Tech Won't Save Us - Crypto’s Final Boss Fight w/ Molly White

Episode Date: June 15, 2023

Paris Marx is joined by Molly White to discuss the Securities and Exchange Commission’s lawsuits against Binance and Coinbase and what they might mean for the future of the crypto industry. Molly White is the creator of Web3 Is Going Just Great and a fellow at Harvard Library Innovation Lab. Follow Molly on Twitter at @molly0xFFF.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter, and support the show on Patreon.The podcast is produced by Eric Wickham and part of the Harbinger Media Network.Also mentioned in this episode:Tech Won’t Save Us was in the New York Times!Molly wrote about the Binance and Coinbase cases for Rolling Stone. She also wrote about both cases in her newsletter.Amy Castor and David Gerard broke down the Coinbase lawsuit.Matt Levine has also written about the lawsuits and what it means for crypto being seen as a security.In 2020, Forbes reported on the Tai Chi documents about Binance’s efforts to evade regulators.Binance is also being sued by the CFTC and there are reports that criminal charges could also be coming from the Department of Justice.Prometheum Capital registered to deal in crypto securities.Binance recently withdrew from Canada.Robinhood ended support for tokens the SEC listed as securities.Crypto.com is winding down US institutional trading.Nigeria’s SEC said Binance’s operations are illegal.Elon Musk is being sued over manipulation of the price of Dogecoin.Support the show

The perception is that these regulatory agencies dropped the ball with FTX and they really failed to do their job in protecting U.S. consumers. And so they're trying to get out ahead, I think, on some of the other exchanges that are still operational rather than sort of waiting for everything to go up in flames and then come in after the fact. Hello and welcome to Tech Won't Save Us. I'm your host, Paris Marks. And this week, I have a fantastic conversation for you with a regular guest of the show. I'll leave you guessing as to what her name is if you haven't looked at the guest of the show. I'll leave you guessing as to what her name is if you haven't looked at the title of the show. Because before we get into that, I want to give you a little update on something pretty cool that happened last week. So the New York Times, I'm sure you've heard of it, published an article called Six Podcasts to Make Sense of AI. Interesting. And one of the shows that they listed was none other than Tech Won't Save Us.

They called the show an incisive weekly show and said that it takes a highly skeptical view of Silicon Valley. Tech Won't Save Us, they wrote, is neither doom-laden nor scaremongering, presenting potential solutions alongside its analysis of what's not working. Now, I'm not going to read out the whole thing for you. You can, of course, go check it out yourself. I'll include a link in the show notes. But I thought, you know, it was pretty cool that a major publication like the New York Times, you know, whose coverage of AI has received some criticism, I think it's fair to say, was shouting out a show like this one that's an explicitly left-wing and critical show that's giving a very different perspective than a lot of organizations are on the AI hype that is happening right now. So if you ever want to recommend Tech Won't Save Us to a friend of yours, a colleague,

you can now not only say that Tech Won't Save Us is an award-winning podcast, but you can also say that it was recommended by the New York Times. So there you go. Pretty cool. The show was also recommended last week by Canada Land, which is a prominent media podcast up here in Canada. And I would just say, you know, Jesse Brown, if you're listening, invite me on the show. Have me as a guest. That'd be pretty cool.

With those things aside, great episode for you this week. My guest is Molly White. You'll be very familiar with her as the creator of Web3 is going just great and a fellow at the Harvard Library Innovation Lab. I'm sure you have seen the news, but last week, the Securities and Exchange Commission in the United States filed lawsuits against Binance and Coinbase, some very large, both internationally and in the U.S., cryptocurrency exchanges. And this could be very significant for the future of the cryptocurrency industry. You know, obviously, the hype and the excitement has moved on to AI right now, but that doesn't mean that crypto is not still kind of happening out there, is not still

existing, is not still hoping for its reemergence. And so we need to be aware of that, but also think about, you know, how do we stop that from happening? Because, you know, if you're familiar with the show, you'll know that we're quite opposed to cryptocurrencies and their vision for what the future of our society and our financial system should look like. And so these cases are quite important because they basically allege that cryptocurrencies are securities, that these exchanges are trading securities without having registered to do so. And so they are in violation of the law. In this conversation, we go into what is distinct about the Binance and the Coinbase cases, where they could be going from here, what this might mean for the wider cryptocurrency industry. And at the end of the conversation, I figured, you know,

we haven't had a cryptocurrency episode in a number of months. Molly was last on the show in December to kind of catch us up on FTX and everything that was happening with that case as that platform collapsed. And we were all kind of watching Sam Bankman-Fried and I guess being amused by this guy. And so I wanted to end this conversation as well by getting a bit of an update, right? So we talk about what's going on with Sam Bankman Freed right now, any updates on Doquan, a recent lawsuit that was filed against Elon Musk for his manipulation of Dogecoin prices, and you know, really where this is all going, and what this might mean for the future of cryptocurrency. So I think that this is a great conversation. And if you were wondering what is going on with all this, and you were just looking for an update on crypto, I think that this is a great conversation. And if you were wondering what is going on with all this, and you were just looking for an update on crypto, I think that this is a great conversation to have because

we really dig into, you know, what's happening with these lawsuits, what this means more broadly, and why cryptocurrency is bad and why we hope it will go away effectively. You know, always great to have Molly on the show. I'm sure that you're going to like this one. If you do, of course, make sure to leave a five star review on Apple podcasts or Spotify. You can also on the show. I'm sure that you're going to like this one. If you do, of course, make sure to leave a five-star review on Apple Podcasts or Spotify. You can also share the show on social media or with any friends or colleagues who you think would learn from it.

And if you want to support the work that goes into making the show every week so I can keep having these informative conversations with people like Molly, you can join supporters like Carl in Seattle, Randy from Brooklyn, New York, and Joshua in New Mexico by going to

patreon.com slash techwon'tsaveus where you can become a supporter as well and help support the work that goes into making the show every single week. Thanks so much and enjoy this week's conversation. Molly, welcome back to Tech Won't Save Us. Thanks for having me. Very excited to chat with you, as always, you know, to dip into your great wealth of crypto knowledge and, you know, knowledge dip into your great wealth of crypto knowledge and, you know, knowledge on many other things, of course. You know, last week we had some very big developments in the

world of the crypto industry with the Securities and Exchange Commission, otherwise known as the SEC, filing lawsuits against Binance and Coinbase, some really major players in this space. Now, obviously, I want to dig into all of that, what it's going to mean for the industry, because this comes after a year of kind of collapses and declines and other lawsuits that the industry and other companies in it have been kind of subject to. But before we do that, were these lawsuits a surprise? Or for someone like you who watches this industry really closely, was it kind of expected that this was going to happen? It was just a question of when. It was more a question of when, I think. So the SEC had issued a Wells notice to Coinbase a month or so ago, basically telling them,

we're going to sue you unless you have some really good explanation for why we shouldn't. And Coinbase's reaction to that was basically just a PR push. And so, you know, I think most people who are paying attention expected to see a lawsuit out of the SEC against Coinbase. And then Binance had already been subjected to a lawsuit from the CFTC. And it's been fairly common in these crypto cases to see sort of parallel lawsuits from the CFTC and the SEC against crypto companies, partly because there's not that much agreement over whether or not these cryptocurrencies are commodities or securities and therefore which agency would they fall under. And so to see another lawsuit come out of the SEC against

