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π¨BALAJI & SCARAMUCCI LIVE: SEC vs CRYPTO #CryptoTownHall
Recorded: June 7, 2023 Duration: 3:52:34Space Recording
Short Summary
The transcript highlights the ongoing regulatory challenges faced by major crypto exchanges like Binance and Coinbase, as the SEC intensifies its scrutiny. The potential for asset freezes and legal battles underscores the uncertainty and decline in market confidence. The regulatory environment is seen as a significant threat to the stability and growth of the crypto industry, with concerns about the future viability of U.S.-based exchanges. The situation reflects a broader decline in trust towards regulatory bodies and the potential impact on the crypto market's future.
Full Transcription
All right. We're waiting in a couple of minutes, waiting for a few more people to come up.
Mickle, you're ready to talk about Binance this morning?
Oh, I'm always ready to talk about Binance, crypto.
R as Jay likes to call them, Banance.
Benance.
Benance.
I was like Benance?
What the fuck?
Did you see Brian Armstrong's going to be on CNBC?
I think during this space.
I'm not sure if we have the ability to listen in
or get any clips from that,
but it should be interesting.
Justin, do you mind?
Hey, how's it going, Tom?
Justin, do you have CNBC?
Could you stream it through your system?
I know you have a splitter.
Oh, yeah, I'm not in the studio,
so I can't do it.
Great.
Great.
Just when I needed you, Justin.
He let me down.
First thing in the morning.
I know.
That was like the one time this month I was going to be useful,
and I just totally screwed it up.
All right, I'm kicking you off stage.
I'm just kidding.
All right.
Hey, Tom, how you doing?
Tom, how you doing?
Doing good, my friend, just getting up
and waiting to see who the SEC is suing next.
That's fair.
My bet is on Sonic the Hedgehog, man.
That guy collecting those rings, like, I think he's next.
Yeah, anybody that has coins in their games.
Anybody that has any sort of tokenization is screwed.
Hold on.
Let me bring up a few more people here.
Hey, Scott.
Good morning.
Are we going to talk about how the Saudis now on the PGA tour?
We are going to talk about how the Saudis.
Okay, first of all, I don't like that framing.
That's why I say this.
Okay.
I don't love that framing.
I believe we're a capitalist society, but we will talk about it.
I don't want to take away from that conversation.
That is probably one of the most hilarious situations.
Can we just admit the hilarity?
I know we all kind of feel, it feels bad, it feels painful, but it's kind of fun.
It has to be proof that we're in a simulation, right?
I was just telling my co-founder this morning, I was like, we are definitely in the worst timeline.
I mean, this is by far the worst timeline.
It's astounded.
I mean, if you actually dig into the deal and I only looked at the superficial points, I know we will get into it later.
But, I mean, effectively, the Saudis taking control of the PGA tour.
After all of that pushback, the human rights violations, conversations, and hilariously, after guys like Tiger Woods not taking a billion dollars to go to the live tour.
And then ending up right back in the PGA with a fat paycheck.
I mean, guys like Brooks, Kepka and Nicholson, they've got to just be laughing all the way to the bank right now.
I mean, it just speaks to the ridiculousness of saying, hey, by the way, we do trade with Saudi every single year.
They give us billions of dollars every single year.
But you...
You golf or you.
You are going to be the bastion of America.
You cannot make money.
You are not allowed to make money.
You need to protect the PGA tour, and then the tour sells you out.
It's beautiful.
It's the most American shit I've seen in a long time.
Exactly.
I was like, isn't this America?
I mean, I feel like this was the best explanation.
The new America.
When people...
It is still America. That's true. Like, we're still here.
Hey, listen, it's capitalism. I just, it's funny if anyone who kind of followed the amount of pushback that there was against Liv and the rhetoric from the PGA tour to merge is just...
I it's mind-boggling it's mind-boggling so let's talk through this I feel like we've already jumped
into it it was going to be the second story but I do like this as a first story so it's such a good
warmer so for people that are not aware and you're living under a rock or you just generally don't
give a crap about golf which I could understand um the PGA tour uh
that has been around forever
and LivGolp that has been around for a few years
are officially merging.
LiveGolv CEO, Greg Norman,
who was a very well-known golfer.
Choker. Choker. Choker.
Choker. He was a choker. That's true.
Jesus.
But I do agree.
Had been
he's been vilified.
He has been told that he was a traitor.
He has been told that he was the worst person ever.
Hilariously, and this was what made me kind of chuckle a little,
he wasn't even involved in the deal.
Did you guys hear this part of it?
When he heard in a phone call
just before the announcement was made public,
can you imagine how crazy that is that the CEO?
Say it again?
How does that even...
Oh, he's more of a spokesperson and a partner,
but I don't think he was fundamental in the business negotiations.
I think he was kind of the frontman.
And so the PGA Tour Commissioner, Jay Monaghan,
who, by the way, said to the players,
do you really want to be working for the Saudi government?
Which I thought was so interesting in so many ways
and made some other very disparaging commentary
about Phil Mickelson and others said,
After two years of disruption and distraction, this is a historic day for the game we all know and love.
This transformational partnership recognizes the immeasurable strength of the PGA Tour and combines it with the DP World Tour and live, including the team golf concept.
And so...
official it's official that now the pGA tour is owned by the saudi government on the
Saudi wall fund right which they'll tell you is not the is they'll tell you that that's not what
happened but if you dig into the deal that's effectively what happened and they had to
emergency basically create an unnamed organization to be at the head of it which is led by the
Saudis i can't find the name of it right now but when you read through this it's just i mean it's
mind blowing and nobody knew it was happening
Yeah, so the sovereign wealth
Saudi Arabia
has been doing this in every other industry.
For people that are not aware,
they are one of the largest financiers
of the entire startup ecosystem.
I'm just being honest.
And again, it kind of explains to you
where it comes from.
Just, Harold, I'll go to you next.
But I was going to say that,
one of the things that's very interesting
about the Saudi wealth fund,
the sovereign wealth fund of Saudi Arabia,
is that
They are a limited partner.
Oh, I'm going to mute you, my friend.
But they are a limited partner,
in some of the best VC funds that you all know and love.
And so, you know, you think of some of the biggest ones across, you know, across the world.
They are huge investors and, and MBS actually was known to be a giant investor.
MBS's mom of bin Salaman, the Crown Prince. But, you know, the, the, the,
The thing that's interesting about it
is that nobody cared about
when all the startups were getting their money
indirectly through the sovereign wealth fund,
but now suddenly people are up in arms about LiveGolf
And ultimately, this is capitalism at work.
Yeah, I think it was more of a just pushback because of the monopoly the PGA had,
and they were whitewashing that with other narratives, right?
If it had not been the Saudis and had been someone else that was threatening to split the PGA tour,
they would have found a narrative for that as well.
I think they just didn't like someone threatening there, obviously, like, complete stranglehold on the sport.
We pitched, by the way, we pitched to, you know, the Saudi sovereign fund and was at FII.
So it's really interesting.
But, you know, say what you want.
But they definitely are taking, you know, a page out of Dubai's book, you know, Sheikh Mohammed's book and try to modernize.
We'll see if they are successful.
But we'll see what happens.
So, Eugene, you support human rights violations then, right?
Well, we chose not to raise them.
I'm just saying we spoke with the sovereign wealth fund in Riyadh, but we did not accept any money.
The beauty is that you can consistently, what about your way into rationalize and taking money from the sovereign wealth fund?
It is quite easy, actually.
But Harold, go ahead.
Yes, they have money and you need it.
It's very easy to just.
Hey, Rob, I'm going to go to Harold.
Sorry, he's been waiting for a while.
Go ahead, Harold.
You keep on muting, so I wanted to make sure the Harold gets a chance to speak.
Yeah, I'm here.
You asked me to join you.
So you go ahead and ask me whatever it is, you want to hear.
Yeah, so, well, yeah, sorry.
And I did not remove Harold.
That was removed in the back.
So people don't think that I'm doing this.
But I was going to say that, you know, Rob, you were saying, go ahead.
That threw me off a little.
Yeah, I was saying that, you know, surprise, surprise, people require capital and the Saudis have it,
and therefore you can justify anything you want to justify out of that.
I actually think it's probably a good thing.
If you're looking at like, you know, if you generally, if there's a general issue around the human rights violations
and people want to take issue with that, which is absolutely fine and fundamental, then I think
it's probably best you do take their money and then you can...
you know, get them heavily invested into ideologies that align with your thinking,
and then it's in their financial interest to change their thinking,
you know, that's probably the best way to do that,
because that's capitalism through and through,
and they clearly want to be capitalistic about it.
Yeah, absolutely.
I mean, I think the hard part here is that the...
You can't in the same breath say that we are capitalist society.
You can't in the same breath act like it's okay for us to do business.
with that country and then tell golfers not to that's the thing that always been right the united
states government's done forever it's it's absolutely astounding i mean if you look at the history of
the united states relationship with saudi arabia they've had large monetary controls over
many parts of our government for a very long time it's just completely hypocrisy
Absolutely. So we had to touch on that because that was pretty big news, especially for nerds like myself. But I did want to move to something that I've been thinking quite a lot about, which is the mixed messages the market is giving us.
it has been quite the confusing few weeks, I would say, for the markets.
I feel like all the economic indicators are confusing.
I feel like if you look at the non-farm payrolls and then you compare that to other indicators,
it would be very confusing to know whether we're in a bullish situation.
Should we be bullish or should we be bearish?
And so I brought experts, including Mish and Nancy, you know, a board today to have this conversation.
Nancy, thank you for joining us.
I don't know if you had any comments about Liv or BGA, but wanted to definitely get your thoughts on the markets.
What do you think is going on?
Give us your base case.
What do you think is going on?
Yeah, I think markets are, you know, everybody was very...
bearish coming into 2003 after one of the worst years for stocks and bonds in 22.
And then we had Silicon Valley Bank, and then everybody was expecting the Fed was going to pivot and cut rates.
And now sort of that panic has turned away.
And now we're back at looking at likely, you know, kind of an even coin flip about whether the Fed's going to hike next week.
And then I'm pretty eager to hear if they're going to say anything about the balance sheet.
specifically the mortgages, about a third of the fed's $8 trillion balance sheet is mortgages.
And obviously, U.S. homeowners have the option to prepay.
