The Wolf Of All Streets - SEC Coinbase Case Updates | KuCoin Criminal Charges | Crypto Town Hall

Episode Date: March 27, 2024

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I'm going to share a tweet above in the group that I think is really important. Which one? The swing-based one? No, it's very important. Breaking news even. I'm going to get it up there. Do we call it the nest at the top? What do we call it? Yeah. I love the way that our title today is the crypto market is pumping. I don't know which one. I literally just said, hey, the crypto market's dumping. Or it's a Darth mauling, I think, but check out,

check out the tweet that I pinned above. It's very important. I don't want to sound like a boomer, but I can't find it. Just scroll up the top. Mario said he was going to be a little bit late in the chat. I said, why? And he said, I'm at the dentist. I said, send proof. And so he sent me a photo of him at the dentist, which I immediately obviously shared to the entire world.

I would ask Mario to talk, but he's got a big white device of some sort in his face. So let's look at the markets we got the news now that the sec basically that the sec court case against cornbase is going ahead i think the market didn't like that very much before that we were at 71 500. i mean uh oh is that what trigger i i honestly wasn't paying attention i thought this was some sort of liquidity grab what was the news i gotta find that uh the news was, that I'm trying to open the actual tweet. It says a US judge allows SEC claims that Coinbase failed to register as a

business court ruling. I guess what that means. I guess what that means is that the US judge allows SEC claims that Coinbase failed to register as a US security judge, dismisses SEC claim that Coinbase acted as an unregistered broker via a wallet application. So good and bad. I know Metal Lawman is going to be a guest today. We need some lawyers here for sure because we have to talk about this.

I'm going to pin this. We have to talk about this. We have to talk obviously more about QCoin. Carlo's here too. Awesome. We got to get our crack team of lawyers. Every time we do that, though, it costs us like, you know, $700,000 of spaces or something in legal fees.

Guys bill for everything. Guys bill for everything. So we got Carlo coming up. That's interesting. So I remember we had basically all of the crypto judges went to the court case, went to the Coinbase hearing, you remember, in New York to hear when Coinbase attempted to get this case dismissed. So I'm wondering if because I haven't looked into it, is this sort of the resolution of that, that we are seeing what's going forward and what's not. I wonder if Carlo can hear. I see he's connecting. But I would love to get his take on that once we get him up here and get Metal Law Man. Coinbase failed to register a securities business. Okay.

Judge dismisses SEC claim that Coinbase acted as unregistered broker via wallet application. Yeah, that's kind of big to me. I think we need to dig into this a lot deeper. Yeah, I mean, I guess all this means is there's going to be a court case. You know, the SEC tried to brush it off. All this means is that there is actually going to be a court case. You know, that's all it is. I don't, I don't think that there's anything, anything new, anything new that like it's just,

Yeah. There was a hope at the time that if you remember that the coin, Coinbase ran, your mic is hot. But there was a claim at the time that the Coinbase lawyers had done exceptionally well in the courtroom when they were attempting to get this thrown out entirely. And so a lot of people had hope that there would be no case moving forward. But I think on day two or three of that, a lot of the lawyers said as well as the Coinbase lawyers did, it was still unlikely they would be able to get all of it thrown out. So this looks like that was actually the accurate take, that some of it will move forward and some of it will not. I'm just curious as we dig into it, which parts are going to have, if the parts that are moving forward are those that would have the largest implications for the market or not, in theory. Although, to be quite frank, you know, the market only reacts very temporarily very temporarily seemingly to any of this news before resuming its sort of trajectory yeah i mean i think that i think that this is just you know

you know what i actually think this is honestly this is the biggest options close out that we've had in crypto i think ever it's the first week that we've had the first time that we've had a quarterly close um there are longs and there are shorts. And I think there's a battle between the longs and the shorts. And I think you're going to get a whole lot of news this week because of that. That's the way I see it. I see Mario's here. I'm going to have to jump off in 10 minutes.

So maybe I'll just swap co-host spaces with Mario and let Mario be the other co-host. Yeah, we can sort that in the background. I saw Carlo was trying to get up. I think we weren't able to get him up. But James, you're here. We just got off of YouTube, obviously. So I know where you stand. We can we're going to dig into all these claims. But did you see what just happened with coin here? You were in the courtroom when they asked to get this dismissed. So have you seen this? It's pinned above. No, this is news to me. The judge is letting the case proceed. Is that right? So all we have is the tweet above, which says, and I'm sure we're going to get more, US judge allows SEC claims that Coinbase failed to register as securities business, court ruling.

And then Judge dismisses SEC claim that Coinbase acted as unregistered broker via wallet application. That's kind of vague, wallet application. Does that mean the exchange in general or like their Web3 wallet? Sounds like the Web3 wallet. But look, I'm going to have to see the opinion. But you know, this is not a surprise. As I've said on every show I've been on, it's really, really hard to win a motion to dismiss at the beginning of a case before any discovery has been done. We learned that in the Ripple case. And this is just life in the securities world. I am highly optimistic that

Coinbase will win in the end. But the judge has done the, sounds like done the conservative thing and allowed the case to proceed to discovery. And it's going to follow a track very similar to Ripple and will culminate in motions for summary judgment down the line. Yeah, I was talking about this right before you got on, but there was this consensus in the crypto community that Coinbase had performed so exceptionally well, their lawyers had performed so exceptionally well in that hearing to have the case dismissed, that it was all over. And actually, you were there, right? And you said, that's true. But exactly what you just said, this ain't going to get thrown out.