Binance, I think was pretty expected. Yeah, that makes a lot of sense. And I think we'll come back to that distinction between the CFTC and the SEC and what they're both looking to get out of this through the course of this conversation. But I think before we dig into the specifics of both of the cases, maybe it's good to get a bit of an overview on Binance and Coinbase. You know, what are these companies, where do they come from, and what kind of role do they play in the crypto ecosystem? Right. So Binance is a giant in the cryptocurrency industry. They are the largest cryptocurrency exchange in the world and by a pretty solid margin as well. I mean, they have a very where US customers are not supposed to trade on Binance.com, the primary exchange. They're supposed to use this smaller, less expansive cryptocurrency exchange called Binance US. We saw a similar thing with FTX and FTX US. It has to do with the fact that a lot of cryptocurrency offerings are just not necessarily allowed in the US. And so crypto companies provide sort of a smaller subset.

As for Coinbase, Coinbase is the largest crypto exchange in the US. And so enjoys a fairly large amount of market share here. And they've always marketed themselves as sort of the above board compliance crypto exchange. They're a public company. They're based in the US. And so they try to attract customers by saying that they're doing things the right way and they're compliant. Whereas Binance has always been a little bit more, let's say, loosey-goosey about

some of the regulations. They've never really engaged with regulators to a major extent. At least they sort of speak about working with US law enforcement and stuff like that. But it's much more of a arm's length relationship, I think. Yeah, I think that makes a lot of sense. And you know, Coinbase is obviously, we know where it's located. It's operating in the United States. It is publicly traded company. And of course, its stock has suffered recently. Binance, of course, is kind of a very shady organization. You know, we don't really know where it's kind of operating from. Its executives are kind of all over the place and

very kind of hidden figures. So, yeah, it's much harder to figure out what's actually going on there than with Coinbase, I guess. Yeah, Binance definitely is a little bit more of an enigma. You know, we know the CEO, Cheng Peng Zhao, you know who that is. But there are a lot of other sort of higher ups in the company who are these sort of elusive figures. And, you know, there is no official Binance headquarters. They claim to have no primary base of operations. And it's all just sort of very strange. Yeah. And just to back up what you're saying about how kind of large Binance is within the crypto ecosystem, in a newsletter that you've published quite recently, you use data from CoinGecko as of June 5th, 2023, which shows that based on crypto exchanges by volume, Binance is responsible for 45.8% and Coinbase is 9.2%. I'm assuming those are global numbers, but just so people get a picture of how significant Coinbase is 9.2%. I'm assuming those are global numbers, but just so people get a picture of how significant Coinbase is in this, especially after the collapse of FTX. I guess that was last

year now. So it's a really significant deal that the SEC is now going after both of these companies. So let's start with the Binance case then, right? Because this one came down on Monday, June the 5th. It was the first one that was announced. Coinbase came the next day. Of course, you know, surprise to in one week. So what is the SEC alleging that Binance has done wrong for it to kind of merit this allegations out of the SEC that a number of major cryptocurrency tokens are unregistered securities. And so they've listed about a dozen cryptocurrencies, including Solana, Cardano, some of the pretty big ones, saying that these are securities. And so because you are not registered with the SEC as an exchange, a broker dealer, or a clearing agency, it is illegal and in violation of securities laws for you to be offering these securities to US customers.

So that's a fairly substantial portion of the lawsuit and is largely the same charges that they brought about against Coinbase as well. But there are also charges around Binance offering securities of their own. So the SEC has alleged that the Binance tokens BNB, which is their sort of free-floating cryptocurrency exchange token, and BUSD, which is a US dollar pegged stablecoin, they've alleged that both of those are also unregistered securities. And so Binance is violating securities laws by offering those. And then they've alleged that the staking products provided by Binance are also securities and therefore not allowed because they're not registered. And so staking is basically just the process of taking a cryptocurrency, locking it up, and then earning rewards on it through a process in the cryptocurrency world with these proof of stake cryptocurrencies where they're used care of that whole process for you and then just pass through the rewards. And the SEC is saying, no, that's far too much like an investment

product that would require registration and all the disclosures that come with it. So those are sort of the security side of things with this lawsuit. There are also a number of charges and also just sort of descriptions of activities in the lawsuit that go a bit beyond just the failing to register with the SEC side of things, where the SEC is actually alleging fraud, various forms of malfeasance around wash trading and sort of allowing wash trading to happen on the platform, and commingling of customer funds via these entities that are sort of opaque, but seem to be run by Binance's CEO, CZ, Chen Pengzao, that are these sort of trading firms, market makers on the Binance platform that were sort of receiving a lot of Binance customer funds without that being

disclosed to customers. So it's kind of a lengthy lawsuit with a lot of moving parts. That latter part you were talking about, is that at all similar to like what was going on with FTX last year? Yeah, there's a strong similarity there, I think, where the head of the company was operating the exchange, but then also operating these trading firms that were trading on the exchange. And there are some real concerns there around conflicts of interest where, you know, normally those types of functions would be separated and not something that, you know, you would want the same person or the same entities controlling just because you would end up potentially trading against your own customers.

So we saw that in FTX with the FTX Exchange and then Alameda Research, which was the trading arm. With Binance, we're seeing it with Binance and then these two trading firms called Merit Peak and Sigma Chain, which are both owned and operated largely by CZ. And it seems like there is actually some overlap between the employees of Binance and the employees of these trading firms as well. Yeah, it makes a lot of sense then, of course, to see these similarities between these two major platforms and, of course, the regulatory enforcement that's coming from them. Binance has not collapsed in the way that FTX did. And of course, Binance was involved in that whole story. We don't need to go over that again. If people want to know more about that,

they can, of course, go back to the last episode we did in December, where we talk about that in much greater detail. So I feel like one of the things that really stood out to me as I was reading through the details of the Binance case, as you laid them out in your newsletter and some other things that you've written and other people have written, is really kind of, you know, Binance has this international platform for people outside the US to trade on. But then it also had Binance.us, which was ostensibly kind of a separate platform for people who are in the United States to trade cryptocurrency on. But I believe the SEC is alleging that the divide between these two platforms was not as real as the company was making it seem. Can you talk to us a bit about

that and why that's significant? So that was a significant portion of this lawsuit, as well as the previous lawsuit we saw out of the CFTC, where they are basically alleging that the Binance US exchange was kind of a front. They claimed that it was a very separate entity. You know, it has its own CEO. It's, you know, very much arm's length from the primary Binance platform. But these two lawsuits are saying that, no, that's really from the primary Binance platform. But these two lawsuits are saying that, no, that's really not the case, that it was CZ who is pulling all the strings,