They're long volatility.
And so owners of financial mortgages are short volatility.
And I'm curious to see if they're going to actually have to be starting to sell some mortgages
because prepayments are way down in the U.S.
because consumers are pretty rational.
So Nancy, just so we can get some clarity here, are you thinking that we're going to continue sideways for a while?
Or are you thinking that more data needs to come out for us to get a sense of which direction things are going to go?
Do you mean in the equity market or the bond markets?
In the equity markets.
Oh, in the equity markets, it's tough to say.
I mean, you have a couple stocks sort of leading the charge.
It feels very, you know, kind of deja vu to me to 2000 when every dot-com stock was going up now.
It just seems like, you know, replace that with AI stocks.
And you have, you know, a lot of probably good opportunities out there, but a couple of large, you know, large companies that are leading the charge. So it's hard to say I am, I'm not a, I'm a volatility fixed income, a lot of other types of experts, but not not on individual stocks. So I.
It does look a little like, you know, kind of the pendulum has swung the wrong way,
and now everybody's experiencing FOMO and why didn't I have the cues?
And, you know, I hear all sorts of things from our clients.
No, it's interesting.
Mish, do you feel the same?
Do you feel like there's a lot of hype in the market, especially with AI?
But beyond that, you know, what's your outlook right now?
Are you bullish or bearish in the short term?
Well, you know that for the last couple of weeks when I've been with you, and by the way, good morning, Dr. Danish and everybody.
I have been telling you that the risk factors were all pointing on while the market was stuck or at least even in some cases testing lower levels and AI was having its party.
We did not lose sight of the fact that we're in the trading range and all of the weaker areas.
When I talk about all the weaker areas, I'm speaking specifically.
Right.
of the Russell's, the retail sector and the transportation sector, including the banking sector,
although that sort of has its own range going on right now, had really just done nothing more
than test the bottom of a six to eight year business cycle low.
And so the recession was something that we were putting off on the side.
in favor of stagflation. So that assumption is played out. We looked at, remember, we talked about
basic materials. We talked about CLF. We talked about chemoors. A couple of stocks that were,
I think it was your expression, Danish stuff that makes stuff. And all of this was probably
right. And here we are, right? Everything that we talked about has played out to this point. But people tend to get
over-exuberant about moves and one thing that you realize about traders in particular and in the
retail space in particular is that they get bearish at the bottom and bullish at the top.
Now, I'm not necessarily saying this is the top, but there's a couple of things that I feel
I can give to you to watch for that would be extremely valuable.
So number one would be looking at those ratio relationships that we showed you, particularly looking at the long bonds versus the junk bonds. Right now they downturned a little bit and that's okay. That's a good thing. You want the junk bonds to outperform the long bonds. You want the long bonds to underperform the spy. And that's all still happening. So we're okay. But
If you want to see things change, look to see if those ratios flip.
That's number one.
Number two is let's not lose sight of even though the cues have done well and tech has done well.
And even the S&P finally cleared a two-year business cycle to show chances of an expansion.
The Russell 2000 still has a ways to go.
So I believe that we could have more upside here, but it will be tough.
It'll be a wall of worry, and I'll get to that in one second.
And if we cannot get through 1900 or even 1950 in the Russell 2000, even if the spy is at 435 or 440, that could be the test of the top of the range.
And there'll be a few reasons why it doesn't go higher.
Number one.
commodities. It's the first month so far that that's turned up in terms of the Goldman Sachs
Commodity Index since October. So commodities are also joining this run. And if you remember,
we've talked about this, right? Commodities and equities can go up together until at such point
commodities continue to go up. And that's what we are also concerned about. What's going to happen
here, particularly again in food commodities. All of a sudden now we're seeing the softs rise.
Live cattle went to all-time highs yesterday. We have the grains starting to look like a bottom
copper, steel. These are kinds of things that could come and haunt and go back to the
stagflationary period. And then, of course, we have to look at the U.S. dollar.
which looks like now maybe we've seen the little bit of the near term top again after a bounce,
and we break down under 103.
That too can have an impact on commodities.
So nothing really has changed.
It's just where we are in the cycle.
And right now we've seen the rotation back to value,
but we've also seen it into commodities, tech taking a breather, which is fine.
Some stocks have had a real party and have been fun that we've talked about with great profits that I believe people should lock in and raise stops on.
And I think we have to now look and see what happens next week, as Nancy was saying with the Fed.
I still think that it's possible that they may announce that.
Either a pause or possibly we're not going to even meet in June.
I know I'm in the minority, but I've heard more people.
And then there you go.
Yeah, I mean, talking about the Fed a little bit, Trevor, wanted to go to you.
Thanks, Mish.
I was going to say that, you know, one of the questions that I have is,
Look, the economic data has been mixed.
I have to say the economic data has been mixed.
Anybody that thinks that it's been clearly bullish or clearly bearish
hasn't looked at all the data, in my opinion, right?
And so both Nancy and Mish are kind of pointing to the fact that there's been mixed data
It's very sector specific.
We're seeing commodities and equities potentially rise.
Russell has not gone as fast as others.
There's opportunities still in the market that kind of smells bullish, but I will not speak for Mish.
Trevor, my thought for you, my question for you is, how do you think the Fed is going to read all of this,
especially given the data from the non-farm payrolls, which did surprise?
Yeah, I think there's a couple of things.
And we've talked, you know, at length about, you know, specific headwinds, tailwinds.
And I think what's interesting about everybody says this time it's different.
But I do think what's different here is that equity markets specifically are kind of the beneficiary of,
you know, this very, you know, contrarian or pro or opposite, contra contrarian, if you would,
you know, perspective. So I think there's kind of like really two main points that I would
take away. And Mish kind of consolidated a lot of the thoughts that kind of concerned me about how
the Fed would interpret data. Look, at the end of the day, right, input material costs are going to
continue to go up. And if they do, the way that we're reading them in the commodity index,
the problem is that.
eventually that's going to translate into real implicit cost to businesses, right?
So I think one of the things that concerns me a little bit is that as we continue to see, you know,
equities, you know, chop, until geopolitical risk turns down or, you know, the Fed has more of a, you know,
definitive explanation of what their expectation is.
I think we're kind of in this range that doesn't really allow for much expansion, which is okay, right?
Like, you know, we don't always need to go up, you know, two to threefold over five to ten years.
We need to have rotation out of shitty stocks and into good stocks.
And I think the rotation into value is kind of one that the market has needed.
I think we had free money for a long time and we're rotating out of that.
So I think the reaction from the market has actually been a little bit more stable than I think most people expected.
We had a couple blips the last six to 12 months as we were kind of going in this higher rate environment.
quite frankly you know it's it's kind of mind-boggling for most people and myself and the the
individuals that I'm around that are high net worth individuals that are you know still kind of honking
the horn and saying hey you know we're we're really nervous and equities are kind of stayed neutral
to where they were at um
So I think there's a couple things. So the Fed obviously has kind of indicated or showed a hand that they're not necessarily as sensitive as they were during the taper, you know, tantrum that we had at I think 11.
You know, and obviously the debt ceiling has kind of, you know, just passed along. And I think ironically, where we're at right now is indicating to the markets and the bond markets that.
You know, just with the variation of pricing on bonds has been quite staggering.
I mean, you know, in the construction space, if you're if you're on a floating rate anywhere, you know, most of the time you have to have a SOFER or LIBOR rate cap that kind of swaps against that interest rate risk.
And I think one of the things that's become a little bit more interesting is instead of just blindly going in and buying interest rate caps right now, people are starting to wonder, okay, like, am I going to be range bound and what's the premium that I'm paying for this volatility in the bond market versus where I'm at in equities or versus where I'm at in any other exposure?
So I think one thing that I would point to that.
in consolidation of Mish's point,
is that if we continue to see commodity,
you know, pressure to the upside.
I think at some point you have to see some sort of crack
that's going to indicate where the overall sediment of the market's going to be.
And I think that's going to kind of tell us where rates will potentially go
over the next 12 to 24 months is if we actually see kind of this deflationary pressure
and, you know, mixed data coming in, etc.
There's at some point going to see, you're going to see a rotation of actual market
implications from all this data that we're seeing.
That's a little bit more, I guess, forward curve if you would look at it,
rather than continually looking in the rear view.
I mean, I think all of us can agree that the Fed has constantly been looking in the rear view
and trying to project as best as they can.
But I think everybody's been sitting on the channel talking about, man, like,
obviously these things are happening.
And if we're continuing to, you know, push rates higher,
it's going to have real world impacts.
And I just think that we can't negate,
The challenge, though, Trevor, is that OPEC cut its production again.
The challenge is that we are seeing commodities rise just like you guys were talking about.
The challenge is that we are in a world in which the Fed doesn't work with real-time data, and they're working with backwards data.
And there is a lag.
And this is the core issue that we keep talking about, which is we're sitting here again talking about how the data that we're looking at has some lag in it.
Mish, you know, wanted to get your thoughts on this.
You know, we have put so, we have raised interest rates so quickly,
has it really flushed through the system?
And does the Fed not know what we're all talking about?
Yeah.
Well, yes, Danes, first of all, I'm glad you brought up OPEC plus because I think that's another real example of what I saw yesterday after the reaction was initially the oil market went up and then, you know, it fell back a little bit.
You see, OPEC plus can impact the price of oil, but people look so short term.
Right.
And right now, basically, what oil has proven to me is that it is part of this whole potential super cycle of commodities in that the supply has definitely diminished.
Supply chain is still going to be somewhat of a problem.
And anything, any rise of demand or any disruption for any particular reason.
Right.
oil goes back up over $80 a barrel, you know that people are going to start buying the futures, anticipating that oil is going to rise.
I mean, even natural gas looks like it's bottoming.
Now, in terms of the Fed, yeah, I couldn't agree more.
Actually, Trevor made some good points.
They are very...
reactive, not proactive. The rate of change on the race was spectacular. I still believe that if
I had to put my head in their head, and of course, that's not so easy to do, I'd be thinking
right now, well, the market held, yeah, text in its own fumes. Commodities are bounced,
but it may be more technical. I'm not really seeing any major problems. There's still very
mixed data, as you said, Danish. So let's take a victory lap here and say,
we avoided recession and they'll do nothing until the day of the potential where we have
obviously mother nature issues still going on i mean besides the fires in canada we've had major
drought panama canal supposedly very low so they're actually raising the rates of shipping and also
reducing the amount of stuff that people that the ships can carry
You've got all kinds of problems with drought in other areas of the world.
