WEBVTT - Crypto's Moment of Clairty

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<v Speaker 1>This is Bloomberg Law with June Grosso from Bloomberg Radio.

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<v Speaker 1>This is Bloomberg Law. I'm Madison Mills in for June

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<v Speaker 1>Grasso this week. So we were just talking about the

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<v Speaker 1>fallen leader of FTX, Sam Bankman Freed. I went from

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<v Speaker 1>having Sam Bankman Fried's name in my mouth a lot

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<v Speaker 1>when FTX first collapsed in our coverage not so much

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<v Speaker 1>the case anymore. That's partially because in early June, the

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<v Speaker 1>SEC filed a pair of lawsuits against those other crypto

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<v Speaker 1>trading platforms, among them Finance and Coinbase. The agency says

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<v Speaker 1>the glory days of crypto business practices are over and

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<v Speaker 1>that they're also not legal. So here it makes sense

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<v Speaker 1>of that for us is Hannah Miller, Bloomberg News crypto

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<v Speaker 1>reporter to discuss. Hannah, thanks so much for getting on

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<v Speaker 1>with us. Let's start broadly here with where the SEC

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<v Speaker 1>is at. Talk to me about their overall vibe and

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<v Speaker 1>feeling towards crypto right now.

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<v Speaker 2>So, for years and years, the crypto industry has just

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<v Speaker 2>been clamoring for what they call regulatory clarity. You know,

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<v Speaker 2>they've been asking for clear rules and guidelines to be

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<v Speaker 2>laid out, and they have their answer. Now, the SEC

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<v Speaker 2>is cracking down. These lawsuits show that they are coming

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<v Speaker 2>after crypto companies and that they consider many of the

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<v Speaker 2>tokens that are traded on these platforms to be unregistered securities.

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<v Speaker 1>And when you talk about that these crypto firms were

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<v Speaker 1>kind of itching to have this regulation, how important is

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<v Speaker 1>that in what the SEC's moves will look like moving forward?

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<v Speaker 1>Is that is that like a good enough excuse for

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<v Speaker 1>the practices of these crypto firms.

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<v Speaker 2>Yeah, so we've seen them argue, you know that they've

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<v Speaker 2>been working with regulators that there isn't a clear path

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<v Speaker 2>for them to register, you know, their tokens of securities.

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<v Speaker 2>You know that they just haven't been able to get

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<v Speaker 2>these answers. But now you know, they've gotten their answer

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<v Speaker 2>and it's not the one they've been craving. So they're

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<v Speaker 2>they're really, you know, at a loss here. There's a

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<v Speaker 2>lot of questions about whether crypto can actually survive in

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<v Speaker 2>the in the US, never minds thrive. So they're looking abroad.

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<v Speaker 2>You know, they're eyeing places like the UK, They're looking

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<v Speaker 2>at Asia. You know, they think that really their best

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<v Speaker 2>bet is to go overseas.

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<v Speaker 1>So is the sense among your sources that that's a

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<v Speaker 1>pretty likely outcome.

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<v Speaker 2>Yeah. I mean everyone's saying, you know, they're pushing us

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<v Speaker 2>away from the US. And you know the other thing too,

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<v Speaker 2>is that other countries take signals from the US in

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<v Speaker 2>terms of how they you know, form their regulations. So

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<v Speaker 2>the fact that you know the US is cracking down,

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<v Speaker 2>you know that that could dissuade regulators in other parts

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<v Speaker 2>of the world from you know, being more accepting of crypto.

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<v Speaker 2>So I think, here, what you know, when I'm talking

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<v Speaker 2>to two people, you know, there's obviously still hope that

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<v Speaker 2>you know, that these lawsuits will drag on for years

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<v Speaker 2>and that there could make be changes or you know,

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<v Speaker 2>more favorable treatment during that time. But you've seen companies

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<v Speaker 2>like Coinbase look abroad start expanding their operations there and

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<v Speaker 2>you know, building new hubs in different markets.

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<v Speaker 1>So let's talk about coinbase and finance. Starting with Coinbase,

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<v Speaker 1>which feels like the bigger deal of the two to me.

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<v Speaker 1>Talk me through the SEC's uh, you know, moves towards

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<v Speaker 1>Coinbase in particular.