you know, in Binance US and that the ostensibly independent leadership of that company was actually kind of just a puppet. They even have a quote from a former CEO using the term puppet as a way to describe the sort of weird governance that was happening there. with the large customers who are based in the US, there was this whole process in which Binance employees pushed those customers to the international exchange via a handful of really sort of shady operations involving having them register shell companies outside of the US so that they could claim they were not based in the US. There was some really questionable activities happening around the know your customer process, which is sort of the way that people identify themselves and verify their identities to the exchange. And it seems like the whole thing was pretty much just a way to pretend to US regulators that they were abiding by the laws that are in place here,

while very much just pushing people to the exchange that they really wanted them to be able to trade on. And a lot of this really validates some reporting that came out in 2020 from Forbes around this document that's been called the Tai Chi document, which was a program put together by some consultant for Binance saying that you should avoid all of these regulatory issues by doing exactly this, setting up this complete facade of a US company and then using that to distract the regulators while continuing to do the very same things that the regulators have been starting to crack down on you for. And so, you know, we're really seeing that coming out in these two lawsuits from the

SEC and the CFTC, validating that reporting that that is pretty much exactly what Binance is doing. It's wild. There are quotes to that effect in the lawsuit itself, of course, as the SEC is laying this out. And as you quote in the stuff that you've written about it, again, not to always go back to FTX, but am I wrong that that was also what FTX was doing? That was also part of their kind of problem? Well, it's, I think, maybe a little bit less premeditated, I guess, in the case of FTX. You know, this Tai Chi document is really, I think, damning for Binance as far as the fact that they've been really intentionally doing this to skirt regulations. But there are allegations in both lawsuits around just the quality of attempts at making sure that U.S. customers were really segregated to this U.S. exchange.

And the segregation of funds between the two exchanges has been put into question in both cases where if they were really complying by the regulations, there would be no commingling of assets between these US customers and the rest of the FTX or Binance exchanges. Whereas in reality, we're seeing that the funds were really just all pulled together, it looks like. So that is a part of why in the FTX case, FTX US customers are waiting in line with everybody else to receive some portion of their assets back as the bankruptcy case proceeds. Had they been properly segregated, had the SEC and other regulators really cracked down

on this, that might not have been an issue. And I think that might be a factor in why the SEC is taking this action now and Binance is they really feel like at least the perception is that these regulatory agencies dropped the ball with FTX and they've really failed to do their job in protecting US consumers. And so they're trying to get out ahead, I think, on some of the other exchanges that are still operational, rather than sort of waiting for everything to go up in flames and then come in after the fact. That'd be ideal, right? I mean, that's the dream. Yeah. And I think that's what I was thinking of most as well is it was the co-mingling of funds a lot with the FTX that I remembered, you know, how the US and the

international funds were really kind of mixed together. There was a lot of back and forth there, even though there was claims that they were supposed to be completely separate. And to pick up on the point that you were just making, you know, one of the key pieces of the SEC suit against Binance is that there's also a temporary restraining order against Binance, which seeks to freeze assets belonging to Binance's US entities. Again, I'm quoting you there as I read this out. Can you explain to us, you know, why that is and what they're seeking to do in having this restraining order placed

on the assets and ensuring that the company can't access them? Yeah, so the motion for the temporary restraining order is really interesting and somewhat unusual, where it seems like the SEC is really concerned that Binance or its executives might do something with the funds that belong to U.S. customers. And so they're seeking this emergency action to freeze those assets. And it's limited a little bit in the sense that they still want customers to be able to withdraw those funds. So it's not a freeze like we've seen in the bankruptcy cases where assets are totally frozen. Customers have no access to their own funds that are stored on the exchange. It's really to stop Binance from doing something

with those funds. And it seems like the SEC is concerned that Binance, CZ, various folks in charge might try to move the funds out of the US bank accounts and entities into portions of the U.S. bank accounts and entities into portions of the Binance system where they are out of reach of U.S. regulators. There's also some wording in there that makes it seem like they're concerned that Binance might destroy evidence and things like that. So, you know, it's a pretty extreme motion in the sense that it's really alleging that Binance is engaged in some shady stuff and they really want the judge to crack down on it before something really bad can happen. It's an unusual thing for the SEC to do. I've spoken to some former SEC folks who talked about how it's a pretty

extreme thing to do and it's sort of a worst case scenario tool in the toolbox. But it's something, again, that we're seeing in the Binance case and not in the Coinbase case. Yeah. And I guess it's not surprising, as we were talking about earlier, where Binance is this kind of international entity that's very kind of shady. You don't really know where it's completely headquartered. You don't even know everyone who's involved with the company. So it's probably not surprising that they're taking an action like this. Yeah. Or they're at least trying to. But we'll see, I think, to some extent how effective it is, assuming that it is granted just in the sense that it's not clear that Binance US customer funds are all as carefully segregated as they

ought to be. And so I wonder to some extent how much the SEC can properly freeze those assets when they're not actually segregated in, you know, US bank accounts or whatever. The lawsuit claims that some of them are stored with the International Exchange. There's claims around how customer funds were transferred to these other two entities, these trading firms that are not even really disclosed to Binance customers. And so, you know, it seems like there's kind of a mess happening over there in the accounting department. But it is, you know, at least an attempt to try to protect assets belonging to U.S. consumers. And, you know, it's a substantial amount of money in this sort of billions of dollars range, which is, again,

beyond the type of thing we tend to see in these TROs, temporary restraining orders, which are usually in the sort of millions of dollar range in normal circumstances. Yeah, hopefully the accounting over there is at least a bit better than FTX, where I believe it was QuickBooks they were using still. Yeah, yeah. And even that, you know, it was like napkin math. It looked like it was very much ad hoc. Yeah, absolutely. I feel like the other big piece of the Binance case that stood out is that, you know, it's not just going after the company

itself, but, you know, CEO of CZ, Changping Zhao, I might be butchering that pronunciation, is also explicitly named in this lawsuit. Can you talk to us about that? Yeah. So CZ is named directly and there are several of the complaints are towards him specifically, which is an interesting distinction from the Coinbase case. And definitely I think speaks to the fact that the SEC sees this as a more fraudulent case, a case in which CZ specifically is engaged in activities that are circumventing the law in some way. So I think in some ways it's a more serious case in that sense, just in terms of the

alleged wrongdoing. I saw something where, you know, I think Matt Levine, you know, one of Bloomberg's columnists was talking about sort of the distinction between like process crimes and, you know, more of the serious fraud and things like that, where selling the unregistered securities, failing to register as an exchange, that's sort of one level of criminal activity where it is, you know, against the law, obviously, but it is not necessarily the same level of malfeasance as fraud, you know, the rampant wash trading, commingling of customer assets and things like that that we're also seeing alleged in the Binance case. And the fact that they're going after CZ specifically, I think, speaks to

that. Absolutely. And I can link to that Matt Levine piece in the show notes for listeners as well. Now, you mentioned, obviously, the case that we're mainly talking about is the SEC suing Binance. But you mentioned that the Commodities Futures Trading Commission, the CFTC, is also suing Binance at the same time. Can these two lawsuits be pursued at the same time? Or is there kind of a conflict there where I'm assuming the CFTC sees what Binance is doing as a commodities issue, whereas the SEC sees it as a securities issue? Can both of these agencies be going after the same target? Yes, I believe they can. I mean, I'm not an expert in sort of this side of things.

