Speaker 1: Hello, Welcome back to another episode of the Mark mos Show,
Speaker 1: where we talk about the decentralized revolution, talking about the
Speaker 1: way the world's changing. Of course, we always look at
Speaker 1: through the lens of politics, finance, and technology, so you
Speaker 1: have better context to what is going on. And I
Speaker 1: want to run through some of the latest breaking news
Speaker 1: headlines of the week because it has not been a
Speaker 1: dull week. It's been making much job pretty easy. There's
Speaker 1: actually there's plenty to talk about. The problem is there's
Speaker 1: too much to talk about. Trying to narrow it down
Speaker 1: to what we're going to talk about, but man, there
Speaker 1: is so much going on. Of course, we've been talking
Speaker 1: about the financial system melting down, the FED raising rates,
Speaker 1: they're draining liquid o the system until something breaks like
Speaker 1: the banks. Of course, the Bank's broke. We talked about
Speaker 1: that last week. If you've missed that, go check it
Speaker 1: out on the podcast. Just search the Mark Moss Show
Speaker 1: on the podcast. But there's another thing at play here.
Speaker 1: There's like this dangerous undercurrent that's going on. So while
Speaker 1: everybody's witnessing the FED and all eyes are on the
Speaker 1: FED and the raising rates, and then we're witnessing the
Speaker 1: banks going down and SVB had to get billed out.
Speaker 1: And then you know, now the Treasury and the FEDS
Speaker 1: that are going to backstop all the deposits now Jane
Speaker 1: Yell and the Treasury said they're not going to. And
Speaker 1: there's all this, right, all this distraction going on, There's
Speaker 1: like something else going on down below the surface, something
Speaker 1: that's deeper and darker and more scary. Now, this week
Speaker 1: came out this report called the Economic Report of the President.
Speaker 1: It was a long report. I wouldn't necessarily recommend that
Speaker 1: you read it unless you want to and carry some
Speaker 1: brain damage. It's about almost four hundred and fifty pages long,
Speaker 1: four and frety pages for the Report of the President.
Speaker 1: The Year in Review, the Years Ahead, confronting new global
Speaker 1: challenges with strong international economic partnerships. Investing in young children's
Speaker 1: care and education. You already know what's happening to the
Speaker 1: kids education at school. You don't want to know about that.
Speaker 1: Chapter five, Building stronger post secondary institutions, So apply challenges
Speaker 1: in the US labor markets. Man, this is all just simple.
Speaker 1: Just tell the government to stop get out of this
Speaker 1: competition in the digital economy, new technologies and old economics.
Speaker 1: Chapter eight Digital Assets, Relearning, economic principles, relearning economic principles.
Speaker 1: I think they're the ones that should go back and
Speaker 1: relearn economic principles. Chapter nine Opportunities for better managing weather
Speaker 1: risk in changing climates. And then there's some appendages Report
Speaker 1: to the President on activities of the Council of Economic Advisors,
Speaker 1: Statistical tables relating to income, employment, production, and more So,
Speaker 1: while all of this, I like to think of it
Speaker 1: like a magician. Right, most of you probably know. I
Speaker 1: hate to ruin it for you, but magic isn't real.
Speaker 1: It's slide of hand. Hey look over there while they
Speaker 1: do something over here, And that's sort of like what
Speaker 1: seems to be happening where all of this stuff is
Speaker 1: going on. And in the meantime, I'm they're like trying
Speaker 1: to ram a bunch of stuff through. Now. In the
Speaker 1: previous segment, I talked about two different open source protocols,
Speaker 1: a monetary protocol and an information protocol. It's going to
Speaker 1: change the world. Closed systems are going to continue to
Speaker 1: get more closed, but open systems are going to continue
Speaker 1: to compete for those and we're going to move more
Speaker 1: to the open systems. If you miss that, go check
Speaker 1: out on the podcast player. Just search Mark Moss show
Speaker 1: you can catch that. But going back to what the
Speaker 1: government's doing. Something I've been talking about for a while
Speaker 1: is this Operation Choke point two point zero as we're
Speaker 1: labeling it. There was a one point zero. Lots of
Speaker 1: people in the government got in trouble under Obama, the
Speaker 1: Obama administration, Lois Learner I believe ahead of the IRS
Speaker 1: had to step down and all these things. But in
Speaker 1: this economic report, well so now with this choke point
Speaker 1: two point zero, and it looks like through the fog
Speaker 1: of war, there's a lot of casualties. So we had
Speaker 1: this banking collapse, and it was silver Gate Bank, then
Speaker 1: it was Silicon Valley Bank, and then it was Signature Bank,
Speaker 1: the three s's. The one thing that seems to tie
Speaker 1: all three of those together is that they were all
Speaker 1: very crypto friendly banks. Silver Gate was one of the
Speaker 1: main crypto banks SVB, which of course Silicon Valley Bank,
Speaker 1: a lot of Silicon Valley was in crypto projects. And
Speaker 1: then Signature Bank, which was another very crypto friendly bank.