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<v Speaker 2>Yeah, so Coinbase is publicly traded, this is a US

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<v Speaker 2>based company, and you know, they've argued the whole time

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<v Speaker 2>that they've been working with the SEC that they have

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<v Speaker 2>these close relationships with regulators. You know that there has

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<v Speaker 2>been some tension, but you know, ultimately they're trying to

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<v Speaker 2>you know, follow the best path they can. However, you

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<v Speaker 2>know this this lawsuit shows that the SEC does not

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<v Speaker 2>think that then they think that Coinbase could have done

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<v Speaker 2>more to you know, work with them, that they could

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<v Speaker 2>have stepped forward and you know, tried to find a

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<v Speaker 2>better path for for registering the tokens that they sell.

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<v Speaker 2>But this lawsuit suit shows that they kind of have

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<v Speaker 2>put Coinbase in a similar category to Finance, which is

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<v Speaker 2>you know, does not have the best reputation in the US.

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<v Speaker 2>It's actually tussled with regulators around the world. You know,

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<v Speaker 2>there are these issues that Finance doesn't even have an

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<v Speaker 2>official headquarters. So to kind of lump these two together

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<v Speaker 2>is a big step back for Coinbase. Granted, the lawsuit

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<v Speaker 2>against Finance is way wider. There are more charges here,

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<v Speaker 2>you know, there are more issues here with Finance.

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<v Speaker 1>And when it comes to the crypto enthusiasts themselves, so

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<v Speaker 1>I know, you spend a lot of time talking with

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<v Speaker 1>how do they feel about this?

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<v Speaker 2>Yeah, so a lot of the crypto enthusiasts I talk to.

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<v Speaker 2>You know, they're saying, right now there's this transition from

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<v Speaker 2>money crypto to tech crypto that people are pulling back from,

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<v Speaker 2>you know, the financial implications of crypto trading things like that,

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<v Speaker 2>and they're looking at how blockchain technolo can actually benefit

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<v Speaker 2>society more broadly. So, you know, there's been a lot

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<v Speaker 2>of push towards using the term web three, which refers

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<v Speaker 2>to the centralized version of the Internet that can be

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<v Speaker 2>built on blockchain, and kind of turning away from you know,

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<v Speaker 2>these these ties to you know, financial scams, you know, bankruptcies, uh,

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<v Speaker 2>things like that, and and focusing more on how blockchain

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<v Speaker 2>can can benefit people.

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<v Speaker 1>And you mentioned in your story though that crypto enthusiasts, Uh,

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<v Speaker 1>we're looking at the SEC listing several of the digital coins,

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<v Speaker 1>even the ones that uh, you know, uh a person

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<v Speaker 1>who's not as familiar with crypto might know, like Solana. Uh.

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<v Speaker 1>How big of a concern is that for people who

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<v Speaker 1>hold those coins now?

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<v Speaker 2>Yeah, so that is a big concern because we've seen

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<v Speaker 2>you know, top tokens, tokens to people love named in

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<v Speaker 2>this SEC lawsuit. So you know, you mentioned Salana Kredano's

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<v Speaker 2>ATA token was another one named, and you know, these

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<v Speaker 2>are big names in the end of and people are concerned,

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<v Speaker 2>you know, like, Okay, well what are these tokens? I

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<v Speaker 2>do have our securities? What are the financial implications of that?

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<v Speaker 2>You know? Can I actually trade these? I also talk

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<v Speaker 2>to a lot to venture capitalists who invest in cryptostartups

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<v Speaker 2>through UH token purchases. So the fact that they're holding

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<v Speaker 2>onto these tokens right now, you know that that's given

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<v Speaker 2>them a lot of uncertainty. And you know, some of

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<v Speaker 2>these are registered investment advisors, so that gives them a

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<v Speaker 2>little a little more cushion with them. But this is

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<v Speaker 2>a this is a huge turning point for the industry

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<v Speaker 2>in looking at these tokens and seeing them as as securities.

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<v Speaker 1>Can they just register them as securities and then we

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<v Speaker 1>can treat it like you know, any old investment or

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<v Speaker 1>Is that not going to happen?