To my understanding, it is possible for something to be both a commodity and a security. But there has been this sort of turf war going on between the CFTC and the SEC over who really is the primary regulator for cryptocurrency assets in the United States. And it is absolutely not a settled debate. You know, there's somewhat broad agreement that Bitcoin is probably a commodity in the United States. That's about as much as everyone agrees on this as far as, you know, some people think they're securities, some people think they're commodities, some people think they're neither, some people think they're both, you know, it's really all over the place. And so we just sort of see these regulators coming out

and making these lawsuits. And then, you know, I think they're really just hoping that the courts will come out and decide it to some extent. But yes, I think it is possible for these two lawsuits to proceed simultaneously. The one thing we do sometimes see is if there is a criminal lawsuit also in the mix, then the civil lawsuits out of the SEC and the CF And so while that is underway, the civil lawsuits are on hold, just because there can be some conflicts that disadvantage both the prosecutors and the defendants as far as, you know, people making conflicting statements and the level of discovery that's allowed in a criminal case versus a civil case and so on and so forth. So that's one case where we would expect to see maybe the civil cases put on hold as if a criminal suit came out against finance, which I think is distinctly possible. But that's more of the realm of speculation at this point. Yeah, I was going to ask you about that, but you preempted me. So that's perfect. But yeah,

I believe kind of what we're expecting is that the Department of Justice is probably working on something as well. The question is more, when is it going to come rather than if, you know, once again? Yeah. So a lot of the behavior that's described in the two civil suits against Binance sounds very criminal. You know, there's a lot of like allegations of what sounds like fraud, questions around sanctions evasion, anti-money laundering law, compliance, and things like that, that would seem like they would be better suited to a criminal case out of the Department of Justice, which there's been reporting about criminal investigations and whether or not they might be approaching an actual indictment and things like that. But so far, there has been no official movement out of

the DOJ. I think a lot of us in the sort of crypto skeptic research community are starting to think that maybe there are charges filed under seal against CZ and perhaps others in the Binance sort of umbrella. But that's, again, all sort of speculation. So, you know, that's Binance. That's the big picture of what's going on with the big kind of international juggernaut. But as you say, Coinbase is the major kind of U.S. crypto trading platform. So you've already talked a bit about it. But what do we see in that lawsuit that's distinct from the Binance case? How are they similar and how are they different? The SEC case against Coinbase involves many of the same charges around failing to register as a exchange broker dealer and clearing agency. And they make the same argument around, okay, here's this dozen or so cryptocurrency assets

that Coinbase lists and makes available to US consumersS. consumers. We believe, as the SEC, that these are unregistered securities. And therefore, in order for you to offer securities, you would need to be registered with the SEC as an exchange, etc. And so those charges are very similar between the two lawsuits. There's also charges that are similar between the two around the staking programs. So Coinbase also offers cryptocurrency staking services. So Coinbase also offers cryptocurrency staking services, and the SEC is making the same argument here that that is a securities offering. That's where the Coinbase case kind of ends. There are no allegations like in the Binance case around fraud, around wash trading, commingling of customer assets and things like that.

So it looks like it's really more of the process crimes, as Matt Levine said, in the case of Coinbase. And we're seeing in the Coinbase case that they're not charging Brian Armstrong. They're not naming him as a defendant specifically. And so it's really more just around the securities laws in this particular case. Absolutely. And Brian Armstrong being the CEO of Coinbase, of course. Yeah, as you say, you know, seems, you know, still serious, but much less serious than what we're seeing with Binance because of the types of things that the SEC is pursuing with Coinbase, how, you know, they're more focused on the securities aspect of it and not going so much beyond that. At the same time as this case was put out on Tuesday,

states in the United States also hit Coinbase with a number of cease and desist orders and fines and things like that. Can you talk to us about that and what that actually means for Coinbase's ability to continue operating in the United States? Sure. So yeah, that was a really interesting aspect of the Coinbase case and not something that we saw in the Binance case, where there was this very coordinated effort by, I think, 10 states that all sort of acted together to tell Coinbase that they need to stop offering their staking services to customers residing in those states. And the specifics of the orders vary a little bit. So there's some

states that said, you need to stop this immediately. There's some states that have given them 30 days to respond and so on and so forth. But it's all to do with the staking services and that sort of thing. And that's really interesting, I think. I think it's just state securities regulators basically saying, okay, the SEC thinks this is a violation of securities laws. We're going to fall in line with that. You know, we agree with the arguments that they've been making. And we're going to try to shut this down right now, rather than wait for this potentially drawn out battle in the courts, you know, about the staking service. And Coinbase, you know, has come out and said that they intend to continue offering

staking as this lawsuit is battled out. And so I think this might make more of an immediate difference, at least in those states, compared to the federal lawsuit. Although there's always the possibility that they could be required to stop offering the staking as a part of a court order or something like that. But it definitely could make more of an immediate difference in that sense. Yeah, it's really fascinating. And I looked at the list that you included in your newsletter as well, because I was like, is this blue states? What is it? But it does seem like a real kind of mix, right? You have California, Maryland, Wisconsin, Kentucky, New Jersey, South Carolina,

Alabama, Illinois, Washington. So, you know, it's a real mix of different states that are kind of pursuing this against Coinbase rather than just kind of one political line or something like that. Yeah, I thought that was interesting as well. Yeah, it just seems fascinating to me just to see how it plays out. Because obviously, we know, you know, there have obviously been Democrats that have been kind of open and close to the crypto industry. But I feel like it's probably fair to say that the Republicans have been more open to the crypto industry than the Democrats. Would you say that's right? Yeah, I would say that's generally true. It's not, you know, a strictly partisan issue, but it definitely is more popular among the Republican side of the aisle.

