Analysis of the SEC vs Crypto War: Key Points and 5 Possible Outcomes

Original Title: 《The SEC Comes for Crypto》

Original Author: Matt Levine

Translation: Odaily Planet Daily

Author Introduction: Matt Levine is a Bloomberg Opinion columnist responsible for financial reporting. He was an editor at Dealbreaker, worked in the investment banking division at Goldman Sachs, served as a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and was a law clerk for a judge on the U.S. Court of Appeals for the Third Circuit.

Editor's Note: Matt Levine's writing style is extremely friendly to newcomers. This article was written after the SEC sued Binance; one of the fundamental disagreements between the SEC and Binance, which is also a core argument discussed in this article, is whether cryptocurrencies are considered securities. If they are securities, then Binance and all other exchanges operating in the U.S. must register with the SEC for the securities they offer to investors; if they are not securities, then registration is not required. Currently, all exchanges operating in the U.S. are not registered with the SEC. Therefore, if the court rules that tokens are securities, the SEC wins; otherwise, Binance wins.

SEC Sues Crypto Giant

"Now there’s a basic standard that all cryptocurrency exchanges are committing crimes, and if you’re lucky, the exchange you’re using is only committing procedural crimes (rather than substantive ones)." Why? Examples are as follows:

Is your exchange illegally operating as a securities exchange in the U.S.? Yes! It certainly is! At least according to the SEC, every cryptocurrency exchange in the U.S. is illegal. You might disagree with this view—many executives at cryptocurrency exchanges do disagree, and we will discuss these arguments in detail below—but from a practical standpoint, if you are trading cryptocurrencies, you are not fully complying with U.S. securities laws.

Is your exchange stealing customer funds? Possibly! Some do, but some do not. If you are a customer, this is what you should be most concerned about.

Operating an illegal securities exchange and stealing customer funds are related, but they are two different things. "Oh, I shouldn’t trust my money to people who are violating U.S. law": Of course, yes, that’s a reasonable stance that can help you avoid many cryptocurrency disasters, but it will also make it impossible for you to trade cryptocurrencies at all. That’s your choice!

I may be exaggerating the principles behind all of this—but not by much.

Yesterday, the SEC sued Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao, accusing them of illegally operating a securities exchange. Today, the SEC also filed a lawsuit against Coinbase Inc., the largest cryptocurrency exchange in the U.S., for illegally operating a securities exchange.

There are basically two ways that cryptocurrency exchanges can get into disputes with the SEC. One good way is to get into trouble for operating an illegal securities exchange (i.e., offering unregistered securities). In April of this year, the SEC filed a lawsuit against Bittrex Inc. for allegedly operating an illegal securities exchange; any reasonable interpretation of the Bittrex case makes it clear that similar cases will also be brought against Coinbase and Binance. In the SEC’s view, any cryptocurrency exchange in the U.S. is illegal.

The other bad way is to get into trouble for stealing customer funds. In December of last year, the SEC filed a lawsuit against a large cryptocurrency exchange, FTX Trading Ltd. This was the SEC’s accusation against FTX. I can say with great certainty that the SEC believes FTX was indeed illegally operating a securities exchange in the U.S. But this was not mentioned in the complaint—because there were too many other issues to address. FTX allegedly stole all of its customers' funds; when an exchange steals funds, the SEC focuses on that. When not all funds are stolen, the SEC focuses on the illegal securities exchange issue.

So, for these cases this week, one question is: Did the SEC sue Coinbase and Binance because they are cryptocurrency exchanges, or because they are evil cryptocurrency exchanges? Are the allegations here "You allow people to trade cryptocurrencies, and we think that’s illegal," or "You entice people to trade cryptocurrencies and steal their principal"?

For Coinbase, I think the answer is obvious. Compared to other cryptocurrency exchanges, Coinbase is very compliant with the law. It is a publicly traded company registered in Delaware and listed on Nasdaq. It went public in 2021 through a direct listing and submitted detailed disclosure documents to the SEC. Its financial statements are audited by Deloitte. Its business model appears to involve receiving funds from customers, using those funds to purchase cryptocurrencies, and securely holding the cryptocurrencies in accounts named after the customers. I wouldn’t dare make any bold assertions about any cryptocurrency participant, and I’ve been wrong before, but I believe Coinbase does not steal customer funds.