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<v Speaker 2>You know, that's a great question. I think there's just

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<v Speaker 2>still a lot of unknowns here, like what the actual

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<v Speaker 2>process is. You know a lot of these tokens also

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<v Speaker 2>are like monitored by the centralized foundations and things like that,

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<v Speaker 2>and it just it brings up a lot of questions here,

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<v Speaker 2>like how can we actually you know, work with the

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<v Speaker 2>SEC to get these these tokens registered if they are securities.

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<v Speaker 1>Well, and as you know, it's a very complicated topic.

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<v Speaker 1>Is there a sense from the sources that you speak

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<v Speaker 1>with that the SEC has the knowledge and understanding of

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<v Speaker 1>digital assets to even regulate them.

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<v Speaker 2>Yeah. So I think when you know, people were initially

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<v Speaker 2>first excited about Gary Gensler, they're like, oh my gosh,

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<v Speaker 2>he actually understands this technology. He's taught a course on

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<v Speaker 2>blockchain at MIT, like he gets it. But I think

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<v Speaker 2>now there there's some fear and concern that like, Okay,

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<v Speaker 2>maybe he doesn't actually, you know, see the potential in

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<v Speaker 2>this technology that he just wants to crack down. So

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<v Speaker 2>it's definitely shaken the industry for sure. I mean they've

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<v Speaker 2>been expecting this for a while, but to actually be

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<v Speaker 2>faced with the reality of these lawsuits, it's a huge deal.

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<v Speaker 2>And you know, the qu industries just continuing to reel

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<v Speaker 2>from scandal after scandal.

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<v Speaker 1>Well, that was going to be my next question for you,

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<v Speaker 1>because I've been saying that, you know, the FTX news

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<v Speaker 1>feels old to me at this point, but obviously that

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<v Speaker 1>kind of kicked all of this off. To what extent.

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<v Speaker 1>Is the downfall of FTX sort of the spark that

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<v Speaker 1>lit this regulatory flame.

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<v Speaker 2>Yeah, I mean it was I think a huge catalyst

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<v Speaker 2>for this. I mean especially because Sam bankf and Fried

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<v Speaker 2>was just so beloved in Washington, DC that he was

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<v Speaker 2>working closely with you know, politicians with regulators, and he

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<v Speaker 2>was he was well known to them and kind of

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<v Speaker 2>seen as you know, a better alternative to to you know,

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<v Speaker 2>cz and Binance. So the fact that you know, his

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<v Speaker 2>his exchange just collapse and set off this you know,

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<v Speaker 2>tidal wave of issues for the industry. I mean that

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<v Speaker 2>they're still dealing with them.

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<v Speaker 1>And Hannah, in our final kind of forty five seconds

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<v Speaker 1>with you, you mentioned the investors and and folks in

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<v Speaker 1>this industry are looking globally for their next steps. Is

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<v Speaker 1>there any chance of that option getting dwindled as well

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<v Speaker 1>by the same regulatory issues.

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<v Speaker 2>Yeah. I mean we've already seen you know, regulators take pause.

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<v Speaker 2>I mean like in Dubai for example, you know they've

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<v Speaker 2>kind of if the uas very much presents it itself

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<v Speaker 2>as you know, a crypto friendly environment, but you even

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<v Speaker 2>see you know, Dubai's top regulator crackdown on a new

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<v Speaker 2>crypto exchange called open x and already having issues there.

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<v Speaker 2>So it's it remains to be seen, you know, what

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<v Speaker 2>will happen in various in various markets. But I think

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<v Speaker 2>any crypto company should be on their toes, whether they're

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<v Speaker 2>operating in the US or outside of it.

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<v Speaker 1>All right, Hannah, well, thank you so much for joining us.

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<v Speaker 1>That was Hannah Miller, Bloomberg News crypto reporter, breaking down

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<v Speaker 1>all the complexities that continue to exist within this space. Again,

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<v Speaker 1>Hannah Miller with Bloomberg News. I'm Madison Mills in for

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<v Speaker 1>June Grasso. Coming up next that PGA Live merger will

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<v Speaker 1>bring you the latest. This is Bloomberg. This is Bloomberg

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<v Speaker 1>Law with June Grasso from Bloomberg Radio. This is Bloomberg Law.