Yeah, there's definitely some Democrats who got some crypto money and we're happy to go along with it. And so, you know, obviously we talked about with Binance how they're also facing the CFTC case and possible criminal charges. Does it look like any of that is coming with Coinbase or I don't think it's necessarily likely that we'll see anything criminal, at least not based on what we're seeing in the SEC lawsuit. So, you know, despite the SEC and the CFTC being civil, they can only file civil charges. The Binance lawsuits, they described a lot of activity that seemed to go far beyond just the sort of securities law violations, whereas that was not the case in the Coinbase suit. So, I mean, it's always possible that something could happen from the DOJ against Coinbase, but I think it would be based on behavior that is not known to the public at this point, just from what we've seen. And I guess if we were zooming out on Coinbase just a little bit, like what has their business been like recently since we've seen the

downturn in the crypto ecosystem over the past year and a half or so? And have they experienced the hit because of this lawsuit? They have. We've seen an impact to their stock price, obviously, since the lawsuit was announced. But I think that even before the lawsuit, Coinbase was seeing some challenges, both because of the crypto markets in general, but I think also because people knew this was coming. There's been a battle raging between Coinbase and the SEC for quite a while now. This is not the beginning of it. And Coinbase has become, I think, more and more sort of defiant towards the SEC around the allegations that cryptocurrencies are securities and that sort of thing.

You know, they sued the SEC earlier this year, seeking faster reply to something that they filed even before that, where they've been trying to pressure the SEC to create new laws or new sort of rules of the road for the cryptocurrency industry that are quite bespoke to the industry rather than applying existing securities laws. And they argue that, these securities laws were written in the 1930s. They can't possibly apply to cryptocurrency assets because those are so new and unique and innovative and et cetera. The SEC so far has pretty much disagreed with that and said that, well, no, these laws were written to be very broad and to be applied to any sort of asset that might emerge because it is challenging to be reactive to every new invention that someone comes up with. And so there has been this battle sort of raging between Coinbase and the SEC for a

while now, where the SEC has been issuing these sort of warnings and telling the industry, not just Coinbase, that offering these cryptocurrencies to consumers is something that would require registration under securities law. And the industry has largely ignored that, at least in the US. And so now I think the SEC is sort of putting their money where the mouth is and saying, all right, we're going to take it to court, you know, and actually get a ruling on this because so far the industry has been unwilling to comply with the laws that are in place. Yeah, it's an important move to try to see where this thing is going to go into the future. And obviously, we'll talk about the wider kind of implications of that.

You started to mention there, like, how have Coinbase and Binance responded to these lawsuits? Like, what is the tack that they're taking, obviously, in trying to oppose them? So they're both being pretty defiant, I think. It seems like both of them intend to fight it in court. Binance actually made reference to having been in discussions with the SEC over settlements, which I think is really interesting because the SEC is historically very willing to settle with companies over these types of complaints. We've seen a whole slew of settlements recently. Kraken just settled with the SEC over a very

similar allegation around their staking services. And we've seen other crypto settlements in the past as well over allegations of not registering as an exchange and things like that. So to see the SEC basically say, no, actually, we're not going to settle, even if you are willing to settle, really speaks, I think, to the uniqueness of this case. I can't really speculate that well on, you know, why the SEC would make that sort of decision. It could be that Binance was lying to them repeatedly, and they were like, we're not going to settle with you because of that. You know, it could be that they're trying to set a precedent here. You know,

it's hard for me to say, but I do think that's worth noting is just that Binance at least claims that they tried to settle with the SEC and that the SEC turned them down. Coinbase has also repeatedly said even before this lawsuit that they intend to sort of fight to the death with the SEC. And, you know, I think that's a possible outcome for them as well, because, you know, if these things go in favor of the SEC and not Coinbase, you know, that is a very, very major change and a threat to Coinbase. And so they, I think, are going to fight with everything they've got, as far as I can tell. You know, Binance, I think if they wanted to, could make the decision that this isn't worth it. We're just going to exit the US entirely.

And, you know, there obviously might be some action that they would have to take as far as the past breach of law and things like that. They can't just be like, oops, sorry, and then, you know, leave and everything's fine. But, you know, there is the potential that Binance could continue operations because they have such a global footprint. Although I do think that some people have somewhat underestimated the extent to which Binance relies on the US markets as far as their business. There are statements in the two lawsuits against Binance that really support the fact that CZ was unwilling to give up

the US market and was willing to take these fairly substantial risks in order to keep access to US customers. So it would make a dent, I think, in the business. But I think Binance could continue to survive if they exited the US. Coinbase, on the other hand, does not have much of a global footprint. They are a very US-focused exchange. And they've made some comments and sort of threats recently to say that they're thinking about moving outside of the US and setting up shops somewhere outside of US jurisdiction. But I think that's mostly talk, honestly, at this point. Yeah, that makes sense. And I believe Binance recently pulled out of Canada to give an example

of where they've pulled out of countries in the past. But obviously, they'd be far less dependent on Canadian customers than American ones. Right, exactly. So, you know, in recent months, we've seen Binance take a slightly more, you know, defensive stature towards other jurisdictions that have come down on them. You know, they've recently changed some of their offerings in the EU as well. Like you said, they exited Canada. I think they're more willing to fight the U.S. just because they have a substantial market there where there is a lot of money out of U.S. customers coming into Binance. And so they want to hold on to that if they can. Absolutely. You know, maybe this is obvious, but why do these companies want to avoid securities registration and regulation and, you know, it being seen that

they're securities exchanges and selling securities to customers? That's a really good question because I don't actually think it is that obvious to a lot of people. So the types of business that these companies are doing right now, I don't think could be compliant with securities laws. And Coinbase has actually said that multiple times, as have other U.S.-based crypto companies, that there is no way for us to be compliant with securities laws. And their argument is that that is a flaw in the securities laws. The SEC says that that is a flaw in the crypto companies' business models. And I'm inclined to agree with the SEC on this, but there are basically requirements around what types of activities a company can engage in when it comes to securities and the functions that these companies are taking on around being an exchange and a broker dealer and a clearing agency. Those are the types of things that would

normally be segregated in U.S. financial markets because there is this strong potential for conflicts of interest there. And so, you know, I think it would be possible for a company to register as, say, just a crypto exchange with the SEC. There was a company that just did that quite recently. I'm forgetting the name of it off the top of my head, but it was within like the last month or so. But it's the fact that these companies want to do all of those things at once that I think is just not possible. And for good reason, because, you know, we see the type of trading against the customers that we saw in FTX that we are seeing alleged with Binance. You know, these are the exact reasons that those laws are in place.

There are also substantial requirements around disclosures and auditing that would be imposed on these companies if they were to become compliant with SEC regulations that I think would be really challenging to abide by. We've seen some audits of Binance that were published as a part of the SEC documentation that show pretty concerning flaws around Binance's internal controls and just the sort of accounting that was happening there. And that, again, seems to be very commonplace in the cryptocurrency industry, where there's just not the type of record keeping that you would need in order to operate as an exchange. The bar is pretty high, I think, for companies to register and operate under securities

regulations in the United States. And I think it would just be really challenging for that to happen. So I think that this argument that the crypto companies can't comply with regulations is actually quite accurate. It's just the sort of where you go from that that differs pretty dramatically. Absolutely. And I think that is a really great explanation. So thank you for that. I have to note that in the Binance lawsuit, the SEC quotes Binance's chief compliance officer, as you write, who sent in a message, we are operating as a fucking unlicensed security exchange in the USA, bro. So, you know, seems they know it. Now the SEC is saying, yeah, we know it too.