In fact, the SEC’s allegations against Coinbase are quite boring and are entirely focused on the fact that Coinbase is not registered as a securities exchange. Again, the SEC believes that every cryptocurrency exchange is violating U.S. securities laws. However, relative to others, Coinbase’s violations are polite and relatively harmless. They are not completely harmless—the SEC states, "Coinbase’s unregistered status deprives investors of important protections, including SEC oversight, record-keeping requirements, and safeguards against conflicts of interest." But the impact is relatively minor.

For Binance, the answer is more interesting. In terms of cryptocurrency exchanges, Binance has a certain level of legal compliance, but not much—it is known for its lack of transparency, uncertain headquarters location, and aims to avoid complex regulatory networks. (The SEC cites its chief compliance officer as saying in 2018, "We never want [Binance] to be regulated.") Similar to FTX, it has its own token—BNB; it has its own affiliated trading companies; and it provides separate platforms for U.S. customers (Binance.us) and customers from the rest of the world (Binance.com). It was sued by the CFTC in March primarily for allowing large U.S. customers (such as high-frequency market makers like Jane Street and Tower Research) to trade on its Binance.com exchange through its offshore affiliates, and the CFTC’s complaint also mentioned issues related to terrorist financing.

Similarly, the SEC’s allegations against Binance claim to have caught evidence of Binance engaging in misconduct. Binance has some affiliated market makers, including companies like Sigma Chain AG and Merit Peak Ltd., which are allegedly controlled by Changpeng Zhao and trade on Binance’s Binance.com and Binance.us. The SEC suggests they engaged in suspicious activities:

For example, by 2021, at least $145 million was transferred from BAM Trading (i.e., Binance.us) to Sigma Chain accounts, and another $45 million was transferred from BAM Trading’s Trust Company B account to Sigma Chain accounts. Sigma Chain spent $11 million from that account to purchase a yacht. (This is merely implied, with no actual evidence.)

Moreover, from September 2019 to June 2022, a trading company owned and controlled by Changpeng Zhao, Sigma Chain AG (hereinafter "Sigma Chain"), engaged in wash trading, artificially inflating the trading volume of crypto asset securities on the Binance U.S. platform.

Additionally, the SEC claims that Changpeng Zhao and Binance exercised control over platform customer assets, allowing them to mix customer assets or transfer customer assets at will, including transferring to the Sigma Chain company owned and controlled by Changpeng Zhao.

However, the SEC did not emphasize these allegations too much; most of the allegations against Binance are similar to those against Coinbase: Binance is accused of operating a cryptocurrency exchange that is open to U.S. customers and listing some tokens deemed to be securities without registering as a U.S. securities exchange. I tend to view yesterday’s lawsuit as a recognition of Binance by the SEC. The SEC, along with the earlier CFTC, conducted a thorough investigation of Binance and wrote a 136-page indictment, but the only issue they could find was that Binance was simply operating a cryptocurrency exchange.

Although the arguments in both indictments are largely the same, the attitudes of Coinbase and Binance are starkly different. The key legal question (which we will discuss below) is whether the crypto tokens listed on Binance and Coinbase are considered securities. If they are deemed to be securities, then it is likely that Coinbase and Binance (as well as Bittrex and all other exchanges) are operating illegal securities exchanges; if they are not securities, then everything is fine. Coinbase is aware that this is a potential risk and has established committees and related procedures to think about and mitigate this risk. A description from the SEC’s allegations against Coinbase states:

Given that at least some crypto assets are offered, sold, and distributed by a group of identifiable persons or promoters, Coinbase publicly released its "Coinbase Crypto Asset Framework" around September 2018, which included an application form for crypto asset issuers and promoters to apply to list their crypto assets on the Coinbase platform.

Coinbase’s listing application requires issuers and promoters to provide information about their crypto assets and blockchain projects. It explicitly requires information related to conducting a Howey analysis on the crypto assets.

Additionally, around September 2019, Coinbase and other crypto asset businesses established the "Crypto Asset Rating Council" (CRC). The CRC subsequently released a framework for analyzing crypto assets that "distills a set of straightforward yes or no questions aimed at clearly answering the four elements of the Howey test," and assigns a score from 1 to 5 to crypto assets, where 1 indicates "the asset has little or no characteristics consistent with investment securities," and 5 indicates "the asset has multiple characteristics strongly consistent with securities."