Speaker 1: Now why did those three banks go down? And we've
Speaker 1: talked about it extensively. You know, they got a bunch
Speaker 1: of money deposits because the FED created so much money,
Speaker 1: their deposits swelled up. They put them into US treasuries.
Speaker 1: The FED raised rates, the treasuries lost value. The banks
Speaker 1: didn't have money. Somehow a bank run got triggered where
Speaker 1: a lot of people wanted to go pull their money
Speaker 1: at the bank. The banks didn't have it, And that's
Speaker 1: the story that we're told, and that's actually what happened.
Speaker 1: But why did those things happen is the better question
Speaker 1: to ask. Why was there a bank run triggered on
Speaker 1: SVB putting out on all the other banks. Every bank
Speaker 1: is in the same situation. This is not just unique
Speaker 1: to those banks. They're all in the same situation. So
Speaker 1: why was there a bank run? Now, you know, I'm
Speaker 1: no stranger of dipping my toe in the conspiratorial waters,
Speaker 1: if you will, because I'm trying to make sense of
Speaker 1: all this and I just don't understand why those banks
Speaker 1: got attacked. And like I said, it just so happens
Speaker 1: that the three of them were very heavily into cryptocurrency companies.
Speaker 1: Now into that after the two thousand and eight banking collapse,
Speaker 1: there was a whole bunch of new regulations that were
Speaker 1: put in place. One of them was called the Dodds
Speaker 1: Frank Act, and one of the original writers of that,
Speaker 1: Bill Dodds, put put out an article saying that he
Speaker 1: doesn't understand why and regulators at the FDIC didn't understand
Speaker 1: why Signature Bank was taken over. It wasn't insolvent. There
Speaker 1: was no reason why I should be taken over. So
Speaker 1: why was it taken over? Why was it taken over?
Speaker 1: The other two Signal two s banks, Well, and they're
Speaker 1: all related to crypto. Now, if we go back and
Speaker 1: read this economic report of the President, it starts to
Speaker 1: give us a little bit of a better picture. Now,
Speaker 1: they had a very scathing report, let's say, to talk
Speaker 1: about cryptocurrencies as a matter of fact. And of course
Speaker 1: it came during this growing industry concern that federal regulators
Speaker 1: are looking to debank these crypto companies. So you know,
Speaker 1: the narrative that they're trying to control is that these
Speaker 1: banks went down because they were doing risky crypto assets. Well,
Speaker 1: first of all, they didn't lose money on crypto. They
Speaker 1: lost money because they put their money into the US treasuries.
Speaker 1: But it looks like part of this chokepoint, you bueno,
Speaker 1: where they're trying to take away the banks that these
Speaker 1: company us. Now, the report that this came out said
Speaker 1: that many cryptocurrencies do not have a fundamental value. Okay,
Speaker 1: well I would agree. Now, of course, I'm very clear.
Speaker 1: I like to say bitcoin not crypto. What do I
Speaker 1: mean by that, Well, I'm not saying that bitcoin is
Speaker 1: not a cryptocurrency. What I'm saying is when I'm talking
Speaker 1: about bitcoin, I'm talking about bitcoin only, and when I
Speaker 1: talk about crypto, I'm talking about crypto everything else other
Speaker 1: than bitcoin. So we always want to make those two
Speaker 1: things very clear. But what is a fundamental value? Typically
Speaker 1: you might consider that be called like an intrinsic value,
Speaker 1: which there's no such thing as intrinsic value. All value
Speaker 1: is subjective. But they say that it's argued that crypto
Speaker 1: assets may provide other benefits, such as improving payment systems,
Speaker 1: increasing financial inclusion, and creating mechanisms for the distribution of
Speaker 1: intellectual property and financial value that bypass intermediaries that extract
Speaker 1: value from both the provider and the recipient. Looking under
Speaker 1: the hood at these arguments, however, shows a more complicated picture.
Speaker 1: So far, crypto acids have brought none of these benefits.
Speaker 1: End quote. That's what the report said. I talk about
Speaker 1: this all the time. We're gonna get this a little
Speaker 1: bit later when I can talk about some other news headlines.
Speaker 1: The number one threat to our democracy, the number one
Speaker 1: threat that they talked about a Davos in Switzerland at
Speaker 1: the World Coming Forum in February is supposedly is misinformation
Speaker 1: and disinformation. But the but the irony is that all
Speaker 1: the misinformation comes from the government. I don't want to
Speaker 1: say all. A good majority of it comes from the
Speaker 1: government itself. So how can they go and say this,
Speaker 1: How can they go and say this? So bitcoin hasn't
Speaker 1: done anything to increase financial inclusion. It certainly helped in Africa.