Yeah, that's not a great thing to put into writing, I think, if you're a compliance officer. But it is very useful to the SEC as they try to make this argument. Yeah, it's always funny to see how these crypto people love to put their crimes into writing. Because I believe FTX, you know, they were doing the same thing in their kind of group chats and stuff like that. They all love to do it. Yeah, it makes me wonder if these companies ought to go back to using phones a little bit more. You know, it's like the fact that everyone uses Slack and Telegram and stuff like that is not very useful to them when the SEC comes knocking. Absolutely. Now, you mentioned earlier that in both of these lawsuits, the SEC is kind of

naming a bunch of other cryptocurrencies and saying these are all securities. So what does that mean for those cryptocurrencies and for the other exchanges that are not facing SEC lawsuits right now, but are still kind of allowing those currencies to trade? What is the implications of that? Yeah. So I think that's a really fascinating aspect of this. So I mean, I think other exchanges could respond in a handful of ways to this. They could make the argument that because this case is not settled, it's just a complaint at this point. That means that the SEC, you know, there is no firm decision that those cryptocurrencies are securities. But I think historically, we've seen that when the SEC actually names a token as a security in one of these lawsuits,

a lot of exchanges in the US have historically at least backed off from offering those currencies. The one that I'm thinking about in specific is the Ripple case and the XRP token, where the SEC sued in 2020. They said that this XRP token is an unregistered security. And most of the platforms in the United States stopped offering it to US customers because they didn't want to end up on the wrong side of an SEC lawsuit for listing a token that had already been described as a security. In this case, I think it's going to be interesting to see what happens. So we have seen a little bit of that already. Robinhood in specific has delisted, I think Solana, Cardano,

and Polygon tokens, which are three of the ones named in the lawsuit. And so they are taking this sort of conservative route where they're really trying to say, no, no, we're really trying to not list securities here. And so if you think those are a security, we'll have nothing more to do with it. But it's going to be a question of whether or not the rest of these platforms serving US customers do the same thing, because it's a lot of tokens that were named in these lawsuits. And there's some of the bigger ones. I mean, I think the three that I just named are in the top 10, maybe 20 of crypto tokens by market cap. And so that's a pretty big change. And then if you add in BNB and BUSD, those are also right up there. And so that could be a pretty big change for some of these US platforms.

But they are running the risk if they keep offering them that in a later lawsuit, the SEC could come and say, look, we were very clear that we believe these are securities and you kept offering them anyway. And so we're coming after you now. And then there's the open question of what the actual offers of these tokens are going to do. So, you know, if you are the Solana Foundation or one of these groups that sort of stewards these tokens, what do you do when you have been described as, you know, an unregistered security in one of these lawsuits. It's kind of a catch-22, I think, to some extent, because you could have, you know,

someone from the Solana ecosystem, you know, file an amicus brief or something like that in the lawsuit and say, no, no, no, we're not a security. But part of the way that the SEC sort of determines if a token is a security is whether or not there's sort of a centralized group governing it, offering it, you know, controlling the token. And so having some lawyer show up on behalf of your group and say, no, no, no, we're not a centralized group controlling this cryptocurrency is like kind of the wrong thing to do, I think, in that case. And so there's this sort of awkward scenario for those foundations and other companies that are sort of really controlling these crypto tokens where they need to claim that they're a decentralized entity and so not really come out and support. So I don't

know what will happen there. You know, they might leave it up to Binance and to Coinbase to make those arguments on their behalf, which, you know, in this case, both of those companies have a fairly substantial war chest to fight these lawsuits. They have, I'm sure, good lawyers. And so it might be okay for these token offers to just stand back and let that play out. But, you know, it's not good for Solana as an ecosystem or for Polygon or Cardano or any of these others to have that written out in the lawsuit that these are unregistered securities. Yeah. When I was reading that, the first thing that came to mind is, I don't know, a year or so ago, I heard a guy pitch a kind of crypto carbon credit scheme using Solana. And I was like, man, I'd be so happy if that goes

down. Maybe it's already gone down. I don't know. Yeah. I've had some unpleasant arguments with the guy behind Cardano. And so when I saw that lawsuit, I was like, oh, but we'll see. Love it. Yeah. Bit of schadenfreude, right? Just a little. And, you know, just to kind of back up what you're saying, some of the other ones named there are Filecoin, Cosmos, tokens for the Sandbox, Decentraland, Axie Infinity, you know, these names that I think people will be familiar with if they've kind of been paying any attention to what has been going on with some of these projects. You know, I guess if we're thinking about these tokens being seen as securities, I'm assuming a company like Coinbase is saying, you know, we are objecting to this

whole notion that we are a securities exchange, that we're offering securities. So we're not going to take those off of our platform because we reject the whole premise, I'm assuming, right? That's what I would assume. I would think that if Coinbase decided now to take those tokens off of their platform, it could be seen as them acknowledging that they were securities, which would probably be bad for them. But that is Coinbase's position and has been, which is that they say very firmly and repeatedly that we do not list securities. We have this whole process by which we evaluate whether or not a token is a security. And the SEC goes into that in a lawsuit to some extent, because they are claiming that even by Coinbase's own

standards, some of the tokens that they have listed really sure seem like securities. And I think that's sort of an interesting point, actually, is that Coinbase used to take a fairly conservative approach towards which tokens they were offering, especially sort of back around the time that they were going public. They did not list nearly as many tokens as they do today. And they were far more cautious, I think, about which ones they were listing. And then since going public, it seems like they've really loosened the standards around what they will list on the platform. I mean, before they went public, you know, they didn't even have Dogecoin on there.

And Dogecoin is something that some people will argue, you know, is not a security because it is decentralized, et cetera, et cetera. I don't know how much I agree with that. But, you know, that's now one of the more conservative ones compared to some of these tokens where it seems very much like almost a stock in the company, whereas there is no sort of Dogecoin company. Thank God. Maybe it'll just be rolled into X slash Twitter.

