Mark Cuban Says FTX and Three Arrows Capital Would Still Be Operating if Gary Gensler Had Done the Right Thing

Billionaire and Shark Tank star Mark Cuban is blasting U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler for his approach toward regulating the crypto industry.

In a new interview on the All-In Podcast, Cuban says that Gensler only relies on the 1946 case of SEC v. W. J. Howey Co. when classifying crypto assets as security. 

The Howey Test qualifies an asset as an investment contract subject to securities law if it is an investment in a common enterprise and there is a reasonable expectation of profit from the efforts of others. 

Says Cuban,

“You have to make it easy to follow the rules. And it terms of everything being a security, Gensler says, ‘Everything applies to Howey.’

There’s the Howey Rule, but the reality is there’s also a ruling that came after called Reves v. Ernst & Young that had to do with interest…

Have you guys ever shorted stocks or done stock loans where you can make some money off a stock loan? You can make one of your shares of stocks available to the borrower and get paid a vig. You might get 10% or 12%. Doing that is the exact same thing as loaning out Bitcoin for somebody else to borrow and they don’t call that a security.

I asked Gary Gensler. If it’s not a security to loan out a share of stock, why is it a security to loan out Bitcoin to somebody else? He didn’t have an answer.”

Cuban says that Gensler’s approach is regulation through litigation.

“He is going to sue you first, ask questions later, and hope that the result of that litigation becomes a rule that everybody else has to follow.”

Cuban says that instead of laying out 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 operating if the US followed in the footsteps of Japan in terms of regulating the industry. 

“If FTX wants to loan out all their Ethereum, you have to do what they did in Japan. You have to have 95% collateral and 95% of anything needs to be put in cold storage. If he had followed the same rules for crypto that Japan did, FTX would still be in business. Sam Bankman-Fried might still be in jail but FTX and Three Arrows Capital they’d still be in business because he did the wrong thing.”

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