kraken disputed that customer information provided to Braunschweig police was fake, saying "every indicator we have suggests these accounts were used by legitimate clients.""
> The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty. It includes big dollar amounts but does not allege a single one of those dollars is missing or misused – no ponzi scheme, no failure to maintain adequate reserves, and no failure to preserve the identity of client funds 1:1. Indeed, none of these things would be true.
> Instead, the complaint makes a technical argument: that Kraken’s business requires special securities licenses to operate because the digital assets we support are really “investment contracts.” This is incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy.
...
> The SEC already tried this theory and a court rejected it outright. The SEC argued in that case that digital assets bought and sold on trading platforms were really securities transactions. The Federal Court for the Southern District of New York disagreed, ruling that the SEC failed entirely to satisfy the relevant legal test. The court held that the SEC’s unprecedented legal theory was contrary to the “economic reality” of such transactions. The SEC’s case against Kraken will fail, too, and for the same reasons.
> The SEC alleges that Kraken “commingled” its own funds with its clients’. This is a similar allegation already made of other crypto trading platforms. The SEC cannot and does not allege that any customer funds are missing, or any loss has occurred. Nor does it allege that any loss will occur. The complaint itself concedes that this so-called “commingling” is no more than Kraken spending fees it has already earned.
> The SEC famously argues that digital asset trading platforms like Kraken can simply “come in and register” with the agency. As most securities law experts know, there is not a single law on the books supporting this position. The SEC has promulgated no rule describing how an order in a digital asset should be matched, no guidance on how a trade should be cleared, and articulated no standards for how to broker a digital asset transaction. The allegation is hollow; there is no such thing as an exchange, broker dealer, or clearing agency for investment contracts. The SEC is demanding compliance with a regime that doesn’t exist.
> Meanwhile, groups of lawmakers from both sides of the aisle have questioned what they call SEC’s “regulation via enforcement” approach. They have asked why the agency’s actions against crypto firms seem less focused on “compliance and customer protection,” but were instead “calculated for maximum publicity and political impact.” Others have observed that the SEC’s strategy “does not protect the public.” Indeed, this suit does nothing to protect the public. Like those in complaints that have come before, its allegations are factually incorrect, contrary to law, and the wrong way to create policy in the United States.
To me the SEC and Gary Gensler are going to get their arses handed to themselves once again.
I'm not a fan of crypto currency, but a big part of my dislike for it is how difficult it is to actually use it. I don't mean technically though. I mean legally.
In Canada, all crypto transactions are considered taxable events. Did you sell a couch on Facebook Marketplace using Bitcoin? Time to calculate your capital gain or loss from a vaguely worded set of guidelines.
It's all political IMO. The real value in crypto is having a currency that isn't subjected to the whims of governments and the people that control monetary policy alongside the massive payment networks like Visa and MasterCard. Controlling the flow of money allows pseudo bans on things the people that control those systems don't like.
My hot take on the whole thing is that half the goal is to make it well known that all the remaining exchanges perform strict KYC and that crypto transactions are trivially easy to track while being extra complicated to report on your taxes (at least in Canada). Once that's done crypto currency doesn't have much value to anyone.
After FTX, political support for crypto deregulation dropped to near zero. FTX, remember, was lobbying for a bill that would allow all the things for which Kraken is now in trouble. That is going absolutely nowhere now.
Also, the SEC, CFTC, and Main Justice now have their act together on cooperating to deal with crypto scams. There used to be jurisdictional issues. Now, it's just treated as crime.
[1] https://www.sec.gov/spotlight/cybersecurity-enforcement-acti...
NFTs as an investment offering are still a good way to make money it seems!
https://www.sec.gov/news/press-release/2022-78
Remember the IRS crackdowns all started under n-1
Kraken has… expanded enough to reach optics.
And the FTX case is done
Ah well, I knew it was too good to be true. The way not to be disappointed is to not get your hopes up involving money.
Hopefully this legal albatross won’t spook them.
I wonder if SEC is charging Coinbase soon, too?
They offer many cryptocurrencies.
The SEC has indicated that it considers most, probably all, cryptocurrencies to a be securities.
The writing has been on the wall for a while -- Coinbase got a Wells letter, basically a "lawsuit is coming" warning, months ago.
It's still not super clear to me why he says Bitcoin is not a security, but that Ethereum would be a security. I'm fine with whatever ruling as long as I can understand how it's being applied. I feel pretty good about considering stable coins securities. I'm less certain about NFTs since there is receipt of a (semi)tangible product.
I wonder if the recent introduction of ordinals to Bitcoin will result in his opinion on BTC shifting soon, too?
The SEC’s first strategy was to go after the companies creating the crypto. Most that are targeted settled and exchanges delisted those crypto assets that were ruled to be securities - registered or not - then the SEC went after well funded, more professional and less risk averse ones and have been losing in court.
So this is a war of attrition so the SEC then just went with blanket statements and goes after the exchanges, without telling them which ones are securities. The SEC also has not been winning at this second strategy.
All anybody has been asking is for the SEC to tell them the difference between the assets. How can a crypto asset be issued compliantly as only a product, and when does it transition into not being a security if so?
The SEC has fumbled over its words as if trained on 10 years of HN crypto comments, and the courts say its arbitrary and capracious.
Already happened. [1][2]
[1] https://news.ycombinator.com/item?id=36211820
[2] https://www.sec.gov/news/press-release/2023-102
https://news.ycombinator.com/item?id=36212120 ("US SEC sues Coinbase, one day after suing Binance")
(To be clear, neither Coinbase nor Kraken were criminally charged. The phraseology "SEC charges" is a loaded, potentially misleading, one).
> As alleged in the complaint, Kraken commingles its customers’ money with its own, including paying operational expenses directly from accounts that hold customer cash.
Didn't FTX/SBF do same?
https://www.kraken.com/proof-of-reserves
https://proof-of-reserves.trustexplorer.io/clients/kraken
If there's any crypto company out there that "gets it" and is doing things right, it's them. The SEC is going after the big one this time. I can't wait to see how it shakes out.
> The SEC alleges that Kraken “commingled” its own funds with its clients’. This is a similar allegation already made of other crypto trading platforms. The SEC cannot and does not allege that any customer funds are missing, or any loss has occurred. Nor does it allege that any loss will occur. *The complaint itself concedes that this so-called “commingling” is no more than Kraken spending fees it has already earned.*
https://blog.kraken.com/news/kraken-continues-to-fight-for-i...
It is ironic that now when you try to use some of the crypto services it asks you if you are in Iran, North Korea, US, etc... I don't think all they were in the same list before.