Yeah, that's true. So, you know, I think that that's sort of an interesting thing to point out as well as just that, you know, it seems like Coinbase began to play very fast and loose around what they were listing. And, you know, some of these tokens, it's like, you know, they were saying, come invest in our company by buying XY token. And that's a pretty strong case for the SEC to say, no, this is a security. And despite the fact that the SEC has listed around a dozen tokens, they really only need to prove that one token listed by Coinbase or by Binance was a security. And then that's enough to show that they were in violation of the law. So that's a tough thing to defend, I think, for these two companies where they have to say that

not only, you know, are some of these tokens, not securities, none of these tokens are securities. Yeah, it's a good point. And especially as you say, like Coinbase was doing assessments and based on its own kind of rules and assessment process, it seems like, you know, some of these things would be securities. You know, obviously, it's been about a week as we talk since the SEC has filed these lawsuits against Binance and Coinbase. You know, when we see bankruptcies, when we see, you know, platforms collapse and things like that, obviously, that's not what we've seen in this case. There's usually kind of ripple effects that kind of hit the rest of the industry. Have we seen any kind of broader follow yet from the lawsuits that have been filed throughout the crypto industry and

companies and coins and tokens and stuff that are not named in these? It's been somewhat limited. So like I said, you know, Robinhood delisted some of the tokens. Some of the tokens that were named dipped in price fairly considerably. So the BNB token in particular has come down a lot because that is so closely tied to Binance. There's some fallout from that token price coming down that could be coming as far as liquidations in the markets and things like that. But so far, that's all been fairly limited. The effect on crypto prices broadly has been also pretty limited, I would say. So there were some dips in the Bitcoin price, for example, that recovered fairly quickly. So I think it's been fairly limited as far as the fallout. I think people just know that, you know, this lawsuit is going to take a while. And I also think that they knew it was coming. You know, this, again, should not have surprised anybody who's been paying attention. And so, you know, it would be a little bit strange for it to have this huge impact on the market if everyone sort of knew it was about to happen. Yeah, it was

already kind of priced in, I guess, you know, the expectation that this was going to happen. I did see that Nigeria's SEC has said Binance's operations are illegal now. Crypto.com says its US exchange is winding down as well. Is that at all linked to what is going on here? It's hard to say if, you know, the Nigerian decision was sort of taking into account the US SEC's arguments. That would be very quick on their part, I think. And, you know, so it could have been a distinct thing that was underway. As far as crypto.com, I think there's an important distinction there where crypto.com is shutting down its institutional trading. They are keeping retail trading open for US customers. So they're not exiting the US entirely, which makes me think that may also be an independent thing where they are saying there's

just not that much interest from institutional traders in the US right now. And so their argument, at least, or their justification for this decision is that, you know, there's just not the interest, there's not the demand. So we're just gonna let that go. But it's hard to say, I assume they are taking into account those types of risks. And, you know, it's hard to argue right now that the U.S. is a sort of more unfriendly place for the crypto markets than it was a year ago. So I'm sure there are a lot of companies that are reevaluating their operations in the U.S. as a result of these lawsuits. Yeah, I think that's a really good point. And I appreciate you laying that out for us. A few final things I want to kind of go through quickly just to get a bit of an update on where the industry is right now. Obviously, we're all familiar with Sam Bankman

Freed and the collapse of FTX last year and how he is facing court date, I guess, in the near-ish future. Any updates on him and what's going on with his case? Or are we just kind of waiting for this all to kick off in October, I believe it is? Yeah, so things have been pretty quiet in the Sam Bankman Freed department. He's not writing blogs or anything anymore. He's got a flip phone and a laptop that lets him access Netflix and that's kind of it. So not much word from Sam Bankman Freed, which has been kind of a blessing. Not a whole lot, I think, happening in his case either, just as far as the filings that we've been seeing. It's

all fairly standard stuff. But he is slated to go to trial sometime in October. That was at least the date that was laid out. That could well be pushed off, but that does seem that's coming pretty soon, I would say. So I'm sure more will come from that. Absolutely. It'll be a big story that everyone will be watching, like the Elizabeth Holmes Theranos lawsuit last year or whenever that was. Right. I will say that his legal team has filed to dismiss a lot of the charges that have been laid against him. So that's worth mentioning, at least, based on several different arguments. So some of the arguments actually have to do with the fact that some of the charges were filed after he was extradited from the Bahamas. And they are saying

that it was not, you know, allowed basically for the U.S. to just tack charges on after he'd agreed to be extradited based on the charges that had been laid out in the beginning. And then some of the other arguments are just around whether or not the DOJ can charge him for some of these like various fraud complaints and things like that. So, you know, they're trying, I think, a lot of arguments on these dismissals. You know, they're sort of, I think, throwing spaghetti at the wall and seeing what sticks is what it looks like to me. But, you know, that's sort of what they have to do, I think. Totally. You know, you can't blame them. That's kind of their job, I guess, is to try to get rid of as much as possible before it actually goes to trial.

You know, another of our crypto buddies, Do Kwon, of course, responsible for Terra and the Terra Luna collapse. You know, I guess that was a bit over a year ago now that happened. You know, he was obviously an international fugitive for a while. South Korean authorities were looking for him and U.S. authorities as well, or I believe that was filed when he was finally found. They found him in Montenegro. Any updates on him? Is he going to South Korea, the United States? What's going on there? So it's kind of a weird situation with him where he was arrested in Montenegro on charges around document forgery because he had these fake passports that he was

using to try to travel. And so I think Montenegro wants him to face those charges before anything else, which is kind of funny to me because I feel like forging a passport is fairly low on the list of crimes compared to his billion-dollar crypto collapse, multi-billion dollar. But he's, I think, sort of expected to face those charges before everything else proceeds. But both the US and South Korea are seeking his extradition for much more serious charges around the actual cryptocurrency crimes and fraud and everything that was going on there. There's been no decision yet on where he will go or when. The only thing is that he was initially supposed to be released on bail in Montenegro, which was really shocking given the

whole months-long manhunt that was going on. He's obviously demonstrated that he's at flight risk. He was supposed to be released on bail. That was appealed. And I guess the judges in Montenegro saw the light and realized that maybe that wasn't such a good idea. So he and his traveling companion, who was also charged with these documents forgery allegations, are both in custody, I think still in Montenegro and waiting to see where they will end up. Very good. Very good. Is there any indication of like, if he does get extradited, like whether South Korea or the US will get precedence? I don't think so. Not that I've heard of. But I have heard that some even South Korean people would prefer to see him extradited to the US because it seems like the charges might be more significant here. But yeah, that's all I know. I was wondering it when I was thinking about it the other day. So I figured I would ask almost done with my little catch ups here. Of course, Elon Musk, we know him very well. Dogecoin, his favorite little crypto token. He's facing a class action lawsuit right now for pumping and

dumping Dogecoin. Is that going to go anywhere? You think? Will he finally face some accountability for something for once in his life? I would love to see that happen. I would love nothing more. My hopes are not terribly high for that lawsuit, I will say. They've made some allegations around cryptocurrency wallets that they believe were under his control. But to me, it seems like the actual evidence that it was Elon Musk controlling those wallets is a little bit light. It has to do with him, or the operator of the wallet at least, making trades in amounts that appear significant to Elon Musk in terms of, I think one of them, it was an amount that might represent his son's birthday or something that looks like a coded message that said, hi, Elon. You would think that that

would be a weird thing to say to yourself. Then there's a lot of arguments around his sort of crude sense of humor where, you know, some of the transactions were made in amounts that reference like 420 or 69 or things that he has historically loved, but things that are also widely loved by crypto enthusiasts. And so, you know, I think if they could definitively tie some of the wallets to him, then there could be an interesting case to be made that there do appear to have been significant trades that were made. And, you know, it could be a market manipulation type of thing. But I think there's a hurdle there first before we get our hopes up too much. Damn.

