The U.S. Securities and Exchange Commission has a tall order: work out a regulatory framework for an industry that has been around for over a decade and prides itself on being unregulated.
But the SEC isn’t shying away from the task.
Last week, it charged a former Coinbase product manager, his brother and his friend for insider trading of crypto assets that generated illicit profits of more than $1.1 million.
An important takeaway from the case is that the SEC decided that nine of the 25 digital tokens involved are unregistered securities.
This sparked debate online, with some saying the SEC was using vague reasoning to make the determination.
The billionaire owner of the NBA’s Dallas Mavericks, Mark Cuban, took to Twitter to give his initial thoughts.
“Wait till you see what they come up with for registration of tokens,” he tweeted. “That’s the nightmare that’s waiting for the crypto industry. How else do you keep thousands of lawyers employed and create reasons to ask for more taxpayer money?”
He was tweeting in response to Sen. Pat Toomey, R-Pa., who had tweeted that the SEC had failed to disclose its view on which tokens classify as securities ahead of launching the case against the trio.
Cuban also linked to a video he posted on YouTube in 2014 that shows he tried to send a no-action letter to the SEC to see whether a stock purchase he wanted to make would violate insider trading laws. If the no-action relief is granted, that means the SEC staff would not recommend that the commission take action against Cuban for his stock purchase.
Cuban shows in the video how the process to submit a letter is complicated even for him, someone with years of experience dealing with the SEC. In 2013, Cuban won a fight against the SEC when a Texas jury cleared him of insider trading charges. He was accused of using a private tip to avoid a large loss when selling shares of Canadian search-engine company Mamma.com in 2004.
In an email to The Dallas Morning News, Cuban said he doesn’t think the SEC has the manpower and knowledge to regulate the industry. When asked how he’d prefer it be regulated, he said, “That’s a book.”
His viewpoint seems similar to Michael Burry, the founder of the hedge fund Scion Capital whose bet against the housing market before the 2008 crash was documented in the film The Big Short. Burry tweeted earlier this week that the SEC didn’t have “the resources or the IQ points” in relation to the commission’s probe into the Coinbase trio.
The charges from the SEC come shortly after it announced in May that it was nearly doubling the size of its Crypto Assets and Cyber Unit in the Division of Enforcement. The unit now has 50 positions dedicated to working to protect investors in crypto markets and to protect from cyber-related threats.
The SEC’s new chairman, Gary Gensler, is also well-versed in crypto, having taught classes on blockchain and digital currencies at MIT. He also spent 18 years at Goldman Sachs and served as chair of the Commodity Futures Trading Commission from 2009 to 2014.
In September, Gensler told The Washington Post that the SEC had “robust authorities” to regulate cryptocurrencies.
Cuban has been supportive of crypto assets. In October, the Mavericks announced a five-year partnership with crypto brokerage Voyager, which ended up filing for bankruptcy protection earlier in July.
His Mavericks team also accepts the meme-based cryptocurrency Dogecoin as payment for tickets and merchandise.
In a recent episode of the Full Send podcast, Cuban said that at one point the team was making “ten thousand a week, here and there.” Dogecoin’s price is down more than 65% over the past year, following the overall fall of cryptocurrency prices since November.
“I’m still bullish on crypto,” he said on the podcast. “Obviously, it’s way down right now. I took a hit. Everyone took a hit on crypto.”
Read More: Mark Cuban fears ‘nightmare’ SEC crypto registration rules but remains bullish on crypto