Matt Levine I think put it best: if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse. And the situation with cryptocurrencies seems to be broadly similar: there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them.
And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.
> And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.
There is nothing per se nefarious about co-mingling customer funds, provided that you are otherwise compliant with the law.
Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege.
Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.
Whether Kraken is breaking the law is something that will likely be decided by a court. The SEC asserts that Kraken has broken the law, but it is not up to the SEC to decide—it is up to the courts.
It is not illegal to operate a spot commodities exchange without approval from the SEC, unless those commodities are also the kinds of securities the trading of which require SEC approval. It is also not illegal to operate as an unlicensed broker-dealer of non-security commodities, or as an unlicensed custodian of non-security commodities. The SEC only has jurisdiction over securities.
It is not in the slightest bit clear yet that the crypto tokens for sale on Kraken are in fact securities of any kind. The SEC asserts that they are, but at this point it is just an assertion. The SEC will have to win in court.
> For what its worth, banks don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves.
And that is why banks are regulated, must register, follow certain rules etc.
> Kraken has been operating under the money transmitter licensing scheme for a decade
Yeah, but that doesn't give them a license to operate a securities exchange, or a bank. How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?
> How many other money transmitters (that are not registered securities exchanges or banks) have 'tokens for sale' like Kraken?
Quite a few. In fact, all of the major centralized exchanges operating in the US are authorized to do so because they are licensed money transmitters (with the exception of some that might be operating under the NYS "Trust" licensing scheme), and none of them are broker-dealers regulated by the SEC, because until very recently the SEC has taken the position that broker-dealers are not allowed to sell crypto assets.
For years the money transmitter licensing scheme was understood to be the correct (and sufficient) licensing scheme under which a crypto exchange could legally operate in the United States. It is only since the beginning of the Biden administration that the SEC has taken the position that crypto exchanges have an obligation to register with the SEC. The Ripple lawsuit was filed at the tail end of the Trump administration (after the election), but it was not targeted at exchanges. It's also worth noting that the judge in the Ripple case found that exchange-traded XRP tokens are not securities. In other words, the SEC's assertion of authority over exchange-traded Ripple tokens was explicitly denied.
There is good reason to believe that SEC will be unsuccessful in asserting even broader authority over all tokens that are available on Kraken.
In order to justify such a specific claim against Kraken to be heard, isn't it necessary to first qualify that such assets are themselves securities?
Am I crazy to call this vexatious harassment?
If P then Q:
If {x,y,z} are securities,
[ then {Exchanges a, B, and C} have provided securities exchange services of assets {x,y,z} without the requisite license are thus owe a civil fine. ]
But how is a suit against Exchange A the appropriate forum to hear whether assets {x, y, or z} are securities?
Given that - presumably - assets {x,y,z} are not yet ruled to be securities, there was not sufficient cause or standing to make a claim of bad faith or intent to provide exchange services for unregistered securities.
Exchange A operated in good faith, pursued the requisite state and federal procedures for assessing whether or not such assets were securities, and specifically does not intend to sell securities.
Should there be an is_this_a_security() function of a US government regulatory agency, defendants would be required to request such review before listing said specific types of assets.
Kraken has been operating under the money transmitter licensing scheme for a decade, and like banks, money transmitters don't have any legal requirement to segregate customer funds—although they do have the responsibility to maintain sufficient cash balances or liquid investments to cover all of what they owe to customers.
I think you meant to say here and unlike banks, because banks absolutely do not need to have sufficient funds to cover all customer's savings.
Unless.. are things different in the US? It's been a decade since I've read the Bank Act (Canadian), and when I did, only 5% of customer's account holdings were required to be held in tangible assets (gold, cash, etc), and inspected yearly by the Minister of Finance.
And I believe even that requirement has been dropped.
Yes, banks typically do not have sufficient funds to cover all customer's savings, and when customers realize their bank played with their money but lost, they freak out and do a so called "bank run". At least banks are regulated, so that's fine, right.
By the way, if you put your cash money in a bank, your money is insured up to 250,000USD in the US and up to 100,000EUR in the EU. Anything above is your own risk. But it's perfectly fine because at least, it's regulated.