Russia is still threatening to cut the Black Sea supply chain of grain.
I mean, all these things could come home in roost.
So getting back to the Fed, I don't think they're going to be looking at that.
I think they're looking at, whew!
We did it. Soft landing. Look at us.
Exactly. And that's what, I was going to go to Nancy on this. You are 100% right.
I wanted to hear from Nancy because I feel like I was hearing the narrative first from Nancy that the soft landing.
Nancy, I'm not saying that you're saying there's going to be a soft landing, but I kind of sort of inferred from what you were saying that you are in the camp of a soft landing.
Are you?
Do you think that the J-Pow won?
I mean, I think people, a lot of people are expecting a soft landing at this point because
Equities have, you know, West's year than last year.
And I think optimism is pretty high.
It's a lot of FOMO.
I would say the thing that I think is probably not.
Can you hear me?
Can you hear me?
No, I'm going to put you down.
Go ahead, Nancy.
Yeah, what I was going to say is I think the stagflation node is one of those things that people are not really expecting.
And I do think that would be a really disaster.
Nancy, now your audio is actually pretty bad.
Nancy, your audio is pretty bad.
I can't hear you now.
somebody might be trying to call Nancy.
But so Tom, I know you've been, Jeff, just give me one second.
Tom, I know you've been speaking a lot about the lag between what the Fed,
between the data and the Fed, wanted to get your thoughts as well.
Yeah, I mean, if you pay attention to Chirpao and the FOMC minutes in the meetings, literally every response to every question is, we'll have to take a look at the data.
We'll have to take a look at the data.
And it seems as if they don't ever look at it.
They don't ever actually look at it, or if they do, it's very lagging.
And I think this is really just confusing market participants.
You know, last week we were looking at 63% confidence of a 25 BPS height.
It's okay.
I think it's still lagging from the forward.
Go, keep going to.
We're looking at 25 BPS.
They had like a 63% confidence.
That was all the way up at 75 earlier in the month.
And now the market has flipped.
Now they're looking for 76% no BPS hike.
You know, that's, of course, I think what we all are hoping for maybe.
But I'm not convinced.
We've seen a lot of volatility on these rate predictions.
And at the end of the day, the Fed just keeps...
keeps raising rates.
And I don't think that they're really looking at what we are maybe.
The economic data that came in, we saw, let's see, recently unemployment rate came in a little higher.
So that might bode well for no interest rate hike.
Uh, jobless claims actually came in a little lower.
You know, this is, I don't think they're seeing the data that is going to really tell them, okay, we need to pivot yet.
I think the economy is and I think that that makes sense, but the, uh, the Fed seems pretty determined on getting this terminal rate higher and,
crushing more banks, perhaps. I'm not exactly sure their aims anymore, but they have followed through
pretty consistently when it comes to the hikes, and they have not noted in the notes or in the meetings
yet that they're interested in stopping them. Well, I think the pushback to that is that they don't
give a crap about equities, that they don't give a crap about... Absolutely.
that's not actually their mandate right their mandate is to break demand bring down inflation
while trying their best to maintain employment.
But I think they care more about inflation than they do.
Price stability is more important to them.
They'll never say it, of course.
But price stability is way more important to them than employment,
since they are totally cool with demand destruction.
The problem with demand destruction is that you can only reduce the demand in your country,
but inflation is a global issue.
This has been the freaking problem.
that you can only reduce demand locally, but inflation is global.
And I think that has been the most confusing aspect of this where, you know,
Mish has been in the stackflation camp.
I think most of us believe that there might be actual concern for all of this flushing
through and causing deflation.
And now this whole, you know, AI movement that we're seeing is,
I'm telling you right now, you know, in my business, I talk to employers every day and employers are adopting AI.
This is not like a lot of Web3.
Sorry, guys.
This is real.
And this is actually going to affect businesses today.
right and so you know this is not like nfts this is like the real deal it's affecting real businesses
today uh i have a lot of crypto people up here so it's i have to like keep apologizing for my
honest comments but you're good yeah
But, you know, this is not like some smoke and mirrors and speculation.
This is like real use cases today.
And employers are using it to help them deal with a recession.
So, Jeff, I wanted to come to you around.
You heard a lot of bad-mouthing of AI earlier.
I didn't give you the chance to jump in then, Jeff.
But, you know, wanted to get your thoughts on both around AI and your outlook on the queue.
on the cues and the other sort of,
to me,
the other big,
big question,
which is I think that there's going to be another rate hike.
How do you think that's going to affect tech?
Yeah,
a couple of things.
Is my audio okay?
Your audio is great.
Okay.
First off,
J.P. Morgan was on the tape, I think, yesterday saying that they see headline inflation going from 4.7% in June to 3.2 in July.
It's found that interesting. Second point on the Fed...
was you heard last week, William Jefferson, who is in line to be the vice chair,
on the records saying that, you know, most likely should pause in June and re-look at, you know,
July, potentially. And there was also the Philly Fed president as well. So this is, to me,
the first time I've seen Fed presidents, you know, openly out there. Basically, there's
there's cracks forming,
whereas before they've kind of all voted in unison.
Maybe there were some objections,
you know,
behind closed doors,
but now they're actually openly out there
you know, with differing views on what should happen in the next meeting, you know,
which is next week. Should it be live or, you know, or should they, should they take a pause?
So I found that interesting. And then finally on commodities, I'm just not, maybe I'm just looking
in the wrong. I was just, I was looking at copper, steel, aluminum, and I'm seeing it, you know,
flat to down on the three months, down on the six month, three months.
flattish on the last month.
I'm not seeing, I'm not concerned about it.
I mean, maybe in the last couple weeks,
some things have turned up,
but I'm not seeing huge concern there on commodities.
And then to your question on the cues,
I mean,
some of the cues have run pretty hard,
right, over the last, you know,
couple of weeks.
And some of them are still way off.
They're all-time high or their 52-week high.
Tesla, for example, is still 40 to 50% off its all-time high.
And technically, it's closed over 218%.
It's got some room to potentially run both on the technicals and the fundamentals.
A lot of analysts are raising current quarter guidance on deliveries.
Recently, the India factory talk is now ramped up dramatically in the last couple of days.
The China numbers are strong.
Looks like they're refreshing the Model 3.
So Tesla alone could potentially...
you know, put the cues on its back and, and,
the only challenge though, Jeff,
is that there's one thing,
which is selling to enterprise,
to help enterprise be more efficient
during a recession versus using,
you know,
a consumer discretionary,
that, you know, people don't buy cars in recessions.
That's like a very well-known thing.
And so, you know, it's not surprising.
I just say, I'll challenge you on that one.
So on inter-resc- if you study the last recession, you're right.
From a, like, from a U.S. auto perspective,
U.S. auto dip, dip about, depending on which year you use, if you look at 2007 to 2008 or 2007 to 2009, it dipped somewhere between 16 to 36 percent U.S. auto sales.
But you've got something called EVs that are growing, you know, basically 50 percent.
um evy adoption inside of that total auto curve year on year so last year five percent of all autos sold
in the u.s. we're ev now it's seven percent not good uh i'll push back really quick before you
kind of go down that hole i was going to say that you know uh last five years don't count everything
was free uh and uh yeah you don't have to count the last five years precedence
You don't have to count the last five years.
EV as a percent of autos is growing globally and in the U.S.
And it will outstrip any recessionary slowdown based on its growth rate.
So, yeah, I'd be happy to debate that.
But those are just, those are the current numbers.
The thing that's interesting about EVs for me, I was actually speaking to an executive, again, for my day job.
around their healthcare actually.
But I was just asking random questions about EVs.
And I was like, oh, we talk about one of your competitors every day,
which is Tesla.
And it was really interesting because the thought process was that there's a underlying belief
that we're going to see EVs go like the TVs did.
And that was a really interesting point, which was,
remember how expensive TVs used to be.
Now TVs barely make their revenue from the actual hardware,
and a lot of them are trying to become platforms or software.
And so the hardware costs will go down incredibly,
which is what we're seeing from Tesla,
but the software costs...
you know, it's going to be very interesting how that might rise.
I understand the margin play and the opportunity.
I'm still very bearish on consumer discretionary spending,
especially on luxury items like cars, new cars.
But, but Mish, I wanted to get your thoughts on Jeff's point on commodities.
Jeff's, I know that's your wheelhouse, so, you know, I'd love to get your thoughts.
Yeah.
Well, yes, let's jump on the EV conversation because it relates to commodities.
I mean, obviously, there has been mass adoption.
Actually, statistically, once you get past 5% of sales as EVs, that is actually the statistic that's considered mass adoption.
And the U.S., of course, is still behind some of the other countries, even oil-rich countries throughout the world.
that are already basically fully are EV.
So what do EVs need, right?
They need certain commodities.
And there's been so many stories, again,
that have floated around about shortages of lithium,
shortages of copper.
And so all of these commodities are still a little bit,
I think behind the apoll here in terms of the rising demand.
I also, Dan, cannot agree with you more.
Forget about the last five years.
Everything in life that we, as we know, is different.
So it's a hard compare.
I also wanted to make sure that I also said,
you mentioned global inflation.
Global inflation is unlike anything we've ever seen
in other inflationary periods in 1979.
Global inflation was not as much of a factor as it is now.
But anyway, getting back.
On top of all of this, there's all these stories circulating that people seem to ignore.
Like, for example, right now, the West Coast, port strikers, they're looking for more money.
So, you know, you could talk about AI doing this, that, and the other thing.
But they cannot really saw, it cannot get to the point yet where everything is so done through.
automation that you need you don't need port workers to bring stuff off of ships and as we're heading more and more into a busy summer season they're looking for more money and they're threatening to strike and not just there you've got also problems in other places like in canada i was reading as well about uh british columbia striking so i don't anybody
UAW as well as are threatening talks are breaking down as well on the auto side.
Right.
So, I mean, just think outside of the box, right?
And to say, oh, commodities are down now.
This is exactly what commodities do.
They are highly volatile in nature.
In 1976 to 1979, after you had this big move up, and you know, I love to talk about sugar, that was the prime example.