We're going to see parts of this move forward. So is it meaningful that we have part of it moving forward and part of it effectively being dismissed? I mean, that's what you expected, I think. Yes. Yeah. I mean, the wallet theory was a little far-fetched. So the case is trimmed down a little bit, it sounds like. But, you know, this is the key question, whether, you know, trading in digital assets in general requires you to register somehow with the SEC, which is impossible, as we know. So I believe, and what I believe from the beginning is that the courts of appeals will get this right. But that's going to take time. It could take years. And what's going to happen before that, maybe, is a change in administration at the SEC. So that would require a big change in November and the attitude toward this whole industry

might change at that time and that is going to happen or not happen a lot sooner than these cases run their way through the Second Circuit Court of Appeals and ultimately to the U.S. Supreme Court. Yeah, correct me if I'm wrong, but people love to obviously point at the Ripple case and Gensler and the SEC, but the Ripple case was brought or was even there, right? So a lot of these cases, as you're saying, transcend administrations or, you know, tenure for a chairman. That's right. Yeah, that was Jay Clayton's last day in the job that he authorized that complaint

against Ripple. So it did cross over to administrations there. But, you know, we are hearing from the Republican side, from Trump, who appears to be now influenced in his thinking by the vague that his prior hostility to Bitcoin and this whole industry may have ebbed away, particularly as he's made some money with NFTs himself. Yeah, absolutely. So the court's not going to change how they proceed with this, regardless of the administration, right? You're just making the point that it could be literally years until we get an answer, which to me means whether accurate or not, the opinion that the Ripple case settled largely what most of these assets are will sort of remain as the precedent until one of these is concluded way farther down the road.

Well, you know, with lawyers, we kind of key in on that word precedent. Judge Torres, that's one judge's opinion. A judge down the hall from her, Rakoff, has disagreed with her. I mean, it's a precedent in the sense that we all can read it and see it, and it makes sense what she said about XRP in the secondary market. But no other court is bound by it. What you need is a court of appeals, and in particular, the Second Circuit Court of Appeals, which sits there in New York to rule that Torres was right. Then you have legally a precedent that other courts within the Second Circuit must follow. And the Second Circuit is really the most important because it does cover New York. And so, you know, there is clarity from this Judge Torres in that opinion, and we can all read it and see it and it makes sense.

But no other judge is required to follow it. And we've already seen examples where judges have not followed it. So, you know, Coinbase is not in the clear because Judge Torres ruled XRP is not a security. You know, they've got to fight this fight for themselves with respect to, you know, a dozen tokens, and this is going to take time. What I mean by the change of administration is, yes, you're right, the judge isn't going to change her mind, but remember, the SEC is a party to the case. The SEC could say, we are no longer bringing cases against exchanges. Until such time as the United States Congress and the president have passed a law saying the SEC has the authority to regulate crypto exchanges, which they have not yet done. And so they could dismiss the case. They could move to stay

the case and just hold it in place until such time as Congress acts. Or they could settle on very favorable terms with the defendants in these cases. So I believe that we could see dramatic changes if administration changes by January of next year. Carlo. Good morning, Scott. Good morning, everyone. I have to agree with James. I don't think anyone in the legal side of crypto is surprised by the judge's ruling because it was a long shot that Coinbase would run the table and win this. However, split decision, haven't read the opinion yet because I'm driving, but I agree. Let's tee this up. Let's do discovery. Let's take it to the next level. Let's take it to summary judgment where I think the SEC is going to have a real uphill battle here,

especially with the way things have been trending lately for the SEC and their team of lawyers. So ultimately, I think I'm bullish on this for Coinbase, because the more facts that come out, I think the more clarity we're going to get from judges, which I think is going to, in the next administration, hopefully, incentivize Congress to actually pass something to properly regulate the sector. Right. So there was no surprise here for you that this was moving forward, correct? I mean, you were of the same opinion. No. Yeah, because the lawyers did an outstanding job in the argument, had a chance to, you know, kind of view that as it was going on. And I think that Coinbase's counsel did a great job in that

hearing. This judge has a really good intimate knowledge of the facts, which I think will carry over into her ultimate assessment of the summary judgment arguments. And that's where I think she will then have the support that she needs factually to hopefully side on behalf of Coinbase in this thing, because I think that they're on a good footing. Okay. Can we get a sliding scale of timeline for clarity on this? I mean, what's the shortest this could be and what's the longest this could be? Well, you know, because it's going to now fall into the discovery phase of this, there's going to be a huge motion practice. So I don't think we're going to see anything meaningful. And I'd love to get James's take who's more nuanced on SCC.

But I don't think we'll see any significant movement on this case in at least six months to a year. Because I think they're just going to have to, you know, kind of trudge through the discovery process and get their facts lined up. Yeah, unfortunately, my experience in that court, I would be surprised that they got to summary judgment in substantially less than two years. Remember, the discovery here is not about one token. I forgot, it's either 12 or 13 tokens. And so they're going to have to delve into how was the token issued? You know, is it decentralized? I guess it's still considered an issue in this analysis. I'm not a big fan of that Hinman standard, but in any event, 13 tokens, okay, not one. So this is going to take time, and there are going to be subpoenas

sent to the issuers of these tokens, to the underlying projects. And these people are going to need to decide what is their posture going to be with respect to this case, which could end up declaring that the token, which is the lifeblood of their project, is an unregistered security. So it's possible, possible that some of them would intervene, attempt to intervene in the case. Now, there are pros and cons to doing that. I mean, if you intervene, then you are suggesting to the court that you kind of control what's going on, which sounds a little centralized. And so, there are pros and cons here, but the stakes are very, very high, you know, for Cardano and Solana and the rest of them. Do you want to kind of sit as an observer in the stands and watch this case proceed, which