You seem to be conflating “segregating customer funds” and “having enough assets to cover customer obligations.”
Both banks and money transmitters (including Kraken) need to maintain sufficient assets to cover customer obligations. The difference is that for money transmitters those assets have to be liquid, while for banks they do not have to be liquid (which is why SVB got into trouble).
On the other hand, neither banks nor money transmitters need to designate specific assets as being held on behalf of customers, specifically, separate and apart from their own capital or operating accounts. Designating specific accounts or balances as being held on behalf of customers is typically what is meant by “segregating customer funds”.
> Banks, for instance, don't just co-mingle customer funds, they invest those funds on their own behalf and reap the profits for themselves. Sometimes a bank will share a portion of its profit with its customers, in the form of intest; more often, the bank pays little or no interest, and actually charges the customer fees. A bank will risk its customers' money, and its customers will pay for that privilege.
Banking has not worked like this in quite a few years.
> It is not illegal to operate a spot commodities exchange without approval from the SEC
In the case of spot markets CFTC can only intervene if there is a fraud or manipulation. There is also “actual delivery rule”, I.e. if crypto “exchange” didn’t settled spot trade on underlying Blockchain or a ledger in 28 days - they effectively created a derivative, and fall under the CFTC mandate.
At least in the case of Bernie Madoff, the SEC can say "no, it is illegal to run a ponzi scheme and in this case it should say what law the exchange broke to make it valid
But the only time that a judge has ruled on whether or not a crypto token is a security is in the XRP case, and it ruled that it was not (at least when it was sold on exchanges). This is not comparable to a ponzi scheme where the legality is not in question at all.
And let's not ignore the fact that these exchanges have done this right out in the open for around 10 years now. Coinbase even had their IPO approved by the SEC. So it's very clear that the SEC treated this as legal for a decade before suddenly changing their position. This seems incredibly dishonest to me.
The SEC has been consistently saying that most crytoassets were securities. The only acknowledged exception, for which it had contradictory statements, is if a protocol is "sufficiently decentralized" such as Bitcoin and Ethereum.[1]
On the IPO, the registration is independant from such pursuits as the SEC raised during their approval. [2]
That said, there would have been better course of action to protect consumers, such as establishing an appropriate regulatory framework, but I may be too European.
The SEC saying it is very different from a court saying it. The executive branch can say anything it wants to, but it's the judicial branch's job to interpret the law.
Important nit: they ruled Ethereum was a security, as the initial issuance was at least partially a pre-sale. They just decided in that one case to explicitly not go after Ethereum. The only non-security exception they've named was bitcoin.
Which seems like kind of an arbitrary distinction anyway.
Suppose you create a new coin under similar circumstances as Bitcoin. No pre-mine. But it's a new coin and nobody cares about it, so nobody is mining it, so you can go mine it yourself and get all the block rewards for a while. Then once you have a lot of it you go about promoting the coin and developing the technology which causes it to be worth something.
In theory the difference is that anybody else could have mined the coin from the first day too, but at that point nobody else had any reason to think it would ever be worth anything.
> "Coinbase even had their IPO approved by the SEC."
The SEC reviews the disclosures being made by the company that's filing for public listing, not the legality of their business model.
You can go look at the Coinbase IPO filing [1]. Under the heading "Summary of risk factors", it reads:
"A particular crypto asset’s status as a 'security' in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected."
Nowhere does it say "the SEC has approved our operations, it's all good!" On the contrary, Coinbase is saying that the assets they offer on their exchange may be viewed as securities and it may eventually result in fines or penalties. That's disclosure.
They are only securities in the eyes of SEC. There is no legally binding court decision that cryptocurrencies would be securities, and, for example, are not commodities.
Yes, and the SEC sued them in COURT so they can make their case that they are securities and Kraken can make the case they aren’t. Isn’t this what Kraken wanted?
It would be more efficient use of tax payers money to work with Kraken and Coinbase directly and set up rules for what tokens should be securities or not.
Like the EU, Hong Kong, Japan and other countries are doing.
The SEC doesn't actually have the power to do that - the US law does. The SEC can only guide on what it thinks the law says. A court is the way to determine what the law says.