I know. We finally get hit with something, right? Okay, two final questions before we close it off. You know, obviously, Binance and Coinbase are now facing these lawsuits. One of the things that the whole crypto industry was really hoping was that Congress would regulate the industry and do so in a way that, you know, would really help them, right? And that was beneficial to their argument, you know, maybe put this under the CFTC instead of the SEC because they figure that might be kind of lighter enforcement and whatnot. Does it look like Congress is actually going to move forward and do any regulation or

has the interest in doing that kind of evaporated now that AI is the next big thing? I think it's unlikely that we will see anything substantial soon. The proposed legislation that we have seen has not enjoyed a whole lot of support. So there have been a handful of drafts of things that were proposed, you know, involving stable coins and various other things. And it was very much divided among bipartisan lines, I think, where, you know, there was a stable coin bill that was once described as a bipartisan effort. But after the collapse of FTX, the Democrats sort of took a step back and said, we no longer really support this approach, and have even described the bill as basically

completely Republican drafted. And that I think was the closest that we saw to anything enjoying more of a widespread support. More recent proposals have enjoyed quite a lot of support from the crypto industry, but not necessarily from Democrats or the more skeptical of the Congress people see the SEC lawsuit against Coinbase in specific as, you know, a reason that they need to take quick action now and really rein in the SEC and so on and so forth. I've seen some statements out of individual Congress people to that effect. The campaign that Coinbase has been making against the SEC, I think, has won over some Congress people who, in a recent hearing that involved Gary Gensler, the chairman of the SEC, I think has won over some Congress people who in a recent hearing that involved Gary Gensler, the chairman of the SEC, they were quite hostile to him. And so, you know,

it is possible that we'll see something come out as sort of a reaction to the Coinbase lawsuit. But, you know, I don't think that there's anything coming down the line in, you know, the next months or even year, just because of how divided people are in Congress on the crypto issue. Yeah, it makes a lot of sense. And that means that these lawsuits are even more important than, I guess, if that means that regulation is likely not coming from Congress, and it will be the courts that ultimately decide what is going to happen here and what the determination is going to be around these things. And I guess that kind of leads me into my final question. In an article you wrote for Rolling Stone, you said that this is kind of like the final boss

fight as the SEC launches these lawsuits against Binance and Coinbase because they are such major players in this crypto ecosystem. Where do you think this is going to go? What is this going to mean for the crypto industry? And will this kill crypto in the US or broadly? Or is it likely that, you know, this technology is going to continue well into the future, regardless of what happens with this? So I think there is a huge potential that these lawsuits change the direction of the industry in one direction or the other, assuming that the lawsuits actually play out in full. If the courts decide in favor of the SEC, that is an enormous precedent for the crypto industry as a whole that I think would dramatically change how the industry functions in the United States and would

really make a lot of the current crypto platforms that operate here have to either dramatically change their operations or shut down or exit the US. On the contrary side of things, you know, if the courts were to decide that this was an overstep by the SEC, that they had not, you know, proved the points around these tokens being securities, that would be a strong precedent in the opposite direction that, okay, these are not securities, they're something else, you know, whether it's a commodity or some totally new class of things. And that would really open up a lot of doors for the crypto industry, I think, because then they would, you know, be able to function much more aggressively. You know,

a lot of companies that don't have the legal firepower of Coinbase or Binance would be able to start, you know, taking the risks that they were previously afraid to take, you know, because of the SEC. And so I think that would also be a dramatic change. So I think one way or another, you know, these are going to be impactful lawsuits And it just depends sort of what the courts decide, how much they buy Coinbase's arguments around their attempts to comply with regulation and things like that, versus the SEC's arguments that these are really securities and that Coinbase has been sort of brazenly flouting securities laws. And it could be really impactful specifically, I think, for Coinbase and for Binance.

You know, like I said earlier in the episode, I think Coinbase, this is sort of their whole business. You know, if the courts decide that this is violating securities laws, that's, I think, kind of it for Coinbase. You know, like they could stop listing securities and just list, I guess, Bitcoin, you know, and they become a Bitcoin only exchange, which is hardly as lucrative, I think, as what Coinbase has been doing. Or they could try to set up shop outside of the US, but they don't have a very strong established footprint there. And so they would be sort of starting from scratch, I think. And then Binance, you know, I discussed this earlier, they could potentially exit the US, but they would be losing a substantial portion of their revenue,

I think. So, their revenue, I think. So, you know, I think there is the potential for a pretty huge change as far as how things go in the US. Obviously, you know, the SEC doesn't have jurisdiction over what Binance is doing outside of the US. This wouldn't necessarily impact, you know, the crypto industry beyond the borders of the US. But I do think that the US is a substantial portion of the cryptocurrency industry. And so it would put a damper on things just in that sense. We know that the courts in the US are quite politicized because of how the appointments work and all those sorts of things. Is there any indication politically how the courts that would be dealing with these cases, how they would be leaning on this? Or is it not really clear yet?

Yeah. So it's hard to say. Amy Berman Jackson was assigned, I think, to the Binance case. I could be getting that backwards. She has considered some of the cases around Trump and the allegations against him. I don't think she would be considered by any reasonable person to be sort of a Trump loyalist. And so she might be more sort of open to cracking down on the crypto industry than people might worry that a Trump appointee or sort of Trump loyalist might be. But she also, I think, does not have a ton of experience in the sort of crypto cases. Like I said, a lot of her previous experience, at least recently, has been to do with all of the various lawsuits against Trump, which, you know, is not financial crimes necessarily. I guess there's the tax issues, but, you know, it's not a cryptocurrency thing by any stretch. And I

don't think she has any past cases that have involved the cryptocurrency industry. It's hard to say, you know, I think it'll really depend. I don't have too strong concerns yet, at least that, oh, this person, you know, loves cryptocurrency and is going to decide in favor of Binance or Coinbase. Well, that's good to hear at least. And, you know, of course, we'll be watching to see how this all plays out in the coming months, you know, maybe even years, we'll see how long this takes to kind of play its way through the course and what happens. But I know that you'll be watching it and we'll be looking forward to seeing your takes, your analysis on all of this as it continues to play out. And I'm sure that we'll be talking

to you again. Thanks so much for taking the time, Molly. Thanks for having me. Molly White is the creator of Web3 is Going Just Great and a fellow at the Harvard Library Innovation Lab. You can follow her on Twitter at Molly Molly zero X F F F. You can also follow me at at Paris Marks and you can follow the show at at Tech Won't Save Us. Tech Won't Save Us is produced by Eric Wickham and is part of the Harbinger Media Network. And if you want to support the work that goes into making the show every single week, you can go to patreon.com slash Tech Won't Save Us and become a supporter. Thanks for listening. Thank you.