Mark Yusko Expresses Concern Over SEC’s Lawsuits
Mark Yusko, a registered investment advisor, broke his silence on the ongoing lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase. Despite his reservations about criticizing the regulator in a public setting, Yusko expressed his concerns in a discussion with Blockworks’ On the Margin podcast.
Yusko found it absurd that the SEC chair, Gary Gensler, who he referred to indirectly, had put in an urgent request to seize and return Binance’s assets, irrespective of their location. He believes the SEC’s regulatory measures against Binance and Coinbase to be an overreach, infringing upon due process rights.
Innocent Until Proven Guilty: Yusko’s Stance on the Lawsuits
Yusko emphasized the principle of “innocent until proven guilty,” pointing out that the charges are mere allegations in civil lawsuits and not criminal ones. He likened the situation to the wild west.
Differentiating Between the Binance and Coinbase Lawsuits
Yusko, along with podcast host Mike Ippolito, differentiated between the two lawsuits. The lawsuit against Binance involves wider allegations, including co-mingling of user funds and wash trading, while the suit against Coinbase centers around the classification of cryptocurrencies as securities.
The Importance of Due Process and Allegations vs. Facts
Citing the importance of due process, Yusko mentioned the rumors about Binance’s CEO, Changpeng Zao, co-mingling funds. He stressed that these were only allegations and the truth was yet to be determined.
Classifying Cryptocurrencies as Securities: A Misuse of the Howie Test?
Speaking about the categorization of certain cryptocurrencies as securities, Yusko observed that such designations hadn’t been in place prior to their sale. He found the idea of classifying a stablecoin like BUSD as a security baffling, arguing that doing so could mean even bank deposits and money market accounts could be labelled securities for consistency.
He critiqued what he saw as a misuse of the Howie test, arguing against a blanket definition of securities that includes anything expected to appreciate in value. This could have unintended, widespread implications, potentially categorizing all real estate as securities.
Parallels with Past Regulatory Attempts Against the Internet
The current regulatory drive reminded Yusko of failed past attempts to legislate against the internet. Drawing parallels, he noted that efforts to undermine the internet didn’t succeed, and neither might the SEC’s attempts to retroactively enforce laws through the courts, a strategy known as ‘regulation by enforcement.’
Potential Implications and Future Predictions
Yusko and Ippolito agreed that the SEC’s approach in these cases, which seems to be pursuing larger players in the industry, is uncharacteristic and could potentially be spreading their resources thin. They suggested that this may be a temporary period of intense regulatory activity, driven by the current political climate.
Ippolito hypothesized that a change in administration might be on the horizon, leading to the SEC trying to launch these extensive lawsuits, which are expected to take years to resolve.
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