[Obviously the SEC can recommend changes to the law, and if it loses this case it might well do]
> if Bernie Madoff were to go to the SEC and ask them "I don't know how to run a Ponzi scheme legally, can you please update the guidelines to make it easier", of course the SEC is going to refuse.
The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other.
So Congress punts and passes unclear laws. Then the SEC refuses to comment. Then the courts send you away if you try to get them to decide by asserting that you don't have standing because no one has tried to enforce the law against you yet. But then you have no way to know if they'll try to enforce the law against you in the future -- and the only way to find out is to do the thing that may or may not be illegal and see if you get charged with a crime.
Which is bullshit. Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.
And if you're Bernie Madoff, all they have to do is tell you that no, you're not allowed to do that, and here's why. But then if you think you are allowed to do that, you would have standing to challenge that official determination in court.
> “Somebody should have to officially tell you if you're allowed to do something or not, ahead of time.”
And how would this process actually work in practice?
Would making such a request be free? Probably not, since they would consume a lot of lawyer time at the relevant agencies. If it were free, people could file thousands of slightly different requests for all imaginable variations of their dubious business plan, hoping that something would slip by.
If filing such a request costs money, then maybe the process would be more like applying for a patent. There would be some kind of guarantee about processing time, and some kind of legal promise that the response you received actually offers some level of protection when you do proceed with the thing you applied to do. This is clearly a big deal. There would maybe need to be a new profession of counterfactual judges who decide on the legality of things that haven’t happened.
How much should such a process cost? Seems like $10k would only get you started. Who decides the fee structure? What if the case is very complicated and involves many different aspects of law?
Overall, seems like a massive change from how legal systems work today.
I think you're overcomplicating this. In reality, people ask their lawyers whether they are allowed to do something, and those lawyers research the law in conjunction with any interpretive guidance published by the regulators, and sometimes they do consult with regulators directly on behalf of their clients. Where the law is unclear and the regulator refuse to publish guidance or discuss their approach with market participants, lawyers are unable to give a strong opinion. If the SEC were to publish comprehensive guidance on this (clearly a question that a lot of people are asking), it would probably remove any need for people to go asking them, and would also help people to comply with the law and make any enforcement actions easier as a less risky.
The idea of people DDOSing the regulator with thousands of slight variations of a proposal is unrealistic. These are people, not computers - if someone was blatantly abusing the system like that, the SEC would just tell them to knock it off.
And what if Coinbase's lawyers did all that, the SEC told them in those informal consultations that these altcoins that Coinbase wanted to list sure look a lot like securities, but Coinbase executives decided they'd rather ask forgiveness later because there was so much money to be made pushing all those VC-funded tokens onto retail investors while the good times lasted.
The fundamental problem here is that nobody in crypto is acting in good faith. They're just looking for loopholes to exploit. Publishing more guidance is pointless against such actors. Remember, this is an industry where Sam Bankman-Fried stood out as the honest guy who wants to play along with regulators.
> Probably not, since they would consume a lot of lawyer time at the relevant agencies. If it were free, people could file thousands of slightly different requests for all imaginable variations of their dubious business plan, hoping that something would slip by.
If they tell you that you can't do it, that should give you standing to challenge their determination in court. And, of course, if they tell you that you can do it, they can't later prosecute you for the thing they officially approved. Asking them a hundred times doesn't matter; if they say yes then you're happy and if they say no you can sue them and it becomes an issue for the courts in the same way as if they charged you for it, except that you don't go to jail if the courts rule against you because you haven't done it yet.
> There would maybe need to be a new profession of counterfactual judges who decide on the legality of things that haven’t happened.
We could call them lawyers and have them work for the agency in charge of prosecuting that part of the law, so when they publish their opinion it expresses the official position of the prosecutor's office and precludes them from reinterpreting the existing law in a different way against your behavior ex post facto.
> How much should such a process cost?
They're lawyers. They get paid by the hour. The first thing they do is evaluate how many hours it will take to research your question, the estimate is free, and then you decide if you want to pay them. In most cases this will not take much; these are professionals answering questions in the specific area of their expertise. How much time does it take to answer a simple yes or no question?