Mish, so sorry to interrupt, breaking U.S. trade deficit game out.
It has widened sharply in April.
trade deficit increased 23% to 74.6 billion.
The Commerce Department said, like, a few minutes ago,
the data for March was revised to show that the trade gap actually narrowed to 60.6 billion
instead of 64.2, which was the original reported.
But interestingly, we saw a significant increase in trade deficit from...
Again, last month was 60.6.
Now it's 74.6.
Unsure how the markets are going to react to this.
I'm assuming not positively.
But Mish, keep going.
Sorry.
Well, yeah.
I'm sorry.
I lost my train of thought.
What was I said?
No, no.
I wanted to get people's thoughts on the trade deficit.
I mean, another reminder that we are importing more than we are exporting.
Any thoughts from anyone on the trade deficit itself?
on you know is is america continuing to
Caleb any any thoughts i'd love to get your to bring you in on the trade deficit data
i know you haven't had a chance to deep dive deep into it but how do you think the market
will react and again it's not financial advice i just wanted to do you know yeah well good
morning guys um i was out just grabbing uh coffee so i'm back at the house now and happy to hop on
With respect to the trade deficit, I respectfully couldn't care less. I think it's no secret that the United States will have larger and larger deficits over the long run. And I think that's both...
a structural economic dynamic and a government dynamic, right?
So, you know, the government's going to continue to run its own deficits.
Meanwhile, the private sector is going to continue to import consumption, right?
And so from that standpoint, that's just the nature of how things go, right?
I'm in Turkey, right now, I'm in Istanbul.
And so I got to, you know, I've met some people since I've been out here.
And it's pretty interesting to kind of hear their thoughts on things,
both from a like domestic economic perspective here.
And, you know, there's a lot of envy about being an American and the ability to have U.S. dollars in my bank account.
And so I think from that perspective, right, this kind of, you know, trade deficit type situation, the market doesn't care.
The currency markets don't care.
The stock market doesn't care.
It's baked into everyone's expectations.
And in fact, the expectation is that that deficit will only widen as time goes on, right?
Yeah.
The United States is the consumption hub of the world.
And in a lot of ways, we are all very lucky to be in the U.S. economy and to be able to import the productive capacity of the world for our own consumption.
Right.
And so for a lot of the world like China, there are a challenge going forward.
And I won't make this into a China debate or topic.
This will be my last thing that I say is, you know, countries like China are now facing the dilemma of how do we become?
the consumers, right?
So that's a massive challenge for those countries
and for many countries around the world.
So the trade deficit in particular,
It doesn't boil at all into my thesis.
In fact, I might actually be a little bit more worried if that deficit was declining
because it means we're somewhat on a precipice change and markets don't typically like change.
So those are my thoughts there.
But Kayla, I actually agree with you, but I'm going to push back on the eventual.
Yeah, thanks, son.
I want to push back on like.
you know, this flywheel can't persist forever, right?
So when you talk about the trade deficit, in the balance of payments, right?
So it's just, you know, macro 101.
Basically, it equates to a current account deficit or it usually does.
Here's more parts of the equation.
But a persistent current account deficit, I mean, the fact that we have the world's
reserve currency means we can do that, right?
But it will likely put downward pressure on the U.S. dollar, right?
I mean, just, you know, just basic fundamentals.
Right.
and we are increasingly dependent on foreign capital, right?
Like, you know, the Chinese yuan and other things.
So I guess, Caleb, are you, yeah, I agree with you.
Yeah, you know, like human nature, I would say, even more so than government policy and other
things.
Like humans, if they can keep spending, they will just keep spending.
And if they don't have to pay it back, they won't pay it back, right?
So, but at some point, this doesn't work.
So it might work for years, it might work for decades, but at some point, this, this whole
system breaks. I mean, don't you think Caleb or others?
Yeah, so, you know, it can't go on forever.
Caleb, you can go ahead, but I wanted to explain I've been getting messages.
And by the way, people that have questions or comments, please do go in the bottom right and put in your comments.
You know, a lot of times we'll start moving through a lot of information all at once.
And if you have questions, this is the place.
The goal for us is to educate and inform.
This is not financial advice, right?
So if you don't understand what's going on,
don't just go about your day and say it's not a big deal.
Go in the bottom right and ask questions.
And if you have insights, please share them.
We often bring people up.
But Caleb, I wanted to give you a chance to respond.
For sure. I mean, I accredit a lot of my growth of knowledge of economics to someone like
Peter Schiff and generally I subscribe to the Austrian School of Economics. So I 100% agree. Over the long
run, yes, it's not sustainable. But I can't make investment decisions or short-term macro predictions
based on
that long-term eventuality, right? So I do see that as an eventuality, what you mentioned, Eugene. And so I'd
100% agree there. But as far as the things that preoccupy me or keep me up late at night,
it's certainly not one of them in the short term.
I guess the problem is the timing, right?
It's impossible to figure out when the timing is.
Because all these things,
this thing will keep persisting for years and years,
and at some point very quickly,
you know,
things will reverse and that's going to happen really,
really fast.
But I get to your point,
it's hard to predict the timing.
So how do you,
you know,
because you can't do that,
how do you invest based on that?
Is it an open question.
If I can make one more point on it, too,
right?
I see Tom has his hand up.
I really respect what he has to say,
so I'd love to pass it back over to him in just a second here is,
you know,
what?
like the important thing to remember is global markets, global macro is all on a relative basis, right?
And so in many ways, we're the cleanest shirt and the dirty laundry basket.
And so the United States is continuously going to benefit from that dynamic where you wake up in the morning, you're like, damn, I got to put something on.
I got to go out today.
okay well shit i can't do laundry all my clothes are dirty um this shirt is the best right and that's
the united states right we're the prettiest girl at the dance and so everyone wants to dance with us
everyone wants to do business with us our currency in a vacuum um does not look great right we're
essentially having to pass a debt ceiling so that we could issue more debt to pay off old lenders
which was issued to pay off
older lenders, right?
And so on an absolute basis,
this is where someone like Peter Schiff gets it
it totally right. The United States economy, the United States dollar, the whole system's
fucked up, but the entire system is fucked up. And in that fucked up system, we're the most
attractive person to dance with. So I'll just kind of there.
So Caleb's point is, just for people that didn't understand, I will make it even simpler
for simple people like me. We are the least fucked up of the fucked ups. All right, Tom, go
ahead. Sorry, Caleb. Tom, go ahead. Tom, you got on mute bottom left.
Thank you, man.
I want to give just an idea.
I know we have a lot of viewers here and everyone's on different levels.
So the trade deficit increasing, I'd say that's pretty significant, like 20%.
The near-term impact, I don't think, is very important.
But the long-term, I think, is really what everyone's looking at.
So basically what that means is the U.S. is sending out more money, right?
They're moving it out of the country.
And this can have impacts on stocks, obviously, the dollar and bonds.
GDP.
But I think a big concern.
Yeah, GDP2.
Yes, of course.
I think the real concern would be just like this creates more uncertainty.
And we're in an extremely uncertain time.
This could suggest that domestic companies aren't performing as strongly on the global stage.
Could be dampening potentially their earning prospects.
Could put increased downward pressure on currency markets.
Like the dollar is already struggling.
I think it was, I said that earlier, Nancy maybe talking about the dollar hitting like a lower high here.
Yeah.
And even bonds. Bonds, this could lead to like increased borrowing and that can mean higher interest rates.
Demand for credit could go up, higher interest rates, then in turn can depress bond prices.
So it's like I don't see anything about this as really positive.
But again, this is what the U.S. does. This is not new.
We have run a trade deficit, what, forever?
Something like that.
So I just want to give like a little overview for those who might not be as familiar with what that means.
And just so people are aware, imports, so again, to kind of break down the data, obviously, the goods and service imbalance, which is the trade deficit, was $74.6 billion for the month.
It was $1 billion less than the Dow Jones actually estimated, so that's a good thing.
But it was a $14 billion increase from March.
and exports when tumbled by 9.2 billion, while imports rose by 4.8 billion.
As people know, when you start breaking it down that way, you start saying, okay, well, why imports a problem?
Well, technically imports are a net negative for GDP.
Right.
So that's a really big part of it, which is now people are going to start building their base case
so what they expect GDP to happen.
And if we really are truly talking about this soft landing narrative, it does put that at risk.
Trevor, go ahead.
Yeah, I was going to go back to, you know, obviously talking more macro side of things.
I think one thing that if it was Neely or something like that last week or the week before that talked about,
you know, student loan interest rates, you know, and the impact to, you know, that facet coming back online is a deflationary pressure.
I think one thing that's, that's kind of interesting to look at is if you look at the overall education cost,
education has contributed a large portion of inflation over the last, you know, 10 to 15 years.
And I think one thing that's interesting, if we're meshing this well with, you know, the discussion of AI is how quickly and how agile educational institutions have to be.
right now in order to compete with existing, you know, I don't want to say correct per se,
but obviously more agile education style systems.
And obviously historically, if you look at any sort of...
you know, cost of acquisition versus wage growth, I think you're starting to see more and more people really contemplating education, the cost of education relative to their earnings potential, which actually brings an even more heavier discussion about institutions in education.
lowering their price because obviously we've all seen the impact to housing.
You know, as interest rates grow up, asset prices come down, right?
So theoretically, if the cost of education in terms of interest payable by the borrower
continue up, theoretically many would think that price of education would come down.
I haven't seen that happen, which is kind of an interesting thing.
Except like healthcare, education is fully subsidized by the government.
And so therefore, they are not in a free market.
Correct.
But you have to even look at the people who have privatized those lungs, right?
It's not fully, not every student is rotating their, you know, funding for college subsidized, you know,
government program, right? A lot of people rotated into private lending. So you have to look at,
you know, there are some pros and cons where I think deflationary pressures are even more
significant that once these student loans start coming back online, you are going to see more
deflationary pressure from those who still have balances that haven't paid them for 18 to 24 months.
Yeah, it's interesting.
That was one of the parts of the fiscal responsibility act, which has not flushed through
the system and won't flush through for a little bit, which is we're going to see people now
starting to pay $300.
I think the average was $300 a month that needs to be paid out.
So it's kind of interesting that no one's accounting for that except for on our stage,
even though it's not financial advice.
