Billionaire and Shark Tank star Mark Cuban is beaming Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC), for his approach to regulating the crypto industry.
In a new interview on the All-In Podcast, Cuban say that Gensler relies solely on the case of SEC v. WJ Howey Co. from 1946 in classifying crypto assets as security.
The Howey test qualifies an asset as an investment contract subject to securities laws if it is an investment in a joint venture and there is a reasonable expectation that a profit will be made from the efforts of others.
Says Cuban,
“You have to make it easy to follow the rules. And it means everything is a certainty, Gensler says: “Everything applies to Howey.”
There’s the Howey Rule, but the reality is that there’s also a ruling that came after it called Reves v. Ernst & Young, which had to do with interest…
Have you ever shorted stocks or done stock loans where you can make some money with a stock loan? You can make one of your shares available to the borrower and get a sticker. You may get 10% or 12%. Doing that is exactly the same as lending Bitcoin so that someone else can borrow it, and they don’t call that security.
I asked Gary Gensler. If it’s not a security to lend some stock, why is it a security to lend Bitcoin to someone else? He had no answer.”
Cuban says Gensler’s approach is regulation through lawsuits.
“He’s going to sue you first, ask questions later, and hope that the outcome of that lawsuit becomes a rule that everyone else has to follow.”
Cuban says that instead of establishing a clear regulatory framework, Gensler is making it difficult to register tokens with the SEC. He says bankrupt crypto firms FTX and Three Arrows Capital would still be in business if the US followed Japan’s footsteps in regulating the industry.
“If FTX wants to lend out all their Ethereum, you have to do what they did in Japan. You need to have 95% collateral and 95% of everything needs to be in cold storage. If he had followed the same rules for crypto as Japan, FTX would still be in business. Sam Bankman-Fried may still be in jail, but FTX and Three Arrows Capital may still be in business because he did the wrong thing.
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Featured image: Shutterstock/TadashiArt/Natalia Siiatovskaia