The answers all get published (no secret interpretations of the law) and can be used by anyone, so large entities will often pay to have an ambiguous law clarified and then everybody knows the answer.
The only thing you're doing here is requiring them to tell you how they intend to interpret the law. That doesn't seem like too much to ask.
> The actual problem is that no part of the government wants to be the one to tell you if something is legal, because whoever actually makes the decision takes the blame for the consequences one way or the other.
One really interesting thing I found about moving out of the US is that this is not always the case around the world. At a startup in the Netherlands we were discussing whether or not we could use a particular tax deduction in a particular way. The wording was really unclear. A colleague called the tax authority, and the person on the line agreed that the wording was not clear. They put us on hold, discussed, and came back that they thought we could, indeed, do what we wanted to do. Upon asking they sent us a letter clarifying.
I could not imagine this ever happening when dealing with the IRS.
> I could not imagine this ever happening when dealing with the IRS.
Have you tried? I haven’t tried it with the IRS, but I have tried asking my states permitting and planning department about the legality of various rental schemes for a property (that I didn’t own) and they were happy to look up the permits and tell me that indeed what I was asking about was not legal for that property. And further they let me know that tons of people do it anyway and that they don’t really check, but it’s a risk.
> there's actually a pretty clear answer as to what would need to be done to be fully above-the-board and legal, it's just not what the cryptocurrency people want, so they want the SEC to make it easier for them.
Fighting the SEC isn't easy or cheap either, raising questions about the reluctance to pursue the pathway to compliance. If there truly exists a legal route for a company to become "above-the-board and legal", why hasn't this path been taken? My guess is that that route is just for show, it doesn't exist in practice.
That's kind of my point. The SEC does not have a mandate to evaluate the merits of transactions or determine whether a securities investment is "good" or "bad". However, it's possible that they are effectively doing so by making the securities registration process for crypto tokens so stringent, it becomes impossible to fulfill. If it was actually possible to register crypto token securities with the SEC, why doesn't anyone do so instead of battling the SEC in court?
No, it has a mandate to determine whether an investment is legal or not.
Have you considered it may be impossible to fulfill because by their very nature these things cannot pass the tests to be legal?
> why doesn't anyone do so instead of battling the SEC in court?
Because none of them meet the bar of legality. Because they do not meet the most basic requirements of consumer protection, transparency, fair market trading. It's not the SEC making requirements for crypto so stringent, it's crypto's complete failure to fulfill the necessary criteria for a registered security.
As others have said - the SEC aren't going to make it easy for me to register my ponzi scheme either, should I blame them when I get shut down for running it anyway? Cry about how they're making it difficult to figure out how to follow their guidelines? Whine that ponzi schemes are not being allowed a simple way to compliance? Or should I maybe re-evaluate what I'm trying to do?
We're in agreement here. The SEC is indirectly making crypto tokens illegal by making it impossible to comply with securities registration requirements. When the SEC says "you have to register", what they really mean is "we think crypto tokens should be illegal".
> register my ponzi scheme either, should I blame them when I get shut down for running it anyway
In my opinion, if the scheme was transparent and no deception was involved, I do believe consenting adults should be allowed to transact. I am not big on the idea of protecting people from themselves, when no deception is involved.
Regardless, ponzi schemes are explicitly illegal. If you think that all crypto tokens should be illegal as well, a law should be passed. Making them implicitly illegal through bureaucracy and at the whims of bureaucrats is not an ideal state of things in a democratic society.
There are laws, the SEC can’t make things illegal and to enforce the laws it has to take things to court.
The laws don’t explicitly say “cryptocurrency is illegal”, instead they are effectively duck-typed, which is good because it stops “oh but my thing is different, this time we’re using bottle-caps”.
Perhaps the laws on penny stock registration don't translate well to crypto tokens? How do you explain that basically no one registers? Surely, "just because" is not it.
The one technical innovation is that in the olden days, a penny stock required paper and phones. You can now press a button and launch a new DeFi token, about 100% of which are unregistered penny stock scams.
They don't register because they think they can get away without it, it's pretty simple.
Pointing at all the other scofflaws doesn't make you not a scofflaw.