When announcing the establishment of the CRC, Coinbase stated: "While the SEC has issued helpful guidance, determining whether any given crypto asset is a security ultimately requires a fact-based analysis." (Meaning, it ultimately depends on the SEC and the courts’ opinions.)

Very responsible, right? Nevertheless, the SEC disagrees with Coinbase’s conclusions and raises some objections to its process:

Between late 2019 and the end of 2020, the number of crypto assets traded on the Coinbase platform more than doubled and then more than doubled again in 2021. During this period, Coinbase offered crypto assets on its platform that scored higher under the CRC framework. In other words, to achieve exponential growth on the Coinbase platform and increase its trading profits, Coinbase made strategic business decisions to add these crypto assets to the Coinbase platform, even while recognizing that these crypto assets had characteristics of securities.

Meanwhile, here is the description from Binance’s "outstanding" compliance officer regarding the fact-based analysis of whether Binance is listing securities tokens in the U.S.:

As Binance’s compliance officer candidly admitted to another Binance compliance staff member in December 2018, "We are operating an unlicensed securities exchange in the U.S., bro."

How clear is that perspective! Coinbase hired a lot of lawyers, conducted extensive analyses, and wrote many checklists to convince itself that it is legally operating a crypto exchange in the U.S. Meanwhile, Binance’s attitude is "It might be illegal in the U.S., but I don’t care." The SEC completely agrees with Binance’s viewpoint. (That is, it thinks both are illegal.)

This could be good news for Coinbase: It may be able to present itself in court as a well-meaning actor trying to comply with the law, while Binance appears to be a malicious actor trying to ignore the law; Coinbase may win in its lawsuit against the SEC, while Binance may lose. But I must say, so far, Binance’s approach seems to be more prudent. Binance recognizes that operating a crypto exchange in the U.S. is likely illegal, but still does so, while minimizing and segregating its risks in the U.S.: it has relatively few customers in the U.S. and seems to conduct most of its business outside the U.S. Coinbase, on the other hand, is fully committed to operating a legal and compliant crypto exchange in the U.S., while the SEC now states that this is impossible. If the SEC is correct, then what is left for Coinbase’s business?

What exactly is a security?

Okay, let’s discuss the basic theory the SEC is presenting here, which we have already discussed when the SEC sued Bittrex:

1. If you operate an exchange that offers securities trading in the U.S., you need to register with the SEC as a securities exchange.
2. The crypto tokens offered by Binance and Coinbase are securities.
3. They have not registered their exchanges in the U.S. as securities exchanges.
4. Violation!

The first point is a bit more complex than it seems; for example, there are some stock trading venues that are not registered as securities exchanges; they are registered as other forms of organizations under different rules. But from the SEC’s perspective, what matters is that the rules of securities exchanges can protect investors. In particular, they often require the separation of three key functions that are typically combined in cryptocurrencies, including the exchange that matches buyers and sellers, brokers/dealers that trade on behalf of customers on the exchange, and clearinghouses that actually move funds and securities. In the stock market, you can place an order on Robinhood’s website to buy stocks on the New York Stock Exchange, and the Depository Trust Co. holds the stocks and settles the trades. In the cryptocurrency market, you can place an order on Coinbase’s website to buy cryptocurrencies on Coinbase, and Coinbase holds the cryptocurrencies and settles the trades.

But the key point is the third point: Are crypto tokens considered securities? The SEC’s basic view is that most crypto tokens—not all, excluding Bitcoin, but most—are securities under U.S. law. Coinbase clearly believes that many of them are not securities. The specific issue in dispute here is whether a series of popular crypto tokens, including Solana’s SOL, Cardano’s ADA, Polygon’s MATIC, Filecoin’s FIL, Decentraland’s MANA, Algorand’s ALGO, Axie Infinity’s AXS, and Voyager Digital’s VGX, are classified as securities, which the SEC mentions were listed on Binance and/or Coinbase.

U.S. securities law defines "securities" to include, but not be limited to, "stocks," "interests or shares in profit-sharing agreements," "preorganization certificates or subscription certificates," "transferable shares, investment contracts, [or] voting trust certificates." The most commonly used term is "investment contract," which the U.S. Supreme Court interpreted in a famous 1946 case, SEC v. W.J. Howey Co.