could rule that your token is an unregistered security? It's going to be really, really fascinating. Wait, so because of the way that this is structured, right, they're saying that Coinbase failed to register as a securities business. So then literally every token that they listed will have to be clarified as a security or otherwise to see if that is the case. I mean, because they mentioned 12, but Coinbase offers hundreds of tokens. Right. So aren't they a securities of business if any of those are unregistered securities? And if all of them are not, does that mean that this gets completely thrown out? Well, the SEC gets to choose which tokens they want to litigate. So they've made their choice. I don't believe the

judge would permit them to pivot. So it's going to be all about the ones that they listed. And yes, I mean, if Coinbase swats away the theory on each one of them, then the SEC has no jurisdiction because there are no securities at issue. Those are then determined to be commodities, assets that are not securities, and therefore the SEC has no enforcement authority over those assets or the exchange that allows them to trade. So it's going to be focused specifically on the ones that the SEC picked out, And that's where the discovery is going to go. And that's where the summary judgment is going to go ultimately in a couple of years. It's interesting from a strategic standpoint that these tokens, whether decentralized or

more centralized or not, they get the benefit now of having the massive legal team and the massive power and budget that Coinbase has to make these arguments on their behalf. And I think there's very little downside in that because now they're going to be able to leverage all of that legal prowess in the courtroom. And it is a gamble whether they should intervene or not. I agree. But if they choose not to, I still think they've got a good flag bearer in this fight. Yeah, I agree with that. Really, really strong legal team, and they are 100% aligned with the issuers. Both of them want these assets to be declared not securities. So there's not a daylight between them. So, you know, it's a little uncomfortable watching from the sidelines and not having your own lawyer in there, you know,

taking their swings. But that may be exactly how this plays out and they choose not to intervene. How long did the library case take? Does anybody know? To deem library credits effectively a security, right? Because you can use that, right? As a sort of an example of how long it would effectively take the SEC to prove that any of these others are securities.

I mean, do we have a situation where Coinbase has to prove they're not securities? Does the SEC have to prove they are? I mean, who's the responsibility on here? It feels like the SEC should have to prove that these things are securities to prove that this was an unregistered securities exchange. Yes, the SEC definitely has the burden of establishing that these are securities. They have the burden of proof on that issue. That sounds, I mean, that sounds impossible with what they've done, unless they're going to use

library as precedent, right? Because don't, with Ripple, with the Ripple ruling, although you said it's judge interpretation, can't Coinbase just say, look, this is this is settled. We're in exchange. This is a secondary sale. What are we doing here? Well, they made that argument on the motion to dismiss, and she was not persuaded at that time, given the standard that applies on a motion to dismiss. But let's not forget Judge Rakoff just down the hall said that the Doquan-Terraluna is a security. You know, so it's there are cases that have gone both ways. And it's strongly implied in prior cases, telegram, kick, et cetera. So this is no done deal on the status of these things. But again, I believe that Coinbase has the better argument.

And I think their chances improve as they move up in the appellate courts. And unfortunately, this is going to take time unless, again, there's a change in administration, which changes the posture of the SEC with respect to this industry. I think that is very possible. And we would start hearing about it early next year. Right. that is very possible and we would start hearing about it early next year. Right. So we obviously have this immediate breaking news with the SEC, but it's not the only thing, James, as you and I talked about this morning that's happening with regulation. The courts, obviously, right now we have KuCoin yesterday being charged, which was relatively huge news that once again seemed like the market didn't necessarily care so deeply about, but saying that they may have laundered up to $9 billion. But the crux of the case, much like Binance, once again, was that they allowed Americans to trade on the exchange with no KYC and therefore in violation of laws in the United

States. That seems to be the other big case. Well, just very clear, the United States government is not stopping here. I mean, James, as you and I discussed this morning, my take is that after finance, effectively any foreign exchange that over the past few years has allowed Americans knowingly is probably just going to get in line here, right? Yeah, that's right. And we have a precedent for that. Some years ago, the Department of Justice cracked down on bank secrecy in Switzerland, and they went after UBS first and indicted them. And they got a deferred prosecution agreement, settled, paid a lot of money, got an independent monitor put in there.

And then every single Swiss bank in turn had to settle with the United States government. And so there's a precedent for proceeding in this way. geofencing to prevent U.S. citizens from getting into their ecosystem and trading on their platform, et cetera. And that's Binance, that's KuCoin, and there could very well be more to come. I think, Scott, that, and we talked about this a little bit offline, this is kind of an assault on VPNs from the perspective of people have been kind of gaming the system. These offshore accounts and these offshore platforms have sort of with a wink and a smile been saying that they're complying and blocking US customers. But then there are, as we learned from the Binance case, obvious workarounds at play here. And I think DOJ is frustrated with that. You know, we saw just last week, EU is coming down on KYC, and they are

strongly opposed to decentralized anonymous wallets. So I think this is all going in the direction of requiring strict KYC compliance, and not trusting the overseas platforms to do it, but to come down and punish those platforms who are sort of with a wink and a smile, avoiding compliance. Right. But to my understanding, Carlo, kind of the discussion that we had, and I won't say how I pushed back, but how I responded when you said, you know, sort of the attack on VPNs. I mean, these exchanges

are not supposed to let Americans trade, right? So it's an attack on VPNs in that regard, but there's no real, I guess, responsibility or risk for the Americans who are actually using the VPNs to trade on these exchanges. Correct? So I mean, not yet. Not yet. I don't, I don't know. And I don't know of any law that's precluding it. But it is certainly, I think, a point of frustration, because it is a way for American consumers to kind of get around the the, the presumed impropriety of trading on these platforms that are not complying with US law. It is largely falling on the platforms, and they're the ones that are getting targeted. So of course, I agree, VPNs are still within the realm of things that people can legally use.

