But the only time that a judge has ruled on whether or not a crypto token is a security is in the XRP case, and it ruled that it was not (at least when it was sold on exchanges). This is not comparable to a ponzi scheme where the legality is not in question at all.
And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by the SEC. So it's very clear that the SEC treated this as legal for a decade before suddenly changing their position. This seems incredibly dishonest to me.
The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1]
On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2]
That said, there would have been better course of action to protect consumers, such as establishing an appropriate regulatory framework, but I may be too European.
The SEC saying it is very different from a court saying it. The executive branch can say anything it wants to, but it's the judicial branch's job to interpret the law.
Important nit: they ruled Ethereum was a security, as the initial issuance was at least partially a pre-sale. They just decided in that one case to explicitly not go after Ethereum. The only non-security exception they've named was bitcoin.
Which seems like kind of an arbitrary distinction anyway.
Suppose you create a new coin under similar circumstances as Bitcoin. No pre-mine. But it's a new coin and nobody cares about it, so nobody is mining it, so you can go mine it yourself and get all the block rewards for a while. Then once you have a lot of it you go about promoting the coin and developing the technology which causes it to be worth something.
In theory the difference is that anybody else could have mined the coin from the first day too, but at that point nobody else had any reason to think it would ever be worth anything.
> "Coinbase even had their IPO approved by the SEC."
The SEC reviews the disclosures being made by the company that's filing for public listing, not the legality of their business model.
You can go look at the Coinbase IPO filing [1]. Under the heading "Summary of risk factors", it reads:
"A particular crypto asset’s status as a 'security' in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected."
Nowhere does it say "the SEC has approved our operations, it's all good!" On the contrary, Coinbase is saying that the assets they offer on their exchange may be viewed as securities and it may eventually result in fines or penalties. That's disclosure.
And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by the SEC. So it's very clear that the SEC treated this as legal for a decade before suddenly changing their position. This seems incredibly dishonest to me.