Under the Securities Act, an investment contract is a contract, transaction, or scheme in which a person invests money in a common enterprise and expects to earn profits solely from the efforts of the promoter or a third party, regardless of whether the shares of the enterprise are evidenced by formal certificates or by nominal interests in physical assets. Such a definition… makes it possible to require "full and fair disclosure of many instruments that fall within the conventional concept of securities in our business world" for legal purposes… it embodies a flexible rather than static principle capable of adapting to the countless and varied schemes designed by those seeking to profit from the use of others' funds through the efforts of others.

Investors provide capital and share in the profits, while the promoters manage, control, and operate the enterprise. Therefore, regardless of what legal terminology is used to describe the specific arrangements of these investors' interests, they involve investment contracts.

The key is whether the scheme involves investment funds in a common enterprise, and whether the profits come solely from the efforts of others. If this test is met, it does not matter whether the enterprise is speculative or non-speculative, or whether there is a sale of property with or without intrinsic value.

This forms the "Howey test," where the court will ask whether the following exist: (1) investment of money; (2) common enterprise; (3) expectation of profits; (4) profits come solely from the efforts of others. The SEC has argued since 2017 that most crypto enterprises fit this description.

Take Solana as an example. Solana is a blockchain that runs crypto applications, and its native token is called SOL. Here is the SEC’s explanation of Solana:

"SOL" is the native token of the Solana blockchain. The Solana blockchain was created by Solana Labs, Inc. (hereinafter Solana Labs), a Delaware company headquartered in San Francisco, founded in 2018 by Anatoly Yakovenko (hereinafter Yakovenko) and Raj Gokal (current CEO and COO of Solana Labs). According to Solana’s website www.solana.com, the Solana blockchain is a network that can build decentralized applications (dApps), consisting of a platform designed to improve blockchain scalability and achieve high transaction speeds, using a combination of consensus mechanisms.

According to Solana’s website, SOL can be "staked" on the Solana blockchain to earn rewards, and when proposing transactions on the Solana blockchain, a small amount of SOL must be "burned." This is a common feature of native tokens on blockchains, used to prevent potential bad actors from "flooding" a blockchain with an unlimited number of proposed transactions through a cryptographically distributed ledger.

Solana Labs sells SOL tokens to raise funds for building the Solana ecosystem:

Solana Labs publicly states that it will pool the proceeds from private and public sales of SOL into a comprehensive crypto asset wallet under its control and will use these funds for the development, operation, and marketing of the Solana blockchain to attract more users to use the blockchain (since those who wish to interact with the Solana blockchain need to provide SOL, this may increase the demand and value of SOL itself). For example, when privately selling SOL in 2021, Solana Labs publicly stated that it would use investors’ funds to: (i) hire engineers and support staff to help develop Solana’s developer ecosystem; (ii) "accelerate the launch of market-ready applications aimed at bringing a billion users into the crypto space"; (iii) "launch an incubation studio to accelerate the development of decentralized applications and platforms built on Solana"; and (iv) establish a venture capital department and trading department dedicated to the Solana ecosystem.

Howey Test:

1. Did investors invest money? Yes, SOL tokens are sold for currency to raise funds for building Solana.

2. Is there a common enterprise? Yes, Solana is an enterprise; it is a blockchain ecosystem competing with Ethereum, Cardano, and others, aimed at attracting users.

3. Is there an expectation of profits? Yes, people buy SOL hoping its price will rise, and it indeed has risen.

4. Do profits come from the efforts of others? Yes, the price increase of SOL is due to its promoters and developers making Solana a popular blockchain, increasing the demand for SOL.

These are typically difficult questions to judge. Most large crypto blockchains are decentralized to some extent; Solana’s growth relies not only on the efforts of Solana Labs but also on the efforts of third-party users and developers who enjoy using it. For some crypto tokens, it can be reasonably argued that people are not buying tokens for the expected investment profits but rather to make payments for transactions on the blockchain; the SOL token is the "fuel" used when people run programs and transact on the Solana blockchain, and if SOL is purchased purely as a "utility token," it can be argued that it is not a security. Most crypto tokens have both utility value and speculative investment characteristics, complicating the analysis.