But it certainly is, I think, opening up a debate as to just how far you can go with a VPN when you're knowingly trading on platforms that are outside of compliance with US securities laws. And I'm curious to see how this will unfold. I am concerned that it may turn into a war on VPNs, because it is a creative way for people to get around this and to obviously trade on platforms that are not complying. Yeah. I'm in no way- Scott, am I- This is not legal advice. I'm not sure if my audience is okay, but am I missing something? We're talking about allowing US consumers to use Pucoin, which is okay, fine.

We're not surprised. But that's completely separate to the money laundering charges, no? I would ask yes the money laundering charges have to do the money laundering charges have to do with the platform and their failure to comply with u.s regulations their failure to come in and register properly so i think the theory is that because they failed to properly register that then whatever profits they're making are ill-gotten gains. Yeah. And that's where it gets interesting because money laundering, one of the essential elements they'll have to prove in money laundering is that these are ill-gotten gains, that these are the fruits of criminal activity. And that, I think, will be an interesting thing that will play out in the criminal case for them for them to make to to to make charges that these are ill-gotten claims uh wouldn't they have some sort of evidence to make

that claim beyond hey we didn't do enough dd we didn't do enough kyc for for users wouldn't there be examples similar to what binance had and i know these questions are simple because i've been keeping keeping tabs of everything but binance had the claims about Hamas, leveraging Binance. So they had specific examples of why they've made those charges. Is there similar examples in KuCoin? Is it worse? Is it better? Cause you know, the token initially yesterday when we covered it briefly, Scott remember we were all chill cause the token only dropped 3%, which kind of represents the market's reaction to the news. Then after the space, it went all the way down to 12% as the West coast woke up.

So, um, excluding price carlo the charges compared to binance when it comes to key coin um how would you compare them it will be yeah it'll be da doj's burden to prove that and i think the way they'll prove that is because they'll lay out a very straightforward case because remember one of the charges in that indictment is an 18 USC 1960 offense, which is a business failing to register as a money exchange. One of the pass-throughs that's required if you're going to target US consumers is you have to register as a money exchanger. And that's an easy, easy charge for the government to prove because they failed to register allegedly with any state or with FinCEN. So I think if they can prove that, then they can prove that they are circumventing US law.

Which is fine, but this is different to Hamas leveraging the platform, for example, certain criminal organizations in North Korea leveraging the platform. So they haven't given any examples. There's no OFAC allegations here. It's not as serious as it is charges against Binance. Fair to say? I think that is fair to say. I think this is much more fixated on the fact that the government has made a case that they have, they're talking out of both sides of their mouth because in one respect,

they're saying they're trying to avoid and block US customers. But then they're obviously, as you read the indictment showing that there were clear workarounds, if you just click the right link on the website, you didn't have to, you didn't have to even deal with the geo blocking. Okay, and the next question I have, if you don't mind, is the what does that mean for other exchanges? Because I asked this this when the binance charges came in i'm like what happens to other exchanges and that's kind of a selfish question because obviously we've got a lot of our projects that we invested in listed on those exchanges and a lot of the projects listed on q coin dumped after that announcement unfortunately

um and of course people started withdrawing their money as a precaution um so the first question is does that mean that my same question now, will we see other exchanges follow suit? We will see similar charges when it comes to, I won't say they're naming them, but all the other exchanges because Binance and KuCoin circumvented those laws. I'm sure the smaller ones had to break more laws to be able to compete. Mario, we were kind of talking about that just a bit before when you were in the dentist with your mouth

wide open and that huge thing in your mouth. And James, we were saying that this is probably all of those exchanges getting in line at some point to pay a fine. So much like I don't think they'll pay one as big as Binance's $4 billion, but you've got to imagine that anyone who is allowed Americans knows that they got to get their coffers ready to pay up to the boss, right? James, I see you lifting your mic, but is that accurate? Yeah, that's right. I mean, if they have not had really effective geofencing to prevent U.S. citizens from getting into their exchange, then they've got a problem and they may very well come forward and, you know, try to settle because the government, believe it or not, has limited resources. So they can't do a full blown

investigation of every single exchange. So they'd love to get cooperation and just, you know, get another notch in the belt. Hey, you guys paid $5 million or whatever it might be, because it turns out they got 37 American citizens in the US who traded on their platform. And they weren't supposed to because they didn't have money transmitter licenses or other licensing that may be required. So yeah, I would expect that you will see more. Is there any exchanges that you guys can name that have properly blocked US consumers from using the platform?