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<v Speaker 1>I'm Madison Mills in for June Grasso this week. So

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<v Speaker 1>that PGA Live Golf Tour. It's loaded with questions and

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<v Speaker 1>the latest is how the century centuries old PGA Tour,

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<v Speaker 1>which is technically a nonprofit, will run once funded by

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<v Speaker 1>one of the world's biggest sovereign wealth funds. PGA Tour

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<v Speaker 1>says it plans to keep its nonprofit status, but how

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<v Speaker 1>are regulators going to feel about that. Joining us to

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<v Speaker 1>discuss is Bloomberg Intelligence senior litigation analyst Jennifer ree Jen

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<v Speaker 1>great to speak with you as always. Can they keep

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<v Speaker 1>their nonprofit status here?

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<v Speaker 3>You know, it's a really good question, and I'm not

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<v Speaker 3>so sure that they can. And I also don't really

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<v Speaker 3>think for profit or nonprofit will make a difference in

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<v Speaker 3>terms of the anti trust review of this. I mean,

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<v Speaker 3>I think right now their biggest obstacle. I mean, we've

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<v Speaker 3>seen all sorts of issues and senators coming out and

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<v Speaker 3>worry about national security, but I think right now their

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<v Speaker 3>biggest obstacle will be anti trust in the DOJ, and

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<v Speaker 3>that review won't really matter. It won't really matter whether

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<v Speaker 3>it's for profit or not for profit.

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<v Speaker 1>Okay, So that's interesting. So that's not really something that

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<v Speaker 1>we need to be looking at in our coverage necessarily.

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<v Speaker 3>Well, I think for tax purposes, I think it does

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<v Speaker 3>make a difference. I'm not a tax expert, so I

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<v Speaker 3>can't really speak to what I mean. I think there's

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<v Speaker 3>so many implications to this across many different areas of

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<v Speaker 3>the law, and because we don't know the details, they don't.

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<v Speaker 3>They haven't hammered out the details yet, so we don't

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<v Speaker 3>even know what kind of an alliance this is, whether

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<v Speaker 3>it's a merger, whether it's a joint venture, whether it's

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<v Speaker 3>something else. They haven't even hammered that out yet, and

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<v Speaker 3>so we don't know either, and the legal implications won't

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<v Speaker 3>really fully be able to be fleshed out or known

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<v Speaker 3>until those sorts of details are completed.

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<v Speaker 1>Well, that's the thing that's interesting to me and hard

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<v Speaker 1>about talking about this is I feel like I need

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<v Speaker 1>to know the number to understand it. How do you

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<v Speaker 1>think about it without knowing the number? Here?

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<v Speaker 3>So, just from an antitrust perspective, the way I think

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<v Speaker 3>about it is that it almost doesn't really matter what

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<v Speaker 3>it ends up being. It is two competitors in a

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<v Speaker 3>very concentrated market coming together to become one, and that

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<v Speaker 3>is sort of presumptively anti competitive. I mean, we saw

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<v Speaker 3>the benefits of Live as a new entrant because a

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<v Speaker 3>lot of golfers got paid a lot of money to

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<v Speaker 3>come over to Live, and then the PGA also had

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<v Speaker 3>to start pushing up their prize money in order to

0:12:36.280 --> 0:12:39.840
<v Speaker 3>keep the golfers within the PGA tour. That's the essence

0:12:39.880 --> 0:12:43.160
<v Speaker 3>of competition. A new competitor comes on board, and people

0:12:43.160 --> 0:12:45.680
<v Speaker 3>are paid more I mean, or you know, prices go

0:12:45.720 --> 0:12:47.720
<v Speaker 3>down for consumers. But this is a different issue. This

0:12:47.760 --> 0:12:50.640
<v Speaker 3>is about labor and the payments made to labor, and

0:12:50.840 --> 0:12:53.240
<v Speaker 3>that will change if they come back together, because once

0:12:53.280 --> 0:12:56.560
<v Speaker 3>again one entity will be able to determine how much

0:12:56.600 --> 0:12:59.360
<v Speaker 3>these golfers are paid. And so you know, no matter

0:12:59.400 --> 0:13:02.160
<v Speaker 3>what kind of what kind of a transaction it is,

0:13:02.760 --> 0:13:05.360
<v Speaker 3>I think that it's sort of superficially just clearly has

0:13:05.400 --> 0:13:06.839
<v Speaker 3>an anti trust issues.