Speaker 1: Over eighty percent of all bitcoin transactions under a thousand
Speaker 1: dollars are being done in Africa where they don't have
Speaker 1: access to banking. It says that they said it could
Speaker 1: bypass interminiaries that extract value. Well, that's being done. It's
Speaker 1: it's doing payment remittances all over the world right now
Speaker 1: and bypassing the extraction of these intimitaries. So it's doing that.
Speaker 1: So looking under the hood, it shows that it's exactly done.
Speaker 1: Just that they've nailed it exactly except for of course,
Speaker 1: the Office of the President is lying to you. If
Speaker 1: you're just tuning in to listen to the Mark Moss Show,
Speaker 1: talking about, of course, the decentralized revolution, running through some
Speaker 1: of the latest breaking news headlines of the week, and
Speaker 1: looking at the attack on the banking sector and the
Speaker 1: crypto sector. I got a very special guest coming up
Speaker 1: when we come back, an SEC attorney. We're gonna talk
Speaker 1: more about this attack. You don't want to miss this.
Speaker 1: I'll be right back in a second. Don't go away,
Speaker 1: all right, Welcome back. If you just tune in, you're
Speaker 1: listening to the Mark Moss Show. Of course we're talking
Speaker 1: about some of the latest breaking news headlines of the weeks,
Speaker 1: you can understand what's going on. And before the break,
Speaker 1: I was talking about how this banking crisis is all
Speaker 1: the rage. Everyone's focused on that, but then there's like
Speaker 1: these dangerous undercurrents at the same time. Some of it's
Speaker 1: sparked by this economic report of the President that came
Speaker 1: out and this kind of choke point two point zero
Speaker 1: that I've been talking about. I have a very special
Speaker 1: guest with me right now. I got James Murphy. You
Speaker 1: can find them online at Meta law Man he has
Speaker 1: a securities attorney, and we're going to talk about what
Speaker 1: potentially is going on here now, James, I had you
Speaker 1: on before, and you know, I was kind of talking
Speaker 1: about how I thought we were going to continue to
Speaker 1: see a massive push into more regulations on these crypto assets.
Speaker 1: They would be labeled securities, and you know, I was
Speaker 1: even going as far as saying as a category, we
Speaker 1: might not see another bull run in cryptocurrencies again, not bitcoin,
Speaker 1: and so far that seems to be what's happening. And
Speaker 1: there's a lot of things happening really quickly. We're really
Speaker 1: seeing the SEC step up enforcement. A lot of data
Speaker 1: points that dig into. Let's start with one that that
Speaker 1: broke this week that seemed to be really big and
Speaker 1: it was coin base being hit with this wells notice.
Speaker 1: Break that down for me a little bit. Yeah, sure,
Speaker 1: So a wells notice is a standard part of the
Speaker 1: process when you are under investigation by the SEC. It
Speaker 1: typically comes near the end of the process US where
Speaker 1: the staff within the Division of Enforcement, which is a
Speaker 1: part of the SEC, says to the target of the investigation,
Speaker 1: we the staff of Enforcement, intend to recommend to the
Speaker 1: Commissioners that they approve a lawsuit against you. The purpose
Speaker 1: of the wells notice that communication is to give the
Speaker 1: target an opportunity to rebut the allegations of wrongdoing and
Speaker 1: to convince the Commissioners not to follow the recommendation of
Speaker 1: the Enforcement Division and instead decline to approve the lawsuit.
Speaker 1: So that's where it is in the process. That's generally
Speaker 1: near the end. There's been a couple weird things about
Speaker 1: how this has happened. One, in the communication, the sec
Speaker 1: declined to inform coin Base which tokens they believe our securities,
Speaker 1: which tokens they're going to assert our securities in a
Speaker 1: potential lawsuit. So that makes it a little difficult on
Speaker 1: coin Base to rebut the contention if they're not told
Speaker 1: which of the tokens are allegedly violative. Yeah, of course.
Speaker 1: And the second weird thing about it is they only
Speaker 1: took two depositions of uh, you know, executives at coin Base.
Speaker 1: That's weird. I've handled many of these and you could
Speaker 1: see dozens, particularly on a big case. You know, this
Speaker 1: is to the advantage of the Division of Enforcement to
Speaker 1: get people on the record under oath as much as possible.