Go ahead, Eugene.
Yeah, I was mentioning, I was looking at the data in detail, so I'm still looking at it.
But, you know, one thing also China, the China data has come out.
And actually, Chinese exports have fallen by 7.5%.
So that's in May compared to a year earlier.
Also imports falling.
So that actually describes, at least on the Chinese side, that there's, you know, almost like de-globalization, right, which is this big thesis.
that's happening. So I think it's just an interesting point, right? Are we seeing decoupling of economies?
I think that would have a large effect. You know, we've had about 70 plus years of a globalizing world.
And in the last 10 to 20 years, we're starting to have a de-globalized world. And that's going to have a big impact on countries as well as GDP, et cetera.
So yeah, I'm looking at the data right now, but really fascinating stuff that's happening.
Caleb?
Just on that point, I mean, a lot of that productive manufacturing capacity has been leaving China now for the past three years because of, you know, what happened with COVID and the world realizing that there's an over-dependency on a specific geographical location.
And so a lot of that has gone to like Vietnam, Bangladesh, Thailand, so on and so forth.
India.
I don't have any.
I picked up a lot too.
Exactly, right, thank you.
So, you know, it's just, it's being reallocated within Asia as a whole.
So I think that's just, you know, an important point to add on to what Eugene just said there
because it's the right thing to bring up.
And just adding a note to that, it's coming to the U.S. too, as we've talked about in the past.
Well, according to the trade deficit data, wouldn't that speak to the opposite?
Well, it's not here now.
It's coming, like, I would say the next, what does the journal say?
I can't remember what they say, but yeah, coming to the U.S.,
Yeah, Jeff.
I was just going to say this is the first time and from a policy perspective in a recent history,
the U.S. has become increasingly more protectionist.
If you look at what they're doing right now with auto manufacturing, with EVs, bringing the batteries here, both on the raw material side and recently on the assembly side.
And then the Chips Act, which really, I mean, those FAPs have barely broken ground that's going to take a few years to play out.
But this is the first time, I mean, I've been sourcing.
I've been sourcing supply chain for a couple of decades, and this is the first time I've actually seen the U.S. actually become increasingly protectionist in its policies, whereas in India, China, Brazil, and so forth, I've been doing this for decades.
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Mish, it's up to you.
Well, I just wanted to add something to what Caleb mentioned,
and that is Vietnam.
And again, I think we had called that the sleeper trade.
But I saw a very interesting chart
in terms of manufacturing capability
and also demand for manufacturing as China goes down
and Vietnam is rising.
So I don't know if anybody has taken a look at that ETF over the last several weeks when we've talked about it.
But it is up a lot considering it's a small trading instrument.
So not trading advice.
Danish, make sure I say that.
But nonetheless, it is clearing a base that goes back to last October.
And really more importantly, from a fundamental standpoint, it's rising as a country where we are looking to create goods, which falls right in line with the numbers that came out today in terms of our imports rising versus our exports.
Right.
I want to jump in on that because, you know, I kind of was doing a tour Southeast Asia like, you know, 10 years ago and looking and looking at different countries. And of course, can't help but think of macroeconomic factors. But, you know, Vietnam is insanely poor, right? I mean, relative to even its, you know, neighbors like Thailand and some others. But I mean, the energy there. I mean, I don't know if folks have spent time on the ground there, but when you do, the energy is just so palpable, right?
And, you know, I mean, it's like very similar to what I felt in Dubai just a few days ago, just, you know, seeing, seeing the rise.
So, yeah, I totally agree with you kind of on the subjective portion.
You kind of feel the energy is a place if you go to.
And as Americans, you know, I mean, we fought a war.
We lost many decades ago.
So I think we tend to ignore, we tend to have a specific blind spot about Vietnam.
But, yeah, definitely, you know, definitely agree that I think the subjective sort of matches the growth in GDP.
Yeah.
I advise it.
companies in this, mega cap companies in this space. And I'll just tell you that, I mean, this is happening.
Fundamentally, this has happened, this transition to Vietnam, not all in. I mean, there's still a
huge face of manufacturing in China, but there's a significant migration that's happened over the
past, call it 36 months into Vietnam.
Yeah.
And this is not a shit on China room.
I just want to be clear.
But I do have to say that unlike other countries, China does require rapid growth.
It's not just about the fact that China has maintenance of their existing manufacturing industry.
They need to continue to grow at a rapid pace to justify...
the debt that they're taking on and the rest of the industries that they have built up,
including their real estate industry, which is sputtering.
But I'm not going to go down that road.
Like Caleb, we can talk about this all day, and we all have our issues with China regardless.
But, you know, I do have to say that, you know, ultimately China has to be smelling the roses
and realizing that they're in big trouble.
But, you know, I wanted to pivot away from this and talk a little bit about what's going on.
In crypto. Now, I have to say I am not an expert on crypto, but I have tons of them right now up on stage, and they've been here kind of weighing in on the bigger, on what's going on in the industry.
So for people that have been living under Iraq, in the last.
48 hours, we have seen more action from the SEC against the crypto industry than we have in the past few months.
And it's not just the SEC. We have seen states come out and...
and join this fight against crypto.
Tom, it'd be really helpful for our listeners.
Again, we have 5,000 plus in the room right now
who might not be as familiar with what SEC is doing
and how the states are following suit.
If you can give us a quick summary of what's happened
in the last 48 hours, that'd be wonderful.
Man, there's a lot of details I'm going to miss here.
The gist of it is that the SEC over the last year has been moving on crypto exchanges.
I would say probably kicked off by FTX, but I guess the actions they're pursuing now are not
related or not similar, not the same problems as FTX.
But in the last 24 hours or 48 hours, we've seen
Gary Gans or the SEC go after Binance,
which is by volume, the largest crypto exchange in the world,
and then Coinbase.
And that is, they're one of the major top ones,
but I would say in the U.S., really the biggest player,
it's like the original exchange I used.
It's really the safety net for the U.S.
And just basically by going after these two, it's,
It's a declaration of war against crypto, and I don't think that's really surprising to anyone based on kind of this choke point 2.0 seen over the last few months last year.
It is basically kicking it up a level to very extreme. These are well-funded.
You know, huge legal teams.
These are not your pushover kind of companies.
And so they're, I don't know if they're looking for a battle.
I don't really think they're going to be able to pin anything on Coinbase.
They approve their IPO in 21.
They're a publicly traded company.
You know, all their financials are audited and visible.
Yeah.
It's a bit of a circus right now, and it's even hard to keep up with all the details coming out.
So if you guys have any other input, it'll probably spark my memory here to some more specifics.
Yeah, so, you know, one of the, there were many different components of the suit.
What was very interesting was that the suit,
the lawsuit against Binance was very similar in certain respects to what they went after Coinbase on,
but was slightly different because of one big difference.
So unlike...
The, oh, perfect.
We got Joe up here.
That'll be great.
If the team can bring Joe up, that'd be great.
So, you know, we have the co-mingling of funds conversation.
And so Binance was accused and allegedly was co-mingling money on the back end,
which does give you a little bit of that FTC's flavor.
But the difference is that was in 2019.
Right.
Right. And so before there was all of this conversation around, and also they don't have an
Alameda research or a hedge fund that is involved in this activity that is then using the co-mingling
of funds to then generate more income. Here it was co-mingling of funds because there weren't
regulations. And so, Mickle, I'd love to get your thoughts on the, for again, for people who
are listening who are not as knowledgeable about this specific issue. One, you know,
You know, the similarities between Binance and Coinbase and those lawsuits and then two
the differences. Go ahead, Michael.
Yeah, so obviously you have two pretty big differences between Binance and Coinbase.
Binance is obviously, the SEC is really going after Binance for some of the sketchier stuff
that happened a while ago.
It's hard to know exactly how much stuff is still going on today.
When it comes down to Coinbase, it's really definitions based on
what the SEC wants to call these different digital assets versus what some other regulators in the U.S. also want to call those same assets.
So I really do think the fundamental issue here, it's not that the cryptocurrency industry doesn't want products regulated.
They want products regulated.
And there's...
products on Coinbase, such as yield accounts and just 4% interest that Coinbase likely knows
they need to register with the SEC. The bigger issue here and the big thing going through all
of crypto is what are the cryptocurrencies themselves? Are those securities? Now, I have heard
great arguments on both sides, but the fact of the matter is and the reason this is so confusing
is because the SEC has been giving very confusing statements coming out and saying Bitcoin's not a security
right.
Ethereum is not a security.
How can you say Ethereum is not a security?
Some other cryptocurrencies are securities and not offer any guidance on what makes Ethereum not a security and what makes another cryptocurrency a security.
So that's the fundamental issue right now.
And I think the way we're going to figure that out is the ongoing Ripple SEC case where we should get a determination on an XRP that should give the market some guidance.
Yeah, so I'm happy to hear from Joe on this.
It's actually, so Joe has been up on stage with Scott and Mario before.
Joe, I haven't, we haven't worked together before, but thank you for joining our stage.
Yes, good morning.
You know, wanted to get your thoughts on, first of all, this over, you know, the overarching premise behind what the SEC is doing.
The SEC has clearly, you know, the crypto industry.
has been asking for clarity for the past few years.
I don't think that could ever be a clearer signal.
I wish that the approach that they took was better.
But SEC is being pretty clear here, aren't they?
And what are your thoughts about not only what has transpired in the last 48 hours,
but what does this mean moving forward?
Yeah, thank you for having me up.
So a couple things you have to start to frame this discussion,
and it's a basic understanding of securities analysis.
Securities analysis in the United States is meant to be a flexible, nimble standard employed by the courts.
This is why this argument you hear that's repeated as a trope by many people about, well, we don't have guidance.
That's the point.
They're never going to give broad sweeping guidance for 10,000 different tokens and assets that exist.
There will be some that move closer on the spectrum towards investment contracts.
There will be others that move closer on the spectrum to commodities.
And the whole point of how we analysis, the whole point of investment contract analysis,
is you need to assess them on a case-by-case fact-specific basis.
It's not black and white.
It's a spectrum, and that's how the law is set up and meant...
to exist. So the gentleman who was speaking earlier who said we're going to get clarity from the
XRP case. That's completely wrong in my opinion. You will get clarity on one particular issuance,
one particular token, one particular set of facts that the court is applying of highway analysis too.
