To The Moon

I have covered the lawsuit of Binance & Coinbase since it started.

• 06 June morning - SEC Sues Binance. Who Wins? Who Loses?

• 06 June evening - SEC Sues Coinbase. Which US Stocks Will Benefit?

They are very interesting development. Click above blue titles to read.

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The plot thickens as every day presents a new possibility on how the lawsuit of the Securities & Exchange Commission (SEC) against (a) Binance & (b) $Coinbase Global, Inc.(COIN)$ would take shape.

Round One:

$Robinhood(HOOD)$ has decided to join in the fray of an impending lawsuit between SEC and Coinbase; in conjunction with another lawsuit between SEC and Binance (world’s largest crypto exchange).

In Summary:

• Robinhood’s Markets' chief compliance lawyer, Dan Gallagher told lawmakers that the firm did attempt to register as a special-purpose broker for digital assets, with SEC.

• Interestingly, Mr Callagher was a former SEC commissioner who has spent a career in securities and corporate law. In short, he is a subject matter expertise.

• Mr Gallagher’s testimony was that he has gone thru’ a 16-month process with the SEC staff trying to register as a special purpose broker dealer.

• Mr Gallagher added that one of the regulator’s final sticking points for Robinhood was the lack of registration & disclosures from issuers of tokens that trade on the platform.

• To which Mr Gallagher argued there’s no way for his company to insist that outside issuers meet SEC demands.

• In the end, Robinhood was summarily told in March 2023 that that process was over and Robinhood would not see any fruits of that effort.

• Robinhood’s “witness” confession echoed similar longstanding complaints from Coinbase, whose top lawyer was also present at the House Agriculture Committee hearing.

• Coinbase’s chief legal officer, Mr Paul Grewal said “… attempted to talk about how Coinbase could (a) register as a broker-dealer, (b) on an [alternative trading system] or (c) even as a [national securities exchange] after months & months of discussion, we’re simply dismissed with no response or any counter proposal or ideas coming back from the SEC“.

Has SEC Lost Even Before The Trail Begins?

Not necessary.

This is because there is an agency - Financial Industry Regulatory Authority (FINRA), an industry-funded oversight arm created by the SEC.

FINRA has over the course of time approved a series of digital-assets broker-dealers, including:

• Prometheum Ember Capital LLC.

• Bosonic Securities.

• OTC Markets Group.

With a qualifier that the above brokerages are officially approved to trade crypto securities, a category of assets whose borders aren’t yet well defined.

My Afterthoughts:

• Has SEC chair Gary Gensler research and done his homework thoroughly before decided to go down the war path with the 2 giants of the Crypto world?

• Having an extend arm (FINRA) and yet not having a clear & distinct direction for companies who wants to be “endorse” by SEC seems to be suicide.

• On top of that, those that were being sued have indeed show proof of having spent extended time & resources to engage SEC; only to be stoned wall. Doesn’t bode well for a regulatory body, no?

With the compliance dispute is no longer in the hands of the industry or the SEC but with the courts where its about proofs, attempts and facts - does it look as though SEC has already lost even before the trial has begin?

• Do you think SEC has painted itself into a corner?

• Do you think it was a foolish attempt by SEC to file lawsuits against Binance & Coinbase; instead of working it through with the industry crypto “leaders”?

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