Speaker 1: So it feels, you know, I'm not representing anybody, and
Speaker 1: it feels like it's a little bit rushed, even though
Speaker 1: they've been threatening. Gary Gensler has been threatening to do
Speaker 1: this for ever since he took office a couple of
Speaker 1: years ago. So those are those are two unusual points
Speaker 1: in and it's possible that the one or more of
Speaker 1: the commissioners will be uncomfortable if the if the Division
Speaker 1: Enforcement continues to refuse to say which tokens that are
Speaker 1: listening on coin Base are securities? Yeah, do we know
Speaker 1: that it's specifically about tokens that are listed that could
Speaker 1: be securities? Or could it be because of like yield
Speaker 1: products that they have some of that we've already seen
Speaker 1: happen with Jim and I. Yeah, great question. I'll tell
Speaker 1: you what. The disclosure by coin Base was the most
Speaker 1: thorough disclosure I think I've ever seen of a Wells notice.
Speaker 1: You know, actually, Mark, there's some disagreement at the securities
Speaker 1: bar as to whether a public company is required to
Speaker 1: disclose the fact that they have received a Wells notice.
Speaker 1: It is the safer course of action to disclose by
Speaker 1: a public company. But in any event, they went in
Speaker 1: a great detail about the whole process leading up to
Speaker 1: this wells notice and all of you know, there are
Speaker 1: many interactions with the SEC trying to head this off,
Speaker 1: trying to establish, you know, a regulatory framework that they
Speaker 1: both could agree on. But in any event, they said it.
Speaker 1: They said it's about some of the assets they have listed,
Speaker 1: and it's about a yield product as well. And so
Speaker 1: we've seen that kind of case before. So we kind
Speaker 1: of know that we've seen what happened with Gemini. They
Speaker 1: paid a fine, they listed it, they were kind of okay.
Speaker 1: But now you're saying coinbase is saying it's actually because
Speaker 1: of some assets. Would that be strange that gem and
Speaker 1: I didn't get hit with assets that it has, it
Speaker 1: only got the yield product. Would it be weird that
Speaker 1: they already went after an exchange and only went after
Speaker 1: yield and now they're going after an exchange for both
Speaker 1: And would they then go back to Jim and I
Speaker 1: or how does that work? Well, you know this fits
Speaker 1: in the under the rubric of prosecutorial discretion. Now they're
Speaker 1: not prosecuting crimes. The SEC prosecute civil claims against people,
Speaker 1: not criminal, but they get to pick. Why did they
Speaker 1: pick coin Base? I don't know, but you're one hundred
Speaker 1: percent right. They could bring the identical case against Gemini
Speaker 1: on listed assets if they want to take the position
Speaker 1: that some of the tokens qualify as securities and therefore
Speaker 1: they're running an unregistered securities It doesn't some of this
Speaker 1: set precedent though, So like, for example, if they go
Speaker 1: after coin Base for listing these tokens, but then Jim
Speaker 1: and I has the exact same tokens listed. I mean,
Speaker 1: wouldn't coin Base go Wait a minute, how come you
Speaker 1: didn't go after them or vice versa, Like, I mean,
Speaker 1: isn't there press there. Yeah, they don't have to go
Speaker 1: after everybody at the same time for the same claim.
Speaker 1: Your use of the word precedent is exactly right. I mean,
Speaker 1: you would expect that if they win against coin Base,
Speaker 1: and let's just make up a number. Let's say they're
Speaker 1: ten tokens that a federal judge declares are securities that
Speaker 1: have not been registered, then you would expect I don't
Speaker 1: want to go too far, but you would expect that
Speaker 1: other exchanges operating the United States might delist the very
Speaker 1: same tokens very quickly. Yeah, they go, shoot, they may
Speaker 1: they may be coming back to us. Yeah, I saw
Speaker 1: that it was a coin Bas's statements that were prepared.
Speaker 1: We prepared for this disappointing development, and they talked about
Speaker 1: how they've tried over and over and over to kind
Speaker 1: of get to get kind of approval and they just
Speaker 1: got silence back. I'm curious. I know, we're seeing lots
Speaker 1: of things. We saw then Just and Son was sued.
Speaker 1: Tron was also sued for securities and mark of manipulation. Um,
Speaker 1: so I guess they're saying the TRX and BTT are
Speaker 1: under unregistered securities. So then I guess those tokens, if
Speaker 1: they're listening on either of those exchanges within be a problem, right, Yeah,
Speaker 1: it's it's got to be, uh, something that they would
Speaker 1: be discussing in the in the compliance legal and compliance
Speaker 1: function within every exchange. These developments they're they're they're following closely.
Speaker 1: And I guess the biggest, most obvious example is XRP,
Speaker 1: you know, and and when the sec went out after
Speaker 1: ripple and uh the XRP token it did get delisted,
Speaker 1: so um, yeah, they're paying attention. Yeah, if you just
Speaker 1: tune in, you're listening to the Mark Moss Show, I'm
Speaker 1: talking with James Murphy. You can find a mind online
Speaker 1: at Meta law Man. He is a securities attorney, and
Speaker 1: we're talking about some of the potential of what we're
Speaker 1: going on Choke point two point zero, how the government
Speaker 1: seems to be going after crypto banks and cryptocurrencies and
Speaker 1: the sec is bringing enforcement action. We're gonna cover a
Speaker 1: lot more when we come back. We're gonna take it
Speaker 1: just a quick break, don't go away, We'll be right back.