Furthermore, even if you purchase SOL as a speculative investment, it is unclear whether your purchase is to share in the profits of the underlying enterprise. Your thought process might be "If I buy SOL, many others might buy SOL, its price will rise, and I will make money." This is not an expectation of profits from "the efforts of others"; it is an expectation of profits from speculative frenzy and online memes. We talked about Dogecoin yesterday, which is a joke cryptocurrency where people openly promise not to take any action to build the ecosystem; people buy Dogecoin because they believe others will buy Dogecoin. I personally think this means Dogecoin is not a security; a purely meaningless token involves insufficient "efforts of others" to qualify. (Undoubtedly, for example, Beanie Babies are not securities.) And even in cases where crypto projects genuinely commit to effort, ecosystem, and diligent smart developers, many people’s pure reasons for buying tokens may be the same as their reasons for buying Dogecoin, namely, for digital appreciation.

But I like to understand the relationship between crypto and securities as most crypto tokens being somewhat obviously similar to stocks of some underlying tech business. In Solana (and Cardano, Polygon, etc.), the underlying business is a platform business for building applications, a blockchain ecosystem primarily for financial services applications, mainly for trading cryptocurrencies. Everyone buying these tokens is, in a loose sense, a quasi-shareholder of that business. They receive returns in the same way traditional shareholders do: stock buybacks. And in crypto terms, stock buybacks are called "burning."

Additionally, Solana Labs promotes its "burning" of SOL tokens as part of its "deflationary model." As Yakovenko explained in an article titled "Solana (SOL): Scaling Cryptocurrency for the Masses," published on gemini.com on April 14, 2021: "Solana’s transaction fees are paid in SOL and are reduced through burning (or permanent destruction) as a deflationary mechanism to reduce the total supply and thus maintain a healthy SOL price." As explained on Solana’s official website, since the launch of the Solana network, the "current total supply" of SOL has decreased through the burning of transaction fees and planned token reduction activities. This marketing of SOL’s burning as part of Solana’s network "deflationary mechanism" gives investors reason to believe that purchasing SOL has profit potential, as the built-in mechanism can reduce supply, thereby increasing the price of SOL.

In the indictment against Binance, the SEC cited Changpeng Zhao’s description of Binance’s own BNB token burning mechanism:

In fact, in an interview posted on YouTube on July 9, 2019, Changpeng Zhao described Binance’s planned BNB burn, stating, "The benefit we promised in our white paper is that every quarter we will use 20% of our profits to buy back [BNB] at market value… We will buy back and burn these tokens. We will burn up to 100 million BNB. Basically half of all available tokens… Financially, this is the same as an economic dividend."

I mean, I would say it works the same way as a stock buyback, but of course, dividends and stock buybacks are essentially equivalent. The key is that in crypto projects, shareholders (sorry, token holders) share in the profits of the project when the project uses a portion of its revenue to buy back and burn tokens, thereby increasing the value of the remaining tokens, just like in stock buybacks.

One way to understand crypto economics is that cryptocurrencies have built a new way to sell stocks of promising tech and financial enterprises without calling them stocks. For example, if you were to start a cryptocurrency exchange and wanted to raise funds, you could offer investors shares of your business. If the business operates well, there will be substantial profits (from transaction fees charged to customers), and you will share those profits with investors. But there are some issues with this:

1. If you sell shares to the public, you will need to register with the SEC.
2. If you sell shares to large venture capitalists, they will need to register with the SEC for resale or otherwise seek an exemption from SEC registration.
3. In either case, you may need to provide some financial information about the business to raise funds.
4. Shareholders may want voting rights, ongoing financial disclosures, etc., which is customary and often legally required.

Alternatively, if you are starting a cryptocurrency exchange, you could go to investors and offer them tokens in your business. If the business operates well, there will be substantial profits (from transaction fees charged to customers), and you will share those profits with investors (through buying and burning tokens). This is quite nice:

1. If you sell tokens to the public, you can declare they are not securities and do not need to register with the SEC.
2. If you sell tokens to large venture capital firms, they can declare these tokens are not securities and resell freely.
3. You will write a white paper to sell the tokens, which does not necessarily need to include a lot of financial or operational details.
4. You can grant the tokens any rights you want.