It will have almost no persuasive authority for many other tokens that were not issued and put
forward into the market in a similar basis. And by the way, once you get the
the ruling in SEC versus Ripple, I would bet every dollar I have that it will be appealed.
If the SEC loses, it will go to the appellate court and it will drag on for months and
months or potentially years in the appellate court and vice versa.
If Ripple, you know, if Ripple loses, they're going to appeal it.
There's no doubt there.
But the difference between what's going on right now, I think somebody said earlier, and I agree with it,
You have to look at this whole thing with the frame of the FTC going down and that I think many enforcement agencies, particularly CFTC and SEC, were waiting to see if there was going to be legislation passed by Congress.
If Congress would have handled it last year, there would have been no need for any of these filings.
And it's not a coincidence that all these filings started to tick up.
after FDX went down, after Congress said there's no crypto omnibus legislation that's coming.
So the regulators were told, okay, go fire off the lawsuits.
It's your responsibility to deal with this.
Congress isn't going to touch it.
So I think the flurry of these suits you've seen since FDX goes down just speaks to the fact that Congress has basically said, we're not going to handle this.
We're not going to pass anything and we're not going to deal with it.
Now, the final thing, people are fundamentally misreading both the finance complaint, the CFTC complaint against finance and the SEC complaint against finance, both of them and the current Coinbase complaint.
All three of those complaints have taken the position that Binance and the suit against Coinbase, the SEC suit, that Binance you're operating as unregistered exchange.
As a broker-dealer, as a clearinghouse, as an exchange, you did not seek the proper registration to...
have these activities and engage in these activities in the United States.
You had to come through us to get clearance to do that.
And if one of the tokens, just one of the tokens,
is found to be an unregistered security and investment contract on their platform
and they were dealing in it, they can seek an order suspending
all of their trading activity for operating an unregistered exchange.
And that is sought in the suit against Coinbase.
It's right there in the relief.
The one final thing before I shot up here is that I don't think there's been enough reporting
and enough discussion of the TRO petition that was filed late yesterday.
It's 73 pages.
I posted it on my...
my Twitter, I'll share it here in the nest here, but there is, there will be a hearing in the next
probably 48 hours.
I'm told it may occur today where they are seeking to freeze extensive amounts of
Binance's assets.
That has been already filed by the, the, we're going to talk about that in a little bit,
you're jumping ahead.
No, no, it's okay.
That was going to be the big topic for today, actually, is, you know, we know what's happened in the last 48 hours.
Now I think, by the way, Joe, thank you so much for coming up.
The level of clarity is exceptional.
I was going to say that, you know, the one thing I was going to bring up in all that you said was around Coinbase.
Look, I...
think that the U.S. government is making a huge mistake. I have to tell you, I'm going to put my
biases out there so that people can listen. You have to be honest, right? And so I put my biases out
there, and this is my disclosure. I think the U.S. government is making a huge mistake. I think that
the U.S. government should have worked lockstep with Coinbase to come up with some of these
regulations so that it doesn't feel like an enforcement action, that it truly feels like they work
together to build something good, and that America would win this war in crypto. That is my
opinion, and again, there's no evidence that that would have worked. Can I ask you a question
about that? Just real quick. So just so people understand, the SEC has limited abilities to issue
pronouncements and regulations. They really do. Their primary tool is enforcement, and that's
what Chair Gensler said repeatedly. If you wanted to work lockstep to create regulations or create
a legal framework, which I think is correct, I agree with you on that.
You know whose responsibility that is?
It's Congress.
And we have a do-nothing Congress where nothing can get past.
There have been like 15 bills on crypto presented in Congress.
None of them go anywhere.
They're just completely gridlocked and frozen.
I agree with you on this.
It doesn't change my opinion about how...
I guess the point here is not specifically calling out SEC.
The point here is to call out the stupidity of our government
that ultimately we have this technology,
which I believe could have value,
either in its current form or as an unbundled version of what it is,
taking different pieces of it and enriching all of our industries.
But what we've done instead...
is that we have continually gone,
this is an anti-innovation fight,
we're seeing it in AI,
we're seeing it in crypto,
we keep seeing it in every industry,
and it's a do-nothing Congress
that talks a lot of shit.
And like that's kind of the,
where we are right now,
to be completely honest,
that's kind of how I feel
overall and I wanted to put my biases out there because what's going to end up happening is that we're going to push coinbase to go offshore
We're going to push all of these companies to stop working in the US and we're going to decouple ourselves from this entire industry
Which will a lot which will put us behind potentially in the financial markets by 10 to 15 years again. It's my personal bias. I wanted to put it out there and Joe what you don't know about me is like unlike Mario and scott and
I'm actually not bullish on crypto like a lot of people.
I think we still haven't hit the trough of disillusionment.
Maybe we have this week.
I think there's a lot more work to do, just to be clear.
When coins like Pepe are trading at a crazy level,
you know something's fucking wrong still.
But, you know, the point that I'm trying to get to is there seems to be a pointed attack against Coinbase.
And the reason why I'm bringing that up is because doesn't Robin Hood also...
trade some of these coins?
Why are we not seeing this?
Hold on.
Okay.
So I said this when the Binance suit got filed.
Okay.
And also, to a lesser extent, other suits that were previously filed.
Okay.
You have copy and paste allegations from the finance suit into the Coinbase suit about their activities and selling these tokens and how that meets the definition of an exchange that just knows to be regulated and clearinghouse activity and broker dealer activity.
This complaint, portions of it can be filed almost copy and paste it into every major crypto exchange in the United States.
It doesn't matter, okay, that it's just necessarily Coinbase.
They are taking the position, broad, expansive position that these crypto exchanges fall within SEC's jurisdiction for registration.
And I will tell you, my particular view is that I think you're going to see every major crypto exchange in the United States face litigation on this issue.
So you do expect, hold on, just want to be clear, you do expect Robin Hood to face issues in the coming weeks.
Again, not financial advice.
So the coming weeks is the tough part where I put a qualifier on there because they may want to use this as the test case and may wait.
But if they're successful in this suit against Coinbase, there's no reason why they won't pursue it against every other exchange in the United States, every other crypto exchange.
Fascinating.
So Tom, I know you had nine lives, though.
Justin, say that again?
Well, it wasn't Robin Hood, because again, I'm the financial idiot in the stage, but isn't Robin Hood also the one that kind of shut off retail investors because they were trading too many meme stocks and people got really mad about it.
And so some people made some calls and Robin Hood shut everybody down to bring control back to the bigger guys.
Am I wrong in that?
No, no, you're correct.
They got into trouble for that.
But at the same time...
I would imagine they're not going to get in trouble for this either.
They must have powerful friends, would be my guess.
Possibly.
Tom, your thoughts?
Yeah, I did want to chime in.
It was kind of a little bit ago,
but I think the only thing clear that the FCC is doing
is basically...
Waging a shock and awe campaign against crypto.
Outside of that, they have been completely unclear with absolutely everything.
And then, I mean, I'm not a legal person, so maybe this is normal, but then going and saying, you're doing it wrong.
And they say, well, how can we do this right?
And they basically say, we've been clear.
And then that's the end of this discussion.
And then to add, we're talking about Robin Hood, Robin Hood absolutely has...
Some of these assets. I know for a fact they have Cardano. They offer these assets. So logically, Robin Hood going to be in the crosshairs. I think that's actually pretty big news.
No, it's a good point.
Again, just to be very clear, Joe is not saying that there's any word or any evidence of this.
He's saying that if they're going to be consistent, then there's a high likelihood that Robin Hood would also be under fire.
Tom, I don't, I'm not saying that you said that.
I just want to make sure that you don't understand.
People really move on what we talk about, which is crazy.
Right. So really, to interject something really quick, my concern for years in crypto space,
because people are like, well, don't you think,
Because, you know, I swing a little bit more libertarian.
So people say, well, don't you like a decentralized currency?
And I'm like, well, yeah, of course I do.
But my biggest concern, and I think we're starting to see it, maybe, is all that takes is one G8 or G6 meeting for them to say, we don't like this.
And then boom.
Crypto is essentially relegated to the depths of internet monopoly currency and loot boxes.
You know what I mean?
Well, what's interesting, and by the way, just wanted to clarify this part.
People, I'm getting a lot of DMs about, well, Robin Hood, look at this tweet.
Robin Hood has removed all of their crypto assets that were named in the suit.
Well, for people that are not paying attention...
Binance was sued for quote-unquote co-mingling of funds in 2019.
Just a reminder, you don't have to be doing something actively for them to come after you.
Mickle?
Yeah, I just wanted to say in response to Joe, because I think he made some really good points.
I don't necessarily, I completely see what you're saying.
This ripple XRP case isn't going to give any certain clarity.
But I think it's going to be really interesting to finally see on a big cryptocurrency how a judge takes apart these issues.
I think it's going to be an important step forward in just seeing legal analysis of these assets.
And I think it is going to help the public just get a better understanding of what's going on here.
So I'm really looking forward to just see, hey, is this judge going to completely agree with what the SEC is saying?
This is obviously a security or is there a nuance?
And if it gets appealed, it gets appealed.
But I think it actually might be important that it does go to the Supreme Court just so we can finally get some better definitions for how we look at these assets.
I know a lot of people at the SEC say this stuff is clear, but there's also people at the SEC who say it's not clear, including Hester Perce.
So we really just need either Congress to step in and finally make it clear so all these different cryptocurrency companies can finally have some clarity with what's going on.
Or we need a court case to help really define some clear...
examples of what's a security and what's not. And I agree with you. It's Congress's fault just
as much as the SECs. It's just annoying watching the fighting go back and forth on who's fault
it is. Yeah. So just just a comments on that. You're correct. And I totally agree with your
latter comments there about how Congress should act and it should provide more clarity. But
we have cases regarding digital assets where judges have applied how he analysis. The Libre decision,
you can go read that. The kick token case, there's, there's, uh,
half dozen of them that are fairly interesting in how they're now.
I mean, even the NBA top shots, which was on a motion to dismiss,
we have an order from a court applying, applying Hally analysis.
So it's like 50 plus pages.
You can go read it and see how a court looks at it.
But you're not going to get.
You're never going to get the context and clarity.
I think that the industry wants because every single case is case-specific.