Speaker 1: All right, Welcome back. If you're just tune in, you're
Speaker 1: listening to the Mark Moss Show. We're talking about, of
Speaker 1: course each and every week, the decentralized revolution running through
Speaker 1: some news and I'm joined by James Murphy. He's online
Speaker 1: at Meta law Man, is a securities attorney, and we're
Speaker 1: talking about some of these security issues and where that
Speaker 1: puts the state of cryptocurrency. We talked about coin Base,
Speaker 1: we talked about Tron. Another thing I want to ask
Speaker 1: you about is the New York Attorney General. So we
Speaker 1: know in the crypto space, New York is like the
Speaker 1: most aggressive government state against cryptocurrency. They have kind of
Speaker 1: had their own New York bit license that they've had
Speaker 1: for a long time, so we know they're very restrictive.
Speaker 1: But the New York Attorney General father the lawsuit against coucoin,
Speaker 1: so another exchange, but also said that ethereum is a security.
Speaker 1: What's going on with that's a that's a really really
Speaker 1: good question. So that a little background. As you undoubtedly know,
Speaker 1: Bill Henman, the head of corporate finance at the SEC,
Speaker 1: years ago, said bitcoin is not a security, and athereum,
Speaker 1: if it ever was, the security is no longer a
Speaker 1: security because it had arrived at a sufficient level of
Speaker 1: decentralization where it would make sense to apply the security's
Speaker 1: laws anymore to ethereum. And that's kind of what everybody
Speaker 1: thought was, you know, the SEC's position. But then when
Speaker 1: Gary Gensler came in, you started hearing more of like,
Speaker 1: is it is ethereum really in the clear here? So
Speaker 1: what happened was a lawyer in San Diego sued the
Speaker 1: SEC last November, asking a federal judge you'd simply declare
Speaker 1: ethereum is not a security. The SEC countered and said
Speaker 1: this case should be dismissed. There is no case or
Speaker 1: controversy here. It's not right for any adjudication because get this,
Speaker 1: we have not decided yet whether we think Ethereum is
Speaker 1: a security is literally in a brief they file. Now,
Speaker 1: in my opinion, that's embarrassing because Ethereum, you know, its
Speaker 1: started eight years earlier, twenty fifteen, eight years, Yeah, that's right, um,
Speaker 1: and they still hadn't made up their mind. That collides
Speaker 1: with Gary Gensler's standard position that it is clear as
Speaker 1: a bell under Howie, that these are all securities. You know,
Speaker 1: what's a security, what's not is clear. And so for
Speaker 1: the sec to say, we just haven't decided yet, and
Speaker 1: they want to backpedal away from the Henman thing. So
Speaker 1: that was embarrassing. That happened, you know, a few months ago.
Speaker 1: And then suddenly the New York Attorney General instigates an
Speaker 1: investigation of coucoin. They use an investigator in their office.
Speaker 1: So there's an investigator signed to the New York Attorney
Speaker 1: General's office and he was told go open an account
Speaker 1: at coucoin, which doesn't have a bit license. It's an
Speaker 1: offshore exchange from the Seychelles Islands. And he managed, as
Speaker 1: a New York resident to get an account there, which
Speaker 1: is a no no. And so they told him apparently
Speaker 1: coucoin lists seven hundred tokens mark they told him go
Speaker 1: buy atherium, so he bought ethereum, sold ethereum, therefore traded
Speaker 1: ethereum as a New York resident. And that is now
Speaker 1: the basis a basis for the lawsuit that a theory
Speaker 1: is an unregistered security and coucoin was not properly licensed
Speaker 1: in any event to deal with New York residents. But
Speaker 1: the underpinning of the case is Ethereum is a security.
Speaker 1: So one wonders if there was any communication between the
Speaker 1: SEC and the New York Attorney General to instigate an
Speaker 1: interesting timing in terms of let's go after ethereum specifically,
Speaker 1: and by the way, coucoin. They served a subpoena on Coucoin.