I may be a bit unfair. I am describing a pure regulatory arbitrage; Binance’s BNB token or FTX’s FTT token is a pure substitute for stock, issued by a company to raise the funds needed to operate a centralized business. Many crypto projects are not entirely like this; in some projects, there is idealism about building decentralized ecosystems that do not belong to any one company, and selling tokens can be a way to create and fund ownerless projects, which is very different from a company owned by shareholders. But in many cases, the cryptocurrency ecosystem seems to be built by relatively centralized teams, with tokens viewed as stocks of a promising new tech company, launched by a promising team with a hopeful idea.

You can see why people in crypto like this! It combines regulatory arbitrage with exciting philosophical novelty. You can also understand why the SEC does not like this! The SEC is very aware of "the countless and varied schemes designed to profit by seeking to use the funds of others." The SEC is a regulatory body that has been circumvented in arbitrage. And it clearly does not like that.

What happens after the SEC’s lawsuit?

In principle, there are several possible outcomes:

1. The SEC wins, and cryptocurrencies are more or less banned in the U.S. Bitcoin, Ethereum, and possibly Dogecoin can still be purchased in the U.S. because they are not considered securities, but any other crypto projects may be deemed securities and cannot be traded in the U.S. Cryptocurrencies gradually decline and disappear, and people turn to artificial intelligence. The SEC slowly crushes cryptocurrencies in a vengeful manner, as cryptocurrencies attempt to circumvent SEC regulation.
2. The same situation occurs, but cryptocurrencies thrive elsewhere, and the U.S. misses out. Cryptocurrencies prove to have immense world-changing value, while the U.S. falls behind in the competition. Or cryptocurrencies prove to be a strange niche financial product that can be traded in Europe but not in the U.S., like binary options or contracts for difference. In either case, cryptocurrencies continue abroad but cannot develop in the U.S.
3. The SEC wins, and then some existing crypto companies, new crypto participants, and traditional financial services companies jointly find a way to trade cryptocurrencies in compliance with U.S. securities laws. Everyone goes all out, saying, "Okay, Solana will start submitting annual reports and audited financial statements," and people will establish cryptocurrency exchanges registered with the SEC, separate from clearinghouses and brokers, etc. This seems very difficult because the SEC is clearly not interested in any crypto project. I won’t sit here and tell you "how crypto companies can register their tokens as securities." Undoubtedly, Coinbase has been struggling to figure out how to do this, and they have been constantly "harassing" the SEC for permissible regulations, but so far, luck has not been great. But I think this is also possible.
4. The SEC loses, and the court says, "What, no, these things are not securities," and cryptocurrencies continue to trade in the U.S. without much securities regulation.
5. Congress (or a future SEC) intervenes to change the rules, stating, "Of course, under existing law, all of this is technically illegal, but stifling such innovation is crazy, so we will create new regulations to allow regulated trading of cryptocurrencies in the U.S."

I don’t know which outcome will occur. The last outcome is what the cryptocurrency industry hopes for, and Congress seems to have some interest in creating cryptocurrency rules.

But I want to say that the SEC is clearly betting on the first outcome. That’s why, after the collapse of FTX and many other large cryptocurrency companies, and after cryptocurrency prices fell, venture capitalists turned to artificial intelligence, the SEC is only now filing these cases. For the SEC, these cases against Binance and Coinbase are high-stakes cases: Coinbase and Bitcoin are large companies with ample funding, excellent lawyers, and lobbying teams, who have the resources and motivation to fight all the way, and they indeed have quite good legal arguments. The SEC could lose! But it is strategically maximizing its chances of winning. I wrote in February:

When cryptocurrencies are popular, seem exciting, and are constantly rising, if you are a regulator saying, "No, we must stop this," you look like a killjoy. Investors want to put their money into something that is rising, and you are stopping them, and they are angry about it. Politicians like rising things and hold hearings on how you are stifling innovation. Cryptocurrency founders are wealthy and popular, criticizing you on Twitter and getting lots of likes and retweets. Your own regulatory staff is also watching for their next job in the private sector, and they want to be leaders in crypto innovation, not just ban everything.

When cryptocurrencies crash, and many projects disappear in fraud and bankruptcy, you can say, "I told you so (it was a scam)." At that point, people are more inclined to regulate or simply ban everything. A founder of a bankrupt crypto company can say, "You stifled innovation," but no one cares.

That’s the bet the SEC is making now. We will see if this bet is correct.