And you genuinely believe that crypto token projects could just take the time to fill out the S-1 form, but don't because it's too time consuming? I find that hard to believe. I'm tempted to believe that they do, but don't get approved, or that they can't, because some requirements are impossible to fulfill.
A case for sympathy for companies like Kraken is they are the ones that do do the proper thing and are US based and regulated. If the SEC goes after them and shuts them down then the punters will move to non US companies like the Bahamas based FTX insead with the problems that we have seen there.
Didn't FTX also have "notable investors", which despite this, were so careless with their money that they didn't even think sending an accountant to check on the (nonexistent) FTX books ?
I would be shocked to learn that claiming "casino" is enough to get the SEC off of your back and I would expect to see a lot more casino licenses if it did.
The SEC has no place in a free market. If people trust a company which co-mingles funds, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the SEC... How good is that?!
If my startup fails because I hired the wrong people, I take the full blame. Why should it be different if I invested in the wrong company or trusted the wrong company with my money?
As someone who is trustworthy and providing a service, I am harmed by the SEC creating a false veneer or respectability for investors to invest in my biggest competitors. I'd rather investors be forced to do due diligence.
The FDA has no place in a free market. If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?!
--
I'd much rather pool our money into a commission that does this for the population than spend every waking moment personally auditing companies for breaking the rules. Oh, and I have to set them too. No thanks.
I am also glad the FDA protects us from chemicals and ingredients that would cause processed food to be unhealthy and harmful, if they didn’t do that we would probably end up with an overweight population and tons of food related health problems.
No, it's making the correct point. The government can't get you out of having to do the evaluation yourself because the government is broken, which is unlikely to change. In fact this is a major problem with the existence of the regulations -- they protect incumbents. Patented drugs get FDA approval, public domain drugs that could be alternatives to them don't because there is no one to pay for the approval process.
If heroin is legal, nobody forces you to buy it. If generic insulin is illegal, you're in trouble.
How do "we" fix it? You can vote for two Senators and one Congressperson and even assuming that your vote in particular was the deciding vote and one of your choices on the ballot was someone actually inclined to do something, you now have a legislature in which the bad laws pass with a margin of 33 Senators and 174 members of Congress instead of 35 and 175.
The only way to fix it would be to fix the structural incentives in place, i.e. institute more checks and balances to prevent regulatory capture. But this is the chicken and egg problem -- to change the rules you have to be in power, but if you're already in power then you like the existing rules because they're the things that put you in power.
Or in times of populism, you use your power to remove the rules that were meant to constrain opportunities for corruption because they're inconvenient to your agenda, and then those constraints stay gone because they're inconvenient to the next administration's agenda too. So how do you get them back, or introduce new ones?
> And nothing can beat a good to great government.
The best form of government is a benevolent dictator. The worst form of government is a malevolent dictator. But the only difference is who is in charge, which changes over time.
> If you don't want regulations, sure, Somalia is that way
Is there some way we can get past the thing where people are unable to distinguish between the government prohibiting acts of violence and the government prohibiting informed consensual interactions between adults and imposing competition-destroying bureaucratic rules at the behest of incumbent megacorps?
Laws are about statistics. Statistically you can't trust even adults with stuff like gambling or smoking. Statistically they will make bad decisions that will wreck the lives of a big percentage of adults. Not a majority, but maybe 20%.
Nobody is using statistics to pass these laws. There is no logical reason for cannabis to be illegal when alcohol isn't or for most stimulants to require a prescription when nicotine is available over the counter. They put caffeine in soft drinks and candy for crying out loud. The Federal Government of the United States directly subsidizes the production of high-fructose corn syrup.
There are two ways to deal with the fact that some people make poor decisions. The first is to teach people to make better decisions. This is obviously the correct answer, because it needs to be done anyway, because the second is insane. The second is to make all of their decisions for them.
And there is no "them" -- they're us. The people making the laws are just as human as anyone else. All you're doing is punting the decision to a different fallible entity which has less information because they're choosing in the abstract without the benefit of context. And causing errors to be universal rather than individual, resulting in systemic risk and lethal monoculture.
It's far better to have 20% of people make the wrong choice than 100%.