Speaker 1: Coucoin did not respond. The Attorney General believes and I believe,
Speaker 1: that there's a good likelihood coucoin will not defend the case,
Speaker 1: in which case the New York ag may find that
Speaker 1: it's you know, it's got a clear fairway to get
Speaker 1: you know, what they want. And that is a declaration
Speaker 1: from a judge, a New York State judge that ethereum
Speaker 1: is a security and boy mark that would be a
Speaker 1: really really big deal when you consider, you know that
Speaker 1: it's the second largest market cap and all of these
Speaker 1: thousands of projects built on the Ethereum network. So a
Speaker 1: couple questions I have with that. So one, you're saying
Speaker 1: that if coucoin doesn't doesn't defend that, then nobody's left
Speaker 1: to defend Ethereum except for the Ethereum Foundation. Okay, So
Speaker 1: I mean so so people, I mean so somebody could
Speaker 1: step up to defend ethereum. Potentially, absolutely could. And this
Speaker 1: is for lawyers like me. This is fascinating because you
Speaker 1: would think the talk and the Foundation would be all
Speaker 1: over this because the stakes are enormous. Even though the
Speaker 1: United States is just one country, it's a pretty important
Speaker 1: country when it comes to you know, the digital asset
Speaker 1: ecosystem and Ethereum in particular, and all of these thousands
Speaker 1: of projects. So far, we haven't heard anything from them,
Speaker 1: and they have a conundrum. Mark for the way is fascinating.
Speaker 1: I don't know if it's fascinating to your audience, but
Speaker 1: this is fascinating. If the tallic and the foundations step
Speaker 1: in and defend the case, it helps the New York
Speaker 1: Attorney in general to say, well, see see what I
Speaker 1: mean is it is? Yes, it is centralized, There is
Speaker 1: control here, you know exactly, and so they've got a
Speaker 1: little bit of a conundrum here and have to make
Speaker 1: a really important decision. Back to that Henman thing, is
Speaker 1: it possible? It seems like it would be possible that,
Speaker 1: to his point, potentially could have become decentralized enough, but
Speaker 1: the merge seems to push it way back to being
Speaker 1: centralized again. So it's is it possible that it did
Speaker 1: go from centralized to decentralized but then also then went
Speaker 1: back to being centralized because of the merge, a common
Speaker 1: enterprise driving the results of you know, their labor and
Speaker 1: because of the staking that they're doing. Okay, so I'm
Speaker 1: not going to offer an opinion on that. What you
Speaker 1: have just said is something that is a theory that
Speaker 1: is definitely out there and being discussed. Now, I'm oh yeah,
Speaker 1: oh yeah, yeah yeah. Well, I mean you've seen staking,
Speaker 1: We've seen staking cases. That's why that's why krack And
Speaker 1: took off. You know, their staking product was declared you know,
Speaker 1: the contended by the SEC and that it was an
Speaker 1: investment contract. And and so krak And said, uh, okay,
Speaker 1: we're not going to defend it. Here's thirty million dollars
Speaker 1: and we'll we'll stop doing this for US customers. I
Speaker 1: tweeted that out that settlement and said Krackin agreed to
Speaker 1: stop the staking staking program, and the CEO tweeted back
Speaker 1: to me and said, well, to be clear, it's only
Speaker 1: in the United States. The rest of the world will
Speaker 1: continue as before, you know, with this staking program. And
Speaker 1: so I think we're seeing a lot of that happening
Speaker 1: where businesses are making a judgment that it's no longer
Speaker 1: safe to engage in certain kinds of uh, you know,
Speaker 1: cryptoactivities here in the United States with US citizens. If
Speaker 1: if the state of New York were to win that lawsuit,
Speaker 1: and if here and would be deemed a security by
Speaker 1: in New York, what does that mean nationally federally? I mean,
Speaker 1: oh boy, that you know, that's a that's a great question. Uh.
Speaker 1: There is a premise in the US Constitution that other
Speaker 1: states are supposed to respect the judgments of one state.
Speaker 1: I don't know if you remember this, but a few
Speaker 1: years ago there was you know, states began to change
Speaker 1: their laws to accept and endure same sex marriage. And
Speaker 1: so this is the same issue. Is if it's okay
Speaker 1: in New y work, does Mississippi have to recognize, you know,
Speaker 1: the same sex marriage. These are very two, two very
Speaker 1: different things, but the legal concept is the same. So
Speaker 1: I'm not going to say how that would definitely work out,
Speaker 1: because of course, of course it hasn't. It hasn't spread
Speaker 1: with like the marijuana laws for example, right, so it
Speaker 1: doesn't always work out that way. But I'm curious if
Speaker 1: that sets precedents for the SEC. But before you answer that,
Speaker 1: I gotta we're gonna take a quick break. If you're
Speaker 1: just tune in, you're listening to the Mark Moss Show.
Speaker 1: We're talking about the cryptocurrency space, that the crackdown, the
Speaker 1: choke point two point zero and what could happen with Ethereum,
Speaker 1: we're gonna come back speculate with that a little bit more.