None? I think there's plenty. Actually, I think that Binance did after, you know, I think for, here's the question, I guess. Was KuCoin actively allowing Americans now? I don't know. I've never used the platform because finance actually, after 2020, 2021, made actually aggressive steps to KYC and block Americans. And outside of people using AI or finding ways to get past KYC,

they actually were very effective in not allowing Americans. As far as I know, they pushed Americans to finance US. FTX, I think a lot of people used FTX and were not using FTX International, not sure. OKX, I know always had a separation of church and state between international customers and Americans and I've never heard of an American trading there. So I think there are plenty of them that have done at least their best. You know, in a world of AI, it's even going to be hard not to, you know, get fooled on KYC AML. But I think there are plenty of exchanges that took the, okay, we're going to allow

anyone and pretend that we don't know they're using a VPN. And I think there are some that have taken it very seriously, certainly over the past few years. I can read you a direct quote from the indictment, which I think kind of touches on that question. This is one of the paragraphs cited in the indictment, which talks about what was going on here. Specifically, when a customer with a US IP address visited the homepage of KuCoin's website, a pop up banner was displayed notifying the customer that based on your IP, we currently do not provide services in the United States from using IP addresses and logging onto KuCoin's accounts. Moreover, if a customer with a US IP visited the page at KuCoin's website, other than the primary page, that was basically the workaround. If you just clicked another page, you could get around it. So they did not, according to the government's allegations,

they weren't very vigorous in how they were enforcing it, because yes, they had the pop-up and that gave the presentation to the public that they were blocking. I think this is fair. If they were that lazy about it, I think it's a fair charge. Yeah, I think some of them, I don't know specifically the KuCoin, but they're lazy, not doing the proper job of geofencing. the Q coin, but there's lazy, right? Not doing the proper job of geofencing. And then we know that there's plenty of exchanges that wanted Americans trading on there and would openly. I mean, that was some of the nuance in Binance.

And James pointed this out this morning. I mean, Binance, they have the receipts, right? The WhatsApp conversations, the text messages effectively saying, hey, ignore this. Let the Americans trade. I don't know if they have that in KuCoin. But we know that there's a lot of exchanges out there that passively said, yeah, we'll put up the warning that Carlo's talking about, but we want Americans, we want the volume, right? So I think there's also nuance and levels to how each exchange was approaching Americans behind the scenes. And I think there are some that very aggressively from day one said,

we're not allowing it. And maybe some Americans got through, but I don't think that's the case here at all. William, just jump in. Well, I'm just taking some perspective on all of this. This is kind of ridiculous. This shows the messiness that the SEC has created. On one hand, one judge sided with going base. On the other hand, they didn't side with the SEC.

It's very confusing. I mean, the SEC is trying to swing for the fences. They are trying to knock off the whole industry. They are trying to do something that maybe, in their hope, is going to be like a ripple effect, like a domino effect, to knock everything down. But this is insanity. The more I look at it, I've had a lot of perspective being in the industry for 10 years.

This is insanity. On top of that, we're not talking about it today too much, but they're still trying to do something with Ethereum in terms of labeling them as a security. But even that is nonsense because for reference and to compare, Kik not too long ago had to pay $5 million for having raised $100 million. EOS paid $24 million after raising $4.1 billion. The Ethereum raise was only $18. So how much do you think they're going to fine them if they do?

$1, $2 million based on that reference just on a proportional basis? So they're trying to just create fun. Yeah, I think in the case, yeah, I'm sorry to interrupt. I think in the case of Ethereum, it's more about the being able to claim that Ethereum is a security precedent that would set for other assets and less about

the actual fine, right? But interestingly, the CFTC in this KuCoin claim, for anyone who missed it, said Ethereum is a commodity. So we saw this sort of pissing contest between the SEC and the CFTC that nobody can understand and helps literally no one. Yeah, but the SEC is going to go back to facts and circumstances. The only chance in hell they have is to go back to the original issuance of the token.

Yes, possibly at the issuance of the token. Yes, possibly at the issuance, it was a security perhaps because there was a promise, whatever. But the numbers are very small, 18 million. That's all they raised. So how much will they fine them if they've raised only 18 when they've fined $ dollars for a hundred million dollar ways and 24 for four billion. So the case is not going to be significant. It's just fun. Joe, I thought you were given some thumbs down.

I mean, what are your thoughts on all that, I guess? Yeah, so I didn't want to pivot the discussion. We're going to discuss the SEC versus Coinbase ruling, right? We did at the beginning. You missed it, but I would love for you to circle back on it because we were trying to unpack it. If you have specific thoughts, feel free. Yeah, so my specific thoughts are that this was always the most probable outcome, which I said at the time,

publicly, the wallet claim was probably the strongest arguments on the motion to dismiss. But, you know, this is a long process. It's going to take years, right? And there will be differences of opinion among reasonable judges and jurists that see this and analyze it differently. So don't expect clarity on these issues anytime soon, barring some sort of brokered resolution where all the participants in the crypto space, crypto industry agree to something with the SEC, which I think is highly improbable. But we got the ruling in the context of a motion to dismiss for those familiar, right? That's a very high bar to get a case knocked out and An emotion is missed. I know there were many commentators, legal armchair, legal experts talking about how the SEC was sure to lose this and how it would be thrown out by the judge because of how oral argument goes, which is yet another reminder.

Do not read really anything into oral argument because judges, when they take the time and take care to go through the actual briefing they tend to really you know uh come up with different different results that can surprise you so you know i think the the objective fair way to look at this putting aside any bias is that this is a long battle ahead between coinbase and the sec i think that this language in the order is probably very much uh something that the sec is happy to be reading some of the analysis and some and we can go down some of the nuance here but some of the the quotes that we have in here of this opinion that you just want for example when a purchaser buys a token she is buying into the tokens ecosystem that is exactly what the SEC wants to read in an opinion like

this that tells them that they have a chance with this particular judge to actually finally have some success after a long string of embarrassing defeats. So, you know, I think when I was giving thumbs down, I don't think it's crazy at all that judges in litigation are coming to different conclusions regarding a very new and novel technology and have to figure out how to fit it into very antiquated laws that were not written uh to handle this industry so that's not crazy that's that's entirely predictable and i think moving forward everybody that's following these cases should practice uh myself included a little bit more humility because we don't know how they're all going to shake out um there's a lot of different issues here and there there's I mean, the Coinbase suited you. There's there's it's like it's not just one suit.