> If people trust a company which poisons their food, they should be punished for misplacing their trust. Both the scammer and the scammed deserve a share of the punishment. Life naturally punishes the scammed already and teaches them a lesson at the same time... Without the help of the FDA... How good is that?!
If your food is poison, you don't have the opportunity to learn from your mistake and stop doing business with that company, because you die. If you don't eat any food, you still die.
But Coca Cola is fully FDA-approved -- even though it's bad for you. Because it doesn't immediately kill you, which gives you the opportunity to make your own choices and learn from your mistakes.
Which is how investments work. Some of them are better than others. The role of the government isn't to make the decision for you, it's to punish the people who deceive you. And since bad investments don't cause anaphylaxis or liver damage, the case for heavy-handed rules or pre-registration is missing.
If someone is running a ponzi or committing fraud, you arrest them, the same as you do if they're selling counterfeit electronics. If someone is just buying and selling cryptocurrency on the internet, which is the thing you purposely intended to exchange for your money, and they do nothing more than faithfully convey to you the thing you knowingly requested, what does the government need to regulate about it? Nothing nefarious is occurring.
This sounds good in theory, but in a world where you can open companies by the dozen, international jurisdictions, no compulsory registration of company facilities, no private right of audit it's impossible to keep track of who is doing what. Additionally, tainting the news by flooding review sites and what not doesn't help either.
> Bayer marketed diacetylmorphine as an over-the-counter drug under the trademark name Heroin.[91] It was developed chiefly as a morphine substitute for cough suppressants
It's perfectly legal to buy drain cleaner at any department store and if you drink it you are likely to die. But you are under no obligation to drink it. Or do heroin. So that has an obvious solution.
Whereas if you have cancer and cannabis can prevent your nausea but the federal government maintains a prohibition on it for three generations, what are your options?
For something more recent, I'd recommend any of the books or documentaries on oxycontin sparking a more recent opium epidemic. As badly as the FDA failed, we'd be worse off if we didn't have one. There's good reasons people want more effective regulation instead of none.
Part of the ban on cannabis, psychedelics, etc has been to ban research on their effects as well. I think there's some clear lines that can be drawn on good laws vs bad laws here.
> For something more recent, I'd recommend any of the books or documentaries on oxycontin sparking a more recent opium epidemic. As badly as the FDA failed, we'd be worse off if we didn't have one.
I feel like the problem we have is that we've utterly failed at informed consent.
You go to the doctor for a minor surgery and come home with a prescription for opioids. You take them even if you're not in any real discomfort, because your doctor prescribed them. Or maybe you could have done with half as much, but then there's a chance it wouldn't have been enough, and having the patient rely on their own judgment is discouraged. So now you're addicted to opioids.
Then we get a backlash where the people who are actually in severe pain can't get their medication because doctors used to over-prescribe it.
This entire system is asinine. The problem is not that people have access to opioids. Anybody can get them by going to a doctor and lying about their symptoms, therefore anybody should be able to just get them from the pharmacy. Stop rewarding mendacity. But the process of getting them from the pharmacy should require being informed of the risks so you can be responsible -- not being handed a bottle with a bunch of papers you're not going to read and then taking them whether you really need them or not.
We need to stop banning everything and start better informing people so they can make reasonable choices.
We disagree on how human nature works and the ability for normal people to become educated on every topic that can harm them. People trust their doctor and don't have the medical training to know if something is riskier than they're told. Addiction is dangerous precisely because it overrides someone's ability to change their mind later.
Purdue and our system of insurance created monetary incentives for doctors to overprescribe and misled them about the side effects. Normal people died even when they followed instructions because of the cycle of withdrawal symptoms.
History has repeated waves of addictive drugs because there's alway someone with an incentive to sell them. This is not a place where market outcomes work.
If the FDA didn't exist, how many more harmful drugs would there be? Would those harmful drugs that had approval retracted still be out there being prescribed?
Just because the FDA is not perfect does not mean that it's a net negative.
Easy to have the best of both worlds, though. FDA can continue to collect and publish data on safety and efficacy of medications which is incredibly useful and absolutely worth the tax money. But if you want to take something not approved, then they should have no right to tell you that you can't take the risk.