Speaker 1: I'm gonna be right back with more talking about the
Speaker 1: SEC enforcements on crypto. Don't go away, I'll be right back,
Speaker 1: all right, Welcome back. If you just tune in, you're
Speaker 1: listening to the Mark Moss Show, and I am joined
Speaker 1: by with James Murphy. He's an securities attorney. You can
Speaker 1: find him online on Twitter at Meta law Man. Now
Speaker 1: we're talking about before the break, about if if the
Speaker 1: state of New York deemed ethereum of security. What does
Speaker 1: that do for other states? And you're saying sometimes states
Speaker 1: kind of respect that, but maybe not always like we
Speaker 1: saw with marijuana. But I'm curious what that means then
Speaker 1: for the SEC. You know, going back to like precedents
Speaker 1: and that sort of a thing. Does that we've seen
Speaker 1: in the past, Like obviously, as I already kind of
Speaker 1: opened up with, like New York has been very restrictive
Speaker 1: and so a lot of things you can't do in
Speaker 1: New York that you can do across the rest of
Speaker 1: the country. So if they did that, would it be
Speaker 1: sort of like always is well, new York's restrictive, you
Speaker 1: can't do a theem in New York, which you can
Speaker 1: do it to to the rest of the country. Or do
Speaker 1: you think the SEC then probably picks that up? And
Speaker 1: I know this is all speculative, Yeah, it is. So
Speaker 1: the SEC, the New York AG is suing under a
Speaker 1: New York statue you'd called the Martin Act, and its
Speaker 1: requirements in order to prevail are are pretty easy to establish.
Speaker 1: And so no other state has the Martin Act, So
Speaker 1: that might be a little bit of a barrier for
Speaker 1: recognition of an outcome where ethereum is declared a security, perhaps,
Speaker 1: but the top appellate court in New York has said
Speaker 1: that in New York state courts, we will look to
Speaker 1: the federal law to determine whether there's a security here,
Speaker 1: and so you will see in New York state cases
Speaker 1: they're talking about the federal case, the Supreme Court case
Speaker 1: of Howee. So you know it will be influential perhaps
Speaker 1: and will certainly be cited by the sec in every
Speaker 1: case if if they were to prevail. Now, one thing
Speaker 1: I would say that makes this even more unusual is
Speaker 1: there is a agency in New York that is responsible
Speaker 1: or determining whether digital assets are securities and whether they
Speaker 1: could be sold to New York residents. And that's not
Speaker 1: the New York Attorney General. It's the New York Department
Speaker 1: of Financial Services. The New York Department of Financial Services
Speaker 1: granted bit licenses to Gemini, coin Base, PayPal, Fidelity and
Speaker 1: others to permit them to trade a number of tokens
Speaker 1: in fidelities cases just too bitcoin and ethereum, but all
Speaker 1: of them we're specifically permitted by the regulator who's responsible
Speaker 1: for making this decision. They were permitted to allow New
Speaker 1: York residents to trade ethereum on their platform. So the
Speaker 1: New York Attorney General's argument collides with this agency that's
Speaker 1: supposed to be the expert on this question. So that's
Speaker 1: a little weird and will be interesting to see if
Speaker 1: the New York Department of Financial Services enters the fray
Speaker 1: and says, hey, wait a minute, we looked at this
Speaker 1: really hard. We have the most stringent requirements for permitting
Speaker 1: trading of digital assets of any state in the United States,
Speaker 1: for sure, and we permitted US trading of ethereum. We disagree.
Speaker 1: It'll be interesting. It'll be political because it's New York,
Speaker 1: but that's going to be interesting. Wow, that is interesting.
Speaker 1: And then it looks like, I mean, I saw you
Speaker 1: tweeted out earlier again check them out online apt meta
Speaker 1: law man you tweeted out earlier back to this kind
Speaker 1: of President's economic report, that there might be something in
Speaker 1: there that might also help out some of these crypto
Speaker 1: security things, regardless of the label used. A crypto asset,
Speaker 1: maybe among other things, a security commodity derivative or another
Speaker 1: type of financial product. Depend on the facts and circumstances.
Speaker 1: So is that something else where now? Maybe potentially the
Speaker 1: executive branch might also disagree with that. Well, I know, well,
Speaker 1: I don't know. I presume that Gary Gensler is unhappy
Speaker 1: with that language, and I'm a little surprised that it
Speaker 1: was allowed in there because it significantly undercuts his position,
Speaker 1: which is, all of these tokens, you know what, however
Speaker 1: many there are now on coin marketcap, I have no
Speaker 1: idea twenty three thousand or whatever. They're all securities under
Speaker 1: my jurisdiction here at the sec except for bitcoin. And
Speaker 1: so clearly that statement it collides with that point of
Speaker 1: view and says, these digital assets, these crypto assets, could
Speaker 1: be commodities, could be securities, could be other financial instruments,
Speaker 1: or could be something else. Entirely, it was a it
Speaker 1: was a non exclusive list of the options that these
Speaker 1: things could be sorted into. And so that feeds into
Speaker 1: an argument that most of these entities that have either
Speaker 1: issued a token or trade tokens on a platform have said,
Speaker 1: and that is, there's no clarity as to which of
Speaker 1: these our securities. And that's required under our constitutional concept
Speaker 1: of due process. You're supposed to know ahead of time
Speaker 1: what is prohibited so that you can steer around stuff
Speaker 1: that's forbidden, and I mean you can't go back and
Speaker 1: like retroactively do things like that. Well, I mean you
Speaker 1: think about that. Well's notice you know, they said, please,
Speaker 1: you've completed here investigation, tell us which tokens are securities?