It's really like like ten suits involved in it with with each of the tokens. Yeah, yeah. Yes. I mean, yeah, it's become my opinion at this point that the longer it takes, the better, honestly. Yeah, I mean, you get more more chance for us to actually get something from Congress, better from a market perspective because people, whether rightfully or wrongfully, will just behave as if the ripple judgment was law, right?

And they'll just keep going on. The longer we don't have clarity, now that we do have the ripple judgment at least saying, you know, whether that was a security or not, people are just going to keep trading and keep going as if what the SEC has to say is irrelevant. Yeah, I mean, and even that case isn't fully wrapped up, right? So, like, to your larger point, okay, the law is incredibly slow moving. It grinds, you know, in a painful, frustrating way. And also to your point, Congress doesn't show any signs of serious action in the, in the near future. So, so yes, you are largely trapped in a, in a situation where you have the status quo that will be

maintained. You're still going to have a lot of issues lacking clarity. I think, you know, that we have with every little tiny opinion we get, we get a nugget or two of, I guess, you know, some inference we can draw about what the courts are going to think when they address these issues. But, yeah, I mean, you know, the notion that this is all going to be wrapped up within, you know, the next year, two years, three years, I think that is wildly optimistic. Yeah, I know that James agreed. Andrew, you had your mic up. Andrew, give us some. Yeah, I just wanted to reiterate and really agree with what Joe's saying here that the length of time that something like this is going to take to adjudicate is going to be enormous. And oh, by the way, every time that the DOJ or the SEC or any national organization comes after one of Coinbase's competitors and either knocks them out

or knocks them down a peg, that only strengthens Coinbase because they grab more assets and more customers. Not, you know, to say nothing of the fact that they're the custodian of nine of the 12 Bitcoin ETFs, which continue to gather assets, right? So over the course of time, a year, two years, three years, four years, Coinbase is going to have more than enough money to be able to fight this stuff to the bitter end. And then on top of that, they're going to be effectively the last man standing as these, you know, three-letter organizations take out many of their competitors. It's a strange way that, you know, the SEC is is is going about this it's it's it's nothing more than a power grab and a way to save face because they've gotten their you know their

proverbial dick kicked in and a bunch of other things and and even if they even if there's a version of this where they quote unquote lose portions of this case in front of this judge, you know, Grayscale didn't stop operating when they had, you know, you know, parts in their process and in the road where they then had to appeal, right? Coinbase will appeal that the court case will continue. They won't stop doing business. I mean, so the length of this stuff, while it's interesting as a headline, while it's interesting, Coinbase and courts, and that's going to grab a lot of likes and a lot of retweets on Twitter.com. This thing is going to last forever. Coinbase has got a massive, massive war chest.

Their stock price is at or near 52-week highs. So for all intents and purposes, when you're tied at the hip to BlackRock and their current fastest-moving product, you're in a pretty good spot if you're Coinbase. Put it that way. James? Yeah, I'm kind of scrolling through the opinion now. It's quite disappointing. Honestly, this judge really relies heavily on Judge Rakoff in the Terraform Labs case and barely mentions the existence of the Ripple decision. She points out that all the SEC has to do is find one token that is a security

and Coinbase loses. They're an unregistered securities exchange. So this is a pretty disappointing opinion. It's long. I'm scrolling through it. But, you know, this is a pretty big deal. It's not a final judgment that it is an unregistered securities exchange. But this is significant. I mean, let's face it, it's the custodian for the entire ETF set, a Bitcoin ETF. And I don't know if anybody's going to get a little uncomfortable with Coinbase in that role. It is a preliminary ruling, but I'm just saying, reading it, it does not read well. It sounds like this judge is taking the SEC's arguments, kind of hook, line, and sinker, and aligning herself with Judge Rakoff. And by the way, that case is being tried right now, and the SEC is going to win that case against the absent Do Kwon, and there's going to be a

final judgment saying that the Luna, and maybe that is alleged stablecoin, the algorithmic stablecoin is also a security somehow. So that's not good. On the other side, what I like is the institutional owners of Coinbase. You know, you got your BlackRock, your State Street, your Vanguard, your Fidelity, Jane Street, Morgan Stanley, they're not going to sit idly by. So I think that, you know, when the time comes, two years from now, when there are motions for summary judgment, there's going to be very, very strong amicus briefs from all over the place, including Congress, saying that the SEC does not have this authority, et cetera, et cetera. So this is going to be a pitched battle. And the stakes are enormous for the trading of all of these assets other than Bitcoin.

Sounds like even since we started talking at the beginning of the conversation, now you think Coinbase has a harder path to trudge here for proof. With this judge, I think they've got a tough path. But, you know, I continue to like their chances at the Second Circuit. I think the law supports the idea that blind trading between people who don't know each other on an exchange of an asset like this that does not represent any equity or any ownership rights in the assets, profits, or income of the underlying project is not an investment contract under about 90 years of case law. So that's what I believe.

And, you know, we'll find out. Unfortunately, it's just going to take a long time to find out definitively. Jeff and Dave. Yeah, real quick. So, so, so, so that last point there, right? So the, the, the judge kind of slams that right, that point. She, she basically says at least at the motion to dismiss phase, that there is no categorical bar in secondary market transactions where you have that blind bid-ask transaction taking place that easily can qualify as investment contract.