Okay.
And, you know, for example, in the Ripple suit, okay, there were, there's documents that, you know, show them, uh, counting the, the value proposition of Ripple and how it is expected to increase.
And there's evidence that the SEC has put forward of them intervening in the spot market.
Those facts aren't necessarily present with 10,000 other tokens.
So the analysis changes based on the facts.
And that's why the clear, that's why there's never going to be clarity unless Congress acts.
Okay.
So I wanted to go to what Joe was discussing earlier, which was around the TRO.
So Joe, tell us what is known right now about the TRO and explain to our audience what that is, you know, what's going on and why it's so significant.
Okay.
Okay, so first off, you know, I'm just taking the, I just, we just have the SEC's view on this, right?
They filed a memorandum that's 70 out pages late last night.
I've gone through the entirety of the, the arguments, right?
A TRO proceeding is sort of an extraordinary remedy in the courts.
What it basically says is let's suspend the normal process of litigation where you get to file a complaint.
You have to wait for the defendant to appear.
The defendant can move to dismiss it or answer it.
You get discovery.
You know, the whole thing gets kicked months and months, or if not years, into the judge finally ruling.
You know, that's the process of normal litigation.
It's similar to SEC versus Rivel Labs, right?
That was filed in December of 2020 if memory serves, and we still don't have a ruling.
In a TRO proceeding.
Basically what the petitioner is asking for, in this case the SEC is asked for, they're saying suspend that whole lengthy process.
We need you to act now on an emergency basis, judge.
We need to act.
You need to act with alacrity.
You need to rule on two things.
You need to rule on whether we have a likelihood of success on the merits.
Right.
which is the standard for a TRO, a likelihood that we're going to win.
And we want you to rule on whether there is a reparable harm,
once you decide whether there is a reputable harm if you don't act right now to preserve the status quo.
So what does that mean?
That basically, it's an extraordinarily high bar, right?
It's one of the highest in the law because basically they're saying,
let's suspend the discovery process.
Let's have a hearing right now and decide if we need to take action, court action, and enter orders.
Now, what the arguments laid out in the 73 page memorandum that was filed yesterday,
which again, I'll pin in the nest, or I'll send it somebody who can pin in the nest.
Basically, the position is that SEC has been working with finance for the last several years,
up to and including allegations in May and June, early June, just a few days ago, are included in this document.
They claim that the assets belonging to Binance U.S.,
are largely under the control of CZ and the Brian Nance International empties.
They're commingled extensively and that the figures that they have been provided,
both through subpoenas, through statements from their lawyers, from,
other individuals in executive positions in the company are contradictory about how many assets they have.
They say that, you know, that even their own auditors have given them, given the SEC different numbers than what the SEC's attorneys and the principals have done, which is
From the SEC's perspective, that's concerning, right?
Their primary goal is to make sure that assets don't disappear, that we don't have an FTX 2.0,
and they want the entities and the assets that are anywhere traced whatsoever to finance US, they want those to be placed under receivership.
Well, that's problematic if you have international holdings that are commingled with U.S. holdings.
And from a consumer perspective standpoint, they're saying the SEC is saying, you, court, you need to freeze all of this.
You need to freeze all these assets so that we can get in accounting and make sure the money doesn't disappear a la FTX.
So question.
Question for you. Sorry. Thank you so much for clarifying that because my understanding with the Binance case was that they were focusing on the 2019 data and that they admitted Binance did admit themselves that they were quote unquote co-mingling of funds, meaning that they were mixing funds from different sources that were not supposed to be mixed. But Joe, are you saying that the SEC is claiming?
that Binance is still co-mingling funds.
I just want to understand that because I have not read the DRO.
Yes, that's the clear implication based on what they are filing here.
So they're saying that this stuff is all under basically CZ's control,
that he has been giving conflicting information,
that their lawyers are giving conflicting information,
and there's a reasonable suspicion in their mind that if you don't enter a TRO to preserve the status quo,
the money could disappear.
That's the argument they've made in 73 pages.
I've tried to boil it down and oversimplify it.
But there's declarations that attach and support it.
There's extensive, you know, sort of back and forth with their lawyers.
They claim that the lawyers are misrepresenting certain statements about the company's holdings, which is fascinating.
I mean, that's an interesting legal question because...
The same lawyers that are going to go and peer and fight this TRO are sort of named,
and communications with them and the SEC are named in the actual petition,
or excuse me, memorandum.
So that's going to be an interesting discussion, and this is going to be presented,
like in the very near term.
You don't file a TRO and sit on it for two weeks.
They will be in court either today or I would guess at the latest tomorrow,
and the judge will say, okay, well, we need a response from the other side.
So, Tom, I wanted to go to you.
I saw you do a thumbs down.
Your initial thoughts, I mean, that is a very different narrative than what we've heard, Tom, especially from the crypto industry, that, you know, that, look, Binance has been honest about their quote-unquote co-mingling of funds.
And again, it wasn't for a nefarious reason.
It was a co-mingling of funds at that time because there were no regulations.
Now that there are regulations they've been, or now that there is more quote-unquote clarity, which is.
You know, you can say it however you want.
But since FDX, they've been much, much better about how they're managing their funds.
Your thoughts on the SEC implying that this activity is ongoing, and it's not just co-mingling of funds within accounts, but co-mingling of funds between countries, between accounts that are outside the country and inside the country.
Tom, your initial thoughts.
Dan, just so you know, I sent you the brief, just so if you want to post it.
It's in the DM.
Oh, incredible. I'll share it.
Tom, your thoughts?
Yeah.
Yeah, so the thumbs down for me was actually not even about that. It was just the thought in my head where they say we want to freeze their assets. Well, exchanges don't really have. I mean, they have assets, but they're not their assets. They're our assets. So if they're frozen, what that really means is U.S. again, it seems the U.S. investor gets screwed by the SEC. And that seems to be like the theme in crypto is not just, we're here to protect you. It's like we're here to.
To give you the bad end of all this.
But Tom, if they truly believe that this is FTX 2.0,
if they truly believe that similar activity is occurring,
don't they have an obligation to ask?
I agree.
If they truly believe that, I agree that they do.
They have an obligation.
But I will say, and this is just my opinion,
and of course I just learned this now that that's the allegation,
I don't believe that's true.
Binance has been around...
at this point they started what
2018 so that's five years
and of course when they started
I would totally believe
they were commingling funds
I was the biggest critic of Binance
when it came out it said
there's no way I'm going to use this
you know exchange in what country
in like China or something
I would have you know
Yeah, I was a big critic, but since then, they have become a class act.
They have handled every issue that they've had presented to them.
They've never had any issues with, like, solvency, or withdraws.
I think that they have the resources, the manpower, and the experience to not do that.
But you're correct.
If they genuinely believe they're doing this, then they have the obligation to act.
Joe, what evidence has the SEC provided?
to justify their implication.
Is it just that, hey, we don't know, so we need to investigate?
Or do they have any real evidence to prove their supposition?
Well, again, whether it's real evidence is sort of in the eye of the beholder.
Yeah.
You have in the in you posted the entire brief right here if I can direct folks they can make it their own decision
Whether it's credible yeah walk us through yeah so you you want to go to so the
So the whole probably first 40 pages here are really just background on the claims and what the nature of the activity
Biances is undertaking the real key part you want to go to and I'll show you let me just get the exact page number
Okay, so start with page 29, really?
That 29 starts with allegations about how CZ and finance have extensive control over BAMS trading crypto assets until at least December 2020, right?
At least, right?
That means that potentially it could be ongoing and continuing.
They cite the evidence and they cite, they're quoting from various pieces of communication, things they've obtained in the course of their investigation.
If you go down even further...
you could see that page 34, they give you specific allegations and statements that they believe
regarding representations about BAMTradings accounts and how CZ and the larger brand incentives
have control over their whole operation, including their staked assets, and all of this is in a
jurisdiction outside of the United States, right? And they cite...
throughout the complaint examples of cz saying we want to skirt u.s regulators we don't want to fall
under u.s regulation we don't want to have any issues with you know um having to answer to us regulators that's
There's a call that's referenced on May 31st,
2023. It says during a call on May,
this is I'm reading from page 36 if people are following.
It says during a call on May 31st,
2023,
Bynet's counsel noted they would defer to BAM to respond
because it was related to BAM assets.
And Bynet did not believe it had any unique information
in its possession that BAM did not have within its control.
The whole point is that they're citing ongoing communications.
And if you move down, later in the brief, they say, you know, these are contradictions.
Like they keep changing the goalposts about where the assets are, who's in control, how much assets they have.
And this is all cause for concern for the SEC.
And if you scroll down even further, this is really the key part I was going to start with.
But look at page...
Okay, sorry, page 58.
They say this court should grant a temporary restraining order and asset freeze to maintain
the status crow, present dissipation of assets, should the SEC prevail and ensure that
investor assets are protected during dependency of this action.
And they go through and they talk about, here's the bait, here's the bullet point summary,
right?
First, BAM trading has proven unable to reliably make representations about the state of its
customer assets.
This is the US entity, right?
As to its management of customer funds, BAMTRATRAD recently admitted that CZ had signatory authority on the bank account that held Binance.
That U.S. platform customer funds, which was consistent with documents produced by the bank, yet several days later, in reverse course and asserted CZ did not have such authority.
And they're citing the, you know, their sworn statement facts.
That is not good.
Hold on, Joe.
You explain to our audience why that's such a huge deal.
That is a big, big deal, Joe.
Can you explain to people why?
And just so, you know, we can go through the whole thing.
I don't want to bore you with reading it because it's in the nest, but like there's tons of those.
There's tons of situations where there are contradictions in what finance, its counsel,
its corporate representatives are representing to a U.S. regulator, right?
And this is...
And auditors.
I read that as well.
It's like the auditors were also contradictions.
auditors and keep in mind this is the
US this is what gives you the jurisdictional
hook because everybody keeps looking at and saying
well this this is you know just the
US entity well if the US entities
assets are co-mingled
with international the international
assets and
and international entities assets, that's really problematic, right?
That means a judge is saying, okay, I got to open the books.
I got to see everything.
I got to see not only the U.S. but the international.
And if the U.S. is truly going to just avoid my jurisdiction, that's really problematic from a legal standpoint.