Speaker 1: And their answers no, we're not. You know, you'll see
Speaker 1: it in the complaint, I guess. And then in that
Speaker 1: case in San Diego, I mentioned, hey, judge, the sec
Speaker 1: will not tell me is ethereum of security? Please, I
Speaker 1: you know, engage with the Ethereum network. I'm now speaking
Speaker 1: as the plane. If there somebody's got to tell me
Speaker 1: if this is illegal, if this is an unregistered security,
Speaker 1: I need a declaration. And the response was, you know what,
Speaker 1: we haven't made up our mind yet after eight years
Speaker 1: of looking at it. So that's that is definitely inconsistent
Speaker 1: with due process in this country. The problem that I
Speaker 1: have with that is, I mean problem with the whole
Speaker 1: legal system is to your to your point, m the
Speaker 1: laws are supposed to be laws, not rules, but laws,
Speaker 1: and we're all supposed to know what those laws are
Speaker 1: in advance, so I can plan my life and you
Speaker 1: can plan your life, and we can plan our lives.
Speaker 1: Off those laws. Now I've taken the stands. I had
Speaker 1: to kind of put mister wonderful Kevin o'leriy in his
Speaker 1: place on the bitcoin desk last year at the conference
Speaker 1: because he was like begging for these regulations. I said,
Speaker 1: hang on, hang on, hang on. Like you're Canadian, I
Speaker 1: get that. I'm American. In America, we're free. So that
Speaker 1: means that we're free to do anything that we want
Speaker 1: unless there's a law that prohibits us from doing that.
Speaker 1: So we don't ask for laws to give us permission.
Speaker 1: Everything is we're permitted to do everything unless there's a
Speaker 1: law prohibiting us. And so back kind of to the
Speaker 1: point that you're making, if there's no law specifically prohibiting them,
Speaker 1: then then we should be free to do it. Now,
Speaker 1: I guess it gets it. You know, there's the ignorance
Speaker 1: of the laws, no excuse kind of a thing, right,
Speaker 1: So there is that. Um, I guess the problem is
Speaker 1: the gray area that's here. But yeah, it seems like
Speaker 1: when these companies like coin base are saying, look, we
Speaker 1: we've specifically asked them, they haven't. You know, they've let
Speaker 1: us proceed with this. I mean, they got a public
Speaker 1: listing like it should have been caught at some point.
Speaker 1: And so you know, I think, like to your point,
Speaker 1: you can't really go back and retroactically change those laws.
Speaker 1: And so that's going to be a problem. It's gonna
Speaker 1: be yeah, absolutely, And look it's not hidden, it's not tricky.
Speaker 1: What needs to happen. Look at Europe, of all places.
Speaker 1: I rarely use that phrase, look at europe An example
Speaker 1: of anything, but twenty seven countries within the European Union
Speaker 1: got together and said, all right, we need comprehensive laws
Speaker 1: about what is going to be permissible in the issuance,
Speaker 1: distribution of trading of digital assets, stable coins, etc. How
Speaker 1: the custody is going to work. You know, how people
Speaker 1: need to prove their reserves, how clients assets need to
Speaker 1: be custodied and segregated. All of this isn't shrined in law,
Speaker 1: and they're rolling it out next month with like a
Speaker 1: year and a half of you lead time for companies
Speaker 1: to adjust their operations, stop doing things that are violative
Speaker 1: of these new laws. That's how you do, or you don't,
Speaker 1: or you don't and you just let them let them go, right,
Speaker 1: or you don't. If you're just tune in, you're listening
Speaker 1: to the Markmas Show. I'm talking with James Murphy. You
Speaker 1: can find them on line at Meta law Man. If
Speaker 1: you want to stay up the date with what's going
Speaker 1: on in the legal space, because it is changing fast
Speaker 1: and you should be up to date on that. We
Speaker 1: covered a lot something to watch. Check him out at
Speaker 1: Meta law Man. He's a security's attorney. I should be
Speaker 1: clear about that and be safe out there. That's what
Speaker 1: we've got. Thanks so much for listening.