The parts of the opinion that I felt were her trying to send a message clear that that argument is not going to fly in front of this particular judge. The other thing I thought was interesting, she kind of went out of her way, taking statements that she didn't really need to make in this particular order about, you know, what various elements of the Howey prong and how they would apply to some of these assets. For example, one of the things she specifically went and commented on was Solana with respect to the expectations of profits prong. And in that particular analysis, she, I'll just quote from it here, she says that she cites public statements by Solana Labs that Solana transaction fees are paid in sole and burnt or permanently destroyed as an inflationary mechanism to reduce the total supply and thereby maintain a healthy sole price, that that was sufficient, at least at the pleading stage, again, to make a claim that a reasonable market participant

buying Solana would have a reasonable expectation of profit in purchasing the token. So, I mean, that type of language, okay, you have to be a little nervous, okay, when you hear that type of stuff, at least with respect to this particular judge. Thanks. when you hear that type of stuff, at least with respect to this particular judge. Yeah, I think there's one aspect of this that's fascinating, and that's political. You know, we know this won't get resolved this year. These cases take a long time. Certainly, it'll go to appeal, etc. So basically, what this does is this puts every one of Coinbase's holders, every one of their wallets now on alert that this election may very well come down to do we want this SEC in power, yes or no. So people who say that it had the motion to been dismissed, it would have severely

decreased the potential impact that could have been made in what's going to go on in elections, particularly the ones that are like Massachusetts, potentially with John Deaton against Elizabeth Warren, certainly with Ohio Sherrod Brown, and who knows, even at the national level. Don't underestimate how people vote their wallets. And if Coinbase is, and we know that they're going to, and we know that the PACs that have been formed by the crypto community are going to, this allows that issue, this gives it significant oxygen. And while it's a high risk thing, and it's not a great thing, it is something to keep in mind. Because honestly, what really matters for the US,

whether the US will be left off the crypto landscape, is whether or not we can get any regulatory clarity whatsoever. Because, frankly, this essentially, you know, the whole notion that these things are securities you didn't come in and register when there is no way to come in and register is fascinating. Now, obviously, you know, the whole Promethean thing, I don't want to go down that rabbit hole right now, but it does make that issue. And I think it's important for people to understand that because, you know, Coinbase is not an does not have an insubstantial client list among voters. Dave, it was you that said on Monday that you sat on multiple panels with Aaron Kaplan from Promethean last week, right? Correct. Yeah. I week, right? Correct. Yeah. I mean, because, yeah, go ahead.

Well, I mean, basically what they've done is they've created a special purpose vehicle. They think they have a multi-year regulatory moat, which, by the way, is disgusting for anyone, you know, as a citizen. For them, you know, kudos, whatever. I mean, you figured out a way to be a securities ATS that can trade crypto assets very limited compared to the way crypto assets trade. It's not 24-7. It's not on demand. I mean, it is what it is. But, you know, at the end of the day, that is what the SEC is going to say. They say, well, you can come in and register. Look, you can do this. Sure, Coinbase couldn't do it without eviscerating their business model. You couldn't trade multi-currency. You can't trade. There's so many different things you can't do. But they'll say, well, but that's

the law. And if you want the law, change the law, which, of course, I think all the lawyers are going to get heartburn on that notion. But really, that's where it's going to come down to. All right. Go ahead. Can I fix it? Okay. Can I, can I, can I move to a separate topic before you wrap? Yeah, please. Dave, I don't know why I've become,

I used to be my go-to man for market analysis. He hasn't been here for a while. So Dave, we've covered, you were there when we had the Bitcoin pump and then dump and then all this craziness that we experienced when we broke the all-time highs. And since then, I've always wanted to chat to you about markets.

I don't know why, when you pet peeve. What are your thoughts on the markets now, Dave? Let me give us a quick overview. I know that, Scott, you probably covered it at the beginning of the show, but I know Dave wasn't there. So, Dave, what are your thoughts on the markets now and what do you expect to see for the rest of the year?

And also, I want to go back to the same question I always ask, and I know I've digressed, but Scott gave me permission, is could this be a shorter bull market considering how fast it's moving? The longer we stay in a trading range like we're in right now, the longer the bull market will be and the higher we will go. That's the simple answer. The simple answer is there's buying interest and buying interest from the people who are the buying interest. And by the way, it's just the start. I mean, you know, I don't see any of my friends who are on the ETF side who understand it. I see listeners that I know, like Billy Barhart, obviously knows what I'm saying is true.

The fact is that the buyers are buying because they think that Bitcoin will 10x or more based upon what's going on in macro and that the network effect of Bitcoin is such that it is the leading candidate to become a digital global store of value, full stop. And so when you have people who are buying it, they don't really give a crap about moving between 65 and 75. They don't care. The people who do, the active traders are very twitchy. And so we've seen multiple runs up to into the 70s. And every time it falls back down, we seem to be pinned somewhere around the 68 to 72 level. And that is unbelievably constructive long term for Bitcoin. And when you look at Ether, I mean, yeah, there's disappointment because people kind of realize that all these rulings make it that there won't be an Ether ETF. Or if there is, it won't include staking.

Who knows? But the fact is Ether is going along with Bitcoin. Bitcoin is the lead sled dog here. And that is how the market is trading. I mean, Solana got thumped today because of this ruling. I think there are a lot of people who are going to wait till the dust settle and say, we got a buying opportunity now because of how, you know, how Solana, you know, more active addresses than Ether yesterday. And so it goes. And so you could go up and down the crypto ecosystem, Mario. But the truth is we're in a trading range.