0:13:06.840 --> 0:13:10.000
<v Speaker 1>And given that it's coming from Saudi Arabia's public investment

0:13:10.080 --> 0:13:14.400
<v Speaker 1>fund the money part. Could this be similar ish to

0:13:14.520 --> 0:13:16.680
<v Speaker 1>what we were talking about with the Microsoft Activision deal,

0:13:16.720 --> 0:13:20.040
<v Speaker 1>where we see different results in different parts of the world,

0:13:20.280 --> 0:13:22.920
<v Speaker 1>or is it really going to be decided in the States.

0:13:23.320 --> 0:13:25.920
<v Speaker 3>Well, I think that's possible because part of this alliance

0:13:25.920 --> 0:13:28.120
<v Speaker 3>that they're putting together, whatever it is, is including the

0:13:28.160 --> 0:13:30.760
<v Speaker 3>European Tour, the DP World Tour I think it's called,

0:13:31.960 --> 0:13:34.520
<v Speaker 3>and so European regulators may want to look at it

0:13:34.559 --> 0:13:39.040
<v Speaker 3>as well. It's kind of rare for the big global

0:13:39.080 --> 0:13:42.319
<v Speaker 3>antitrust agencies across the world to actually come out differently

0:13:42.320 --> 0:13:45.000
<v Speaker 3>on a deal. What happened with Microsoft Activision was kind

0:13:45.040 --> 0:13:47.480
<v Speaker 3>of a rarity, and I don't you know, I don't

0:13:47.480 --> 0:13:49.960
<v Speaker 3>think that they would here because it's also not in

0:13:50.000 --> 0:13:52.600
<v Speaker 3>my mind, it's not quite as complicated as the Microsoft

0:13:52.679 --> 0:13:55.319
<v Speaker 3>activision deal is in terms of looking at how it

0:13:55.360 --> 0:13:57.840
<v Speaker 3>could harm a market. I mean, it seems to be clearer.

0:13:57.920 --> 0:13:59.600
<v Speaker 2>This is a This is basically a.

0:13:59.559 --> 0:14:04.000
<v Speaker 3>Combination of horizontal competitors, and I just think it's more

0:14:04.120 --> 0:14:06.760
<v Speaker 3>likely that the agencies would be more aligned on that,

0:14:06.800 --> 0:14:09.040
<v Speaker 3>and so the European regulators may want to look at

0:14:09.080 --> 0:14:09.400
<v Speaker 3>this too.

0:14:10.080 --> 0:14:12.440
<v Speaker 1>In our final thirty seconds, what do you think is

0:14:12.480 --> 0:14:14.839
<v Speaker 1>going to be the next big reveal that we get

0:14:14.920 --> 0:14:17.240
<v Speaker 1>about this? I guess I'm going to call it a murder,

0:14:17.360 --> 0:14:19.760
<v Speaker 1>even though that may not even be the right rule work.

0:14:19.840 --> 0:14:20.280
<v Speaker 2>We don't know.

0:14:20.400 --> 0:14:22.880
<v Speaker 3>Yeah, well, I think we're going to have to. Senators

0:14:22.920 --> 0:14:25.640
<v Speaker 3>are really popping up now talking about concerns about national

0:14:25.680 --> 0:14:28.000
<v Speaker 3>security or the tax issue that the nonprofit and for

0:14:28.080 --> 0:14:31.480
<v Speaker 3>profit tax issue you raised. The DJ started an investigation,

0:14:31.640 --> 0:14:34.240
<v Speaker 3>so I think, you know, it could be along any

0:14:34.280 --> 0:14:37.120
<v Speaker 3>of those lines that we could hear about the next event.

0:14:37.600 --> 0:14:39.400
<v Speaker 1>All right, well, I am certain I'm going to be

0:14:39.440 --> 0:14:42.120
<v Speaker 1>asking you a lot of questions along the way. Jennifer

0:14:42.160 --> 0:14:45.880
<v Speaker 1>Ree Bloomberg Intelligence senior litigation analysts. Thanks so much for

0:14:46.040 --> 0:14:49.160
<v Speaker 1>joining us. This is Bloomberg Law. I'm Madison Mills in

0:14:49.240 --> 0:14:52.000
<v Speaker 1>for June this week. Stick with us for more throughout

0:14:52.000 --> 0:14:54.720
<v Speaker 1>the week on Bloomberg Law. This is Bloomberg