And if you get seriously sick from that we let you die by the wayside?
The first way to take advantage there is to outsource the cost of dangerous experiments to (sometimes) desperate people and then to society at large for picking up the pieces.
That's the hypothetical half of the equation. The tangible, measurable half is how many people the FDA has killed by denying access to life-saving treatments. A number of studies[0] have been conducted on this topic.
Right, of course. Any preventative treatment is difficult to justify, as it's a risk waylaid, whereas treating symptoms has a visible direct impact on problems faced today; nevermind that it costs 500x as much and has worse outcomes.
I agree, FDA has no place in a free market. In a free market, companies would be able to sell poison to their customers... BUT, if something happened to the customers, they (or their estate) would be able to seek damages through the justice system. The problem we have with regulations is that they deflect responsibility... Any company can say "Look, we adhered to all the regulations" and use that as the basis to avoid taking responsibility if it turns out that the regulations were not adequate. Then they can just play the victim and demand more regulations. If you remove the regulator and just let the company deal directly with the consumer and don't let the government interfere with the free market to promote specific producers over others, then it would work itself out. The company would know that they have no regulatory shield to hide behind and they'll be forced to consider long-term implications of their decisions or face severe consequences and backlash from consumers.
Private regulation can exist inside of a free market. Consumers and producers of food or financial products can voluntarily participate with private ratings agencies. These standards can be higher or lower, based upon market preferences. The existence of a state backed monopoly is widely recognized as prohibitive to competition. State monopolies create issues around corruption, gatekeeping and more. Too many to expand upon here.
If you don't like free markets, that's fine. There's no need to misconstrue the options. The anti-market sentiment is somewhat surprising to see here.
There are no free markets in human societies. You can pick your trade-offs, that's it. Privatly regulated markets can fail, goverment regulated markets can fail.
No, because this is always (ultimately) by consent of the societies it is happening in and within those power structures. It always sits on top of a lot of stuff, never in a vacuum.
There's an important distinction between observing the status quo and holding or aspiring towards ideals. If we only observed what is and ignored principles and ideals, we would never be able to improve the human condition.
Even so, I doubt we'll be able to see eye to eye given your starting premises about collectivism. I'd venture that the individual does own himself and that the liberal tradition starts from this point.
A consequentialist might venture that some of the darkest events in history flow from the collectivist ideologies. The opposing deontological view would be that the individual does own himself and private property does exist. We would struggle to define fraud and theft without these premises. Indeed, objecting to fraud and theft becomes problematic when you are simultaneously arguing that private property, individuals and free exchange are impossible.
I don't think we are that far apart. I don't disagree that there are certain ideals to aspire to.
However, practically, we find out time and time again that these ideals are not enough to sustain themselves and that in the defense of those ideals there are trade offs to be made that compromise them to some extent. Realising some idealised version would require different humans and I don't subscribe to ideas of realities that need those (in the same way that that speaks against idealist versions of collectivism).
The real debate is then what trade offs to make and there we might not agree but that is totally fine and part of the process.
It is similar to the argument against utopia. It is true that we probably will not achieve the anarchocapitalist ideal within our lifetime. Any steps towards a freer and more prosperous society are still laudable. Those incremental steps would most likely involve pragmatic compromises.
Asserting that free-markets don't exist, because they have never lived up to the utopian ideal is a stretch. More so in the context of the discussion. There are already private financial ratings agencies, auditors and more. If people don't like cryptocurrencies or Kraken, they can simply choose not to participate.
The human condition will always contain challenges. This is what gives us the opportunity to improve. When we speak of laissez-faire, the claim is not that it will bring about a utopia or that living within a perfect ideal is a possibility for imperfect humans. The claim is that moves towards the ideal will offer an incremental improvement. History has illustrated this well.
Ok, then we fundamentally disagree as I don't see anarchocapitalism as an ideal to strive towards. Not because I am a collectivist, but because philosophically I think it a far too narrow ideal for humans to aspire to.
In a similar vein, I don't think free markets exists because of how humans are, not because they don't live up to some utopia. We might move towards certain ideals, but there might be a limit how close we get and beyond that there is no net improvement.