And we've seen this before. This happens a lot. And the longer it goes, we get to six, eight, ten weeks of that. It's like a coiling spring. If we even see a slide back a little bit, you know, coming into the summer, I mean, then you're more like the original thesis of a halving cycle. So, you know, I don't have a lot of clarity of what's going to happen over the next two to three months. I think a year from now, we're higher. I don't see any chance. I mean, literally zero chance that either party is going

to do anything to stop $2 trillion deficits. And that's going to be fuel for Bitcoin. So that's my kind of thesis. Now, as we get closer to the election, that's going to have an impact, but I don't want to talk about that now. And just looking at Solana, I'm just fascinated that it's already 20% of the market cap of Ethereum. I know it's been at that level for a while now, but that's just crazy to imagine where we're at now considering where we were just a year ago.

So maybe, Dave, maybe a bit more on your thoughts on Solana beyond the price action today, which is nothing, 3% drop because of the ruling, which is kind of insignificant. Well, my thought has always been kind of Bitcoin maxi light, which is to say that as a store of value, Bitcoin is singular and unique, that everything else in the world of crypto is going to be based upon the use cases that it gets used for and the value that gets created by the network. Right. So once you accept that, then the question is what technology is better? I don't think a better technology than Bitcoin means a damn thing because the network effect, lots of reasons it's fully distributed. I mean, you have met multiple guests who are really good at explaining that. But technology does matter

in every other use case. And to be blunt, Solana has been gaining on Ethereum. And even in any asset class, in the stock market or anything else, when you see Solana and compared to Ethereum, I mean, I'm old, so I'm going to tell you the first thing that popped into my head. Cabletron Systems as Ethereum and Cisco as Solana. Because back in the early 90s, people probably don't know this, Cabletron Systems totally dominated the routing and business in hardware technologies and in connectivity. But Cisco was better, faster, cheaper. And if you look at what happened to the asset prices, it was rather insane. Now, obviously, Cisco did 1,000, basically did 100x.

Now, I'm not saying Solana is going to do that. I'm not saying any of that. But I am saying it is entirely possible for Solana to pass Ethereum if, in fact, its network effects keep growing and it's much better faster. Now, Ethereum just did emerge. Very important. And that's why the price hasn't cratered with all this going on. That will allow layer twos to pick up the slack. And so who knows? I'm not going to prognosticate that. But to say that it's crazy that it's 20% of Ethereum, given that the market's a discount the future, it's absolutely not crazy. Is it right or that? I'm not saying. And so that's kind of my thought process. And let me just, I want to read out one funny comment and then Scott, I'm just going to get you to take over the mic. I'm just going to take an urgent call,

but I just want to read out one funny comment. People in the audience, please do listen before you comment. It would help so um monster flush caused by ignorant fud joe and mario norfolk etc all reporting on all news as if it's new as if it's news causing panic block these accounts for your mental health this is not a joke the sec have no jurisdiction over crypto they are simply barking like dogs do not fall for it they are losing crypto jurisdiction to the cftc in our desperation and at the end he puts blockchain tokens are never securities all right cool so guys number one we're all pretty bullish in the markets i'm not sure if you've heard the space at all um and number two is just you know probably good to listen to lawyers and

and then i like one of the comments like hey i probably listen what is it i'm pretty sure i'm going to listen to the lawyer over a dj when comes to legal opinions. So it's just, it's just gonna, it gives you an idea of the credibility of the company. But I'm reading it just kind of so it goes completely, like somebody would just, please listen to this space. It's not even in the space anymore. Listen to some separate space that says Moon Pump in the title. But do listen to the space, you know, we go through a lot of effort to get some of the smartest minds and smartest lawyers on here that they can think what they're saying is because everyone's getting that greed, bullish mode, um, you know, please stay pragmatic as much as you can. Uh, but Dave, I agree with you.

And I liked the point, the first point that you make before we talked about Solana about us being in it, if we remain in this, within this current range, um, uh, the longer we remain in this range, the longer the bull market will be and the higher we'll go. I think this is probably one of the simplest and best analysis I've heard so far about the markets. But, yes, Scott, I just wanted to ask David about the markets.

I'll let you kind of finish it off. Yeah, we're going to wrap. I'll let William speak since it's just the four of us. Go ahead, William, and then we'll move on. Just two quick things. First of all, yeah, I'm bullish us. Go ahead, William. Just two quick things. First of all, I'm bullish for the short term, but I'm worried about what happens in June,

July, after June. Typically, the summers are a little bit off in terms of at least tapering things down. Number two, don't be fooled by the fact that Solana is 20% of Ethereum just by looking at the number of

transactions. Solana is not within striking distance of Ethereum. I'm a big fan of both chains. And you have to look at the quality of the transactions. Ethereum has the network effects right now. Solana has a lot of good things going for it. But it's another topic. But they are not within striking distance of catching them up. Makes sense. Mario, since you're out of here and we've got the lawyers have left, I think we'll go ahead and wrap and come back tomorrow, especially once everybody's actually read the entire opinion, since it was breaking news today. And we'll be able to, I think, capture it and cover it a little bit better tomorrow. So we will be back everyone 10, 15 AM Eastern standard time tomorrow.

I highly encourage you guys all to check the pin tweet above of Mario at the dentist before you leave. It's probably the best picture it's ever been taken of him. So I highly recommend that until tomorrow. See you guys.