> Why didn't Coinbase just register everything non-Bitcoin?
The organizations that created the assets have to register them as securities, Coinbase didn't create the assets.
A broker-dealer (a securities exchange) can only trade registered securities, broker-dealers have to register to exist. So even if Coinbase went through the process of registering as a broker dealer (to be a securities exchange), they could not trade unregistered crypto securities, and cannot unilaterally register things they didn't create as securities.
Registered crypto securities are a mixture of non-existent, or not the things people want to trade. There are zero popular registered crypto securities.
Those organizations with those "unregistered securities" quote on quote, also don't believe they are creating securities at all, just digital products, cryptoassets. A distinct asset class. This should be possible to do compliantly, but it is also not clear how to do so or where the line is.
Regardless, those organizations have not been approached by the SEC saying "hey you created unregistered securities and sold them, we're suing you".
The SEC has indeed tried a couple of those cases against different crypto assets and their creators and had mixed results, the well funded ones are dragging the SEC through court for half a decade now, for a single case. While the number of crypto assets continues to balloon every single day.
So the SEC changed its strategy recently and started suing exchanges using circular logic, claiming assets that they never said were securities to be securities and saying "these are unregistered securities and you are trading them in violation of Federal Securities laws", having never proved in court that these were securities.
> So the SEC changed its strategy recently and started suing exchanges using circular logic, claiming assets that they never said were securities to be securities and saying "these are unregistered securities and you are trading them in violation of Federal Securities laws", having never proved in court that these were securities.
You're describing the procedure of proving in court that they're securities.
The SEC claims they are, sues someone over it, and they fight it out with them in court. The court decides who proved what.
When the SEC had a disagreement about the category of an asset or transaction, they would go to court to hoping to get the judge to agree those were securities being traded noncompliantly, with the defendant being the issuer
After getting an agreeing verdict on that they would go to the promoters and exchanges and sue them too
Now they're skipping that and going straight to the exchanges, because the SEC wasn't exactly winning
Coinbase is a lot more accessible to the SEC than a shitcoin out of China or Bulgaria or whatnot. It's hardly an unreasonable choice, and I'm not aware of any legal theory that says the SEC can't (or even shouldn't) take that approach.
Coinbase needs far better defenses than they are using, definitely screams incompetence on their end too
There are defenses to the SEC’s approach as it has nothing to do with the remoteness of some issuers, it has to do with the shaky legal ground and symbiosis that the SEC has relied upon. The SEC’s standard can be equally applied to anyone that purchased a baseball card hoping to flip it, where that unilaterally makes all shops and ebay to be unregistered securities exchanges in violation of Federal Securities laws no matter what the baseball card company did to ensure otherwise. Either all consumer product industries and intermediaries are affected, or most crypto tokens aren't at all. Or there is a clear way to make a crypto token that fits into the consumer product framework exclusively, but the SEC wont say and says “its always been clear”. Thats pretty much where we are, based on the SEC’s own logic used in this very case.
> The SEC’s standard can be equally applied to anyone that purchased a baseball card hoping to flip it, where that unilaterally makes all shops and ebay to be unregistered securities exchanges in violation of Federal Securities laws no matter what the baseball card company did to ensure otherwise.
No; the baseball card market fails various bits of the Howey test. If you sold shares in a baseball card collection, that might be a security.
> When a promoter, sponsor, or other third party (or affiliated group of third parties) (each, an "Active Participant" or "AP") provides essential managerial efforts that affect the success of the enterprise, and investors reasonably expect to derive profit from those efforts, then this prong of the test is met.
In the baseball card market, the card manufacturer could cease to exist without the success of the enterprise being impacted. (This is why BTC and ETH are currently being treated by the SEC as non-securities; the original creators of both could vanish without impacting the market for the coins, which is much less true for most coins.)
> the card manufacturer could cease to exist without the success of the enterprise being impacted.
while a promoter, sponsor, or other third party could pop up at any time.
it says nothing about manufacturer or issuer for that prong of the howey test.
and the same is true for all of the tokens listed in the case against Coinbase.
I guess your argument is based on looking for differences to support your worldview instead of looking for similarities, and its not clear if you're aware of the similarities.
The "manufacturer" disappearing from tokens makes them more scarce in many cases. Their functionality remains the same.
another thing you might not be aware of is that the SEC is aware of this. Other commissioners - specifically Hester Pierce - and enforcement division personnel has made this observation, the people calling the shots in the enforcement division and the head commission are avoiding this because it breaks their whole framework if the courts really feel compelled to break this down more holistically. Thats why their approach to unilaterally calling things "evidence" when they haven't even proved they are evidence is a weak evolution of their practice. Prolonging an inevitable challenge to their authority and aspects of their existence.
The organizations that created the assets have to register them as securities, Coinbase didn't create the assets.
A broker-dealer (a securities exchange) can only trade registered securities, broker-dealers have to register to exist. So even if Coinbase went through the process of registering as a broker dealer (to be a securities exchange), they could not trade unregistered crypto securities, and cannot unilaterally register things they didn't create as securities.
Registered crypto securities are a mixture of non-existent, or not the things people want to trade. There are zero popular registered crypto securities.
Those organizations with those "unregistered securities" quote on quote, also don't believe they are creating securities at all, just digital products, cryptoassets. A distinct asset class. This should be possible to do compliantly, but it is also not clear how to do so or where the line is.
Regardless, those organizations have not been approached by the SEC saying "hey you created unregistered securities and sold them, we're suing you".
The SEC has indeed tried a couple of those cases against different crypto assets and their creators and had mixed results, the well funded ones are dragging the SEC through court for half a decade now, for a single case. While the number of crypto assets continues to balloon every single day.
So the SEC changed its strategy recently and started suing exchanges using circular logic, claiming assets that they never said were securities to be securities and saying "these are unregistered securities and you are trading them in violation of Federal Securities laws", having never proved in court that these were securities.