Also, no, people cannot just not participate: if cryptocurrencies cause some wider issue then everyone will have to pick up the tab one way or another.
Why's it surprising to see anti-market sentiment when we've been given a very clear look at how the free market has operated in the crypto space sans government regulation? The whole ecosystem has been dominated by grifts, outright scams, rug pulls, ponzis, unregulated gambling, etc. etc. with no end in sight. Why didn't the free market step up?
It is surprising to see these sentiments on a site ostensibly for entrepreneurs and builders.
If you'd prefer a centrally planned and regulated economy, that is a different discussion. From my side, I believe you should enjoy your views and the living situation which accompanies it.
Not interested in arguing the virtues of either approach here. Taking exception with the inaccurate characterizations is as far as I go. If you believe an economy driven by central bank policy is a free-market, I'm not sure there's much more we can say here.
It did. People learned that there were a lot of scams and now the market for suckers is drying up. This is a typical pattern: Problem occurs, market responds to problem and results in improvement, government simultaneously responds to problem and has no effect or makes it worse, people point to improvement and credit new government regulations or lack of improvement and demand even more government regulations. Then we get stuck with a bunch of burdensome new rules because Something Had To Be Done.
Notice also that all of the stuff you're listing is fraudulent and already illegal. If regulations work then why didn't they work?
You're right. This is why we don't want a completely _free_ market, we want a _competitive_ market that has actors to prevent and punish fraud and abuse.
In the real world, we try to have government operate law enforcement. Doesn’t always work, but it works a lot better than outsourcing law enforcement on financial scams to retail investors.
The analogy isn't valid. If your startup fails because the people you hire steal from the company, you have legal recourse. If you lose money because you invest in companies that underperform, the SEC won't intervene. No markets operate with perfect information for all participants. That creates the opportunity for fraud, and governments regulate to prevent fraud. In principle this permits broader access to markets (whether this is actually true is a different subject).
You're assuming perfect information which does not exist in the real world.
Regulators are good actually.
Forcing companies to make truthful and accurate disclosures and forcing them to implement basic controls is important. It makes everyone better and protects investors and customers from unnecessary frauds and disruptions.
You're just acceptable collateral damage to someone who is ideologically opposed to regulations. At best, your legal recourse is to "sue" an entity that has already been dissolved and bankrupted.
Because people are not islands? If you live in a non-society then that is fine, otherwise financial schemes can pretty much bring down countries (see Albania).
Even in the US, AFAIK the reason these securities regulations exist is that companies did not disclose information before they were forced through. An efficient theoretical free market requires public information, the SEC exists to enforce that.
But at its best, government agencies are exactly that.
It's free people in a free market learning from their mistakes and saying "well THAT sucked! Let's not do THAT again!". But you know, more efficiently, as is the market's want - rather than re learning the same lesson over and over and over again, we write it down and codify it.
Of course, that's regulations at their best. Regulations at their worst are pretty awful too! But given your post was about the very existence of regulations and their related agencies, I thought I'd offer a perspective :).
Does it? Suppose you'd like to keep the fruits of your hard earned labor on an asset that isn't subjected to inflation at the hands of a capricious or warmongering country. And you'd rather not speculate on greedy capitalists. The SEC is effectively limiting your freedom to do so (whether or not that's a good personal choice)
In our society the concept of a "Free Market" is not one where participants are free to do entirely as they please without consequence. The use of the word Free in "Free Market" implies a freedom from restricted competition which definitionally requires a regulatory body to maintain a somewhat level playing field.
Again, in order to ensure this healthy competition in markets, regulation is required. This is why we attempt to inhibit monopolists, and why antitrust laws in general exist. Absolute freedom in the personal sense is expressly not a goal of modern free market economics.
You are free, subject to taxation of course, to hang onto your "hard earned labor" on your shitcoins but Kraken is not free to operate as a securities exchange unless it complies with the regulations in place so as to ensure an orderly and healthy market.
DeFi people are constantly finding out[0] why some centralization and oversight is a good idea.
And given that we've seen exchange after exchange fail to perform basic tasks like "don't commingle customer funds," I have a hard time feeling any sympathy for cryptocurrency companies here.