But basically what they're saying is like, listen, he's a signer on U.S.-based accounts.
That gives him effective full of control over U.S.-based accounts.
And if that's the case, and he's saying publicly in tweets and throughout the communication
that he wants to flout U.S. jurisdiction and he doesn't want to have the ability to be
hauled into court in the United States, how can you not grant a TRO, Judge?
How can you risk someone walking away with U.S. customers' assets?
Sorry, I'm still reading this.
No, it's amazing to me because everybody covered the complaint so extensively, and this thing gets filed, and I haven't heard much on the Twitterverse about it.
Yeah, it's, well, especially because I don't know how many people have actually reviewed the actual document.
I mean, one of the things that we keep hearing over and over is, and by the way, Joe, what's wild to me is that we're not seeing this in regular media going into significant detail about this DRO.
You're hearing the crypto bulls say, hey, this is all just made up.
and then we're hearing the people that are on the traditional finance side saying
crypto's back crypto's back take your money out but in reality there is a ton of evidence that is being
shared now the
the evidence that they're sharing for everybody that's listening, because I know that we've been reading in and out, and Joe is such an expert, and I'm such an idiot, that together it can be hard to figure out the middle ground.
So let me try to explain it.
What I'm hearing from Joe is that there's a significant amount of contradictory nature in this article that is being provided as evidence to say, look, we need to take a look.
don't know who to trust.
They're changing what they're saying every, every few days.
And that's kind of concerning because it reminds us exactly of FDX.
Now, just let's just give the caveat, okay, this important caveat.
But this whole document is you get one side of the story, you get the SEC side of the story.
So that's really important, right?
Like I know enough from being a litigator that there's always two sides of the story.
So just, you know, don't, don't jump to conclusions based on just what the SEC is saying.
But if what the SEC is saying is true, that is quite damning.
Yes.
Do we agree on that?
Yeah.
And the question really is, is Binance going to be able to defend itself in an effective way in a short timeline?
I mean, isn't Joe, if you can give us some context on why people do TROs outside of, quote, unquote, protecting the investors.
Why would somebody do a TRO?
Isn't it also a good, good approach to winning a case quickly?
I mean, because you're not giving the other side time to prepare?
Well, you don't want to start out with a loss, right?
And the main reason people don't do TROs is because it's really an extraordinary remedy.
It's very difficult to meet the standard.
Now, let me give you an example that outside of the crypto asset world that people generally are more familiar with, you know, in a lot of cases where there's physical abuse between spouses and those sorts of things,
you can go in on a TRO very quickly and get an order of protection,
basically saying that my spouse who's beating me can't come and visit my house, right?
That sort of thing.
The reason is because there's an imminent threat to bodily harm.
There's an imminent threat to someone's safety.
And the court needs to act now.
We can't have a divorce proceeding or some other proceeding take months and months or years.
You need to move now or someone's really going to get hurt and permanently hurt.
That's what irreparable harm means, a permanent harm.
Now, in most cases, okay, most cases I handle, most litigation, you know, you breach a contract, you destroy someone's property, that sort of thing.
The judge is never going to grant a TRO in that situation because the harm's been done, right?
The damage has been suffered.
And you go into court and you say, okay, well, we'll do discovery.
There's no reason for urgency.
There's no reason we need to act now.
So the whole point of a TRO is like you need to act now or bad things are going to happen judge and it's going to
You know it's going to be irreparable. We can't we're going to can't put it back together after the fact
Again, even reading these allegations, I'll tell you, my initial reaction is that based on what's been put forward so far, I would probably put my wager down as more probable the judge denies the TRO, because I don't think they have enough here.
That being said, you know, I've been surprised by judges in the past, and I think that this judge will have in the back of their mind.
If I don't act now, am I going to have my face all over the press because of the next FTX with Binance?
you know, keep in mind, a lot of these judges are hostile towards cryptocurrency generally,
and they might err on the side of perhaps not trying to maintain the status quo.
So, Joe, if they have to choose between quote-unquote investors,
Right? And an organization and a corporation here, especially after FDX,
Joe, you've got to admit that is concerning for finance U.S. right now.
There's no way, in my mind, that unless there is irrefutable evidence,
there's no way they don't move forward with this.
I mean, again, I'm thinking about this just from a completely political perspective.
The politics of this is so clear.
You know, and it just seems it would be wild for them not to do this, right?
I mean, am I missing something?
Why do you think, Joe, that...
that they might not grant the TRO.
Well, I think the
notion that contradictions alone
can cause someone to freeze and disrupt billions of dollars
assets. They basically say,
Bynes is holding, I think, $2.6 billion of assets.
The notion that that just merely contradictions
in counsel alone is sufficient cause
is, I think, a stretch.
You know, contradictions,
I'm not saying...
put it this way federal judges whenever you're going in a tiero they're looking you square in the
eye and they're going to say what do you got what's the best you have you can you prove this okay
and even if even if there's a threat of irreparable harm another pillar is likelihood of success in the
merits the judge has to make a preliminary finding that the SEC is going to win the case that
That's basically what likelihood of success in the merits means in a very simple way.
And for that preliminary finding, you know, you have to go through a whole detailed analysis about the underlying allegations.
And I don't know if a judge is going to bite off that.
That's a ton of things to chew on in a very short period of time without giving the other side any discovery or really an extensive chance to protect itself.
You could be right, right?
I mean, I'm just saying I wouldn't put it guaranteed.
I wouldn't say it's not going to happen.
If I had a gun to my head, I would say it's probably more probable than not probable that they're going to enter it, but I wouldn't say it's guaranteed.
Joe, strategically, would you have advised the SEC to do that?
Or do you think it might be a little bit jumping to gun?
I would have absolutely done that.
If, again, there are, there's pieces of evidence they don't put in this for strategic reasons.
That's what any good litigator would do.
Because there's going to be hearing, right?
This is the.
this is the memorandum sort of framing the decision for the judge.
And there will likely be a hearing.
There could be witnesses.
I mean,
I presented witnesses at TRO hearings where they testify and they say,
you know,
I was speaking with so-and-so and he told me that the assets are not safe,
you know,
whatever.
You could see those sorts of things be dropped on at a hearing to try to push the judge
over the finish line.
And I can't really know that without knowing all the SEC's investigation.
Right.
But what I would say, if you truly believe assets are going to disappear and head off to international jurisdictions that can't be confiscated, then, yeah, you would say, go ahead, go ahead, fire it off, try it.
Tom, I would love to get your thoughts.
Sorry, I'm just digesting everything, trying to figure out what it's actually in there.
Same matter.
Yeah.
So I did want to make a little distinction because I know our audience isn't all about crypto, that there is Binance, US, and Binance.com.
And dot com is like a global.
It did start with just the dot com.
And then I don't remember what year it was, but they created this US.
Dot US site that's only for US.
It's K.YC, et cetera.
And then I had a question for Joe, what are the implications, in your opinion, for Binance.com?
Or are they...
completely shielded, isolated from it being like a different entity?
No, I mean, that's, read this whole thing that's posted,
the memorandum of support of the TRO.
I mean, they basically say it's a entirely fictitious distinction.
They've argued in the thing, in the memorandum here that finance US,
it's engineering operation, its trading desk, all major decisions,
they all flow through CZ, they use the same IP, they really is,
There was a concerted effort by CZ to create this really puppet company, which he is fully in control of, even to this day, including in control of its assets.
I mean, you just heard the allegation we read about how he's assigned around their accounts.
And if they're co-mingling accounts with the international, what's the difference?
How is that?
I mean, that's...
That's not how corporate entities work.
If you're a corporate entity, you're truly separate and apart.
You segregate assets.
You don't share the same trading desk.
You don't share the same personnel to make decisions.
You don't take direction from the same CEO.
There's statements in there from some of the U.S. officers, the finance U.S. officers that say,
we couldn't make a move without CZ.
So, you know, try to be clever and set up a separate entity and claim it's, oh, it's U.S., it's fully KYC, but, you know, it's fully regulatory compliant, but then mix everything with the international, uh, that's not going to fly.
Can I just make a quick point on one of the worst things I think I saw for Binance?
Outside of everything with this case, one of the more respectable people in the entire
crypto industry, Brian Brooks, actually took over as the head of Binance.
And he was a former Comptroller over the currency, I believe.
And he took over as CEO of Binance U.S.
and was there for approximately about a week and a half before he stepped down.
So...
obviously when he got there he saw some things or were told some things he didn't like and i think
that definitely factored into my decision on where binaan stands on some of these issues because
clearly if these were things he thought he could easily sort through he wouldn't have got up
his left so i thought that was pretty interesting as well
Yeah, I mean, as we evaluate this, it seems like regardless of what happens, there will be a watershed moment that occurs in the next 48 hours.
And so, you know, for people that are paying attention, the reason why this is critical is if the TRO, and so this is the question that Mikkel was asking in terms of strategy,
Joe, I would be surprised
if the SEC didn't have
a, didn't know for sure that they were going to win
before they would smile this.
I mean, it seems like such an aggressive move
that,
that it feels like,
I'm just trying to understand
why they would go down this road
when they have litigators
who might not be as good as you,
but know as much about the law as you do
and, you know,
that the likelihood in general is low
why they would take such a big chance.
You know, in the,
In the interim, I did want to go to Patrick.
Well, can I just answer that question?
Okay.
So I think when you sit down and decide to file one of these, you estimate your probability of success.
I think it's a high probability of success, okay?
Even with the high burden they have to meet, probably the allegations they have are sufficient.
But again, it's not guaranteed.
But if you're in that department and you're Gary Gensler who definitely greenlighted this, there's no zero doubt he didn't greenlight this filing, if you're making that assessment and people have been screaming at you for months.
do what you can go forward try to you know protect investors where were you for terraluna where
were you for fdx you did nothing you did you waited and you're derelicting your responsibilities
now you're you're fighting the last war you're compensating for what you did in the past and
i think that would probably push me over the edge if i were in that position to say fine we'll go
forward and if a judge wants to deny it put that's on them
Fair point. I mean, so Patrick wanted to go to you to walk through the charts.
I know that you have some very strong feelings about this.
You're going to trigger a few folks here.
We're going to talk about, yeah, no, nothing new.
But, you know, you were comparing FDX to BNB.
So let's do it.
By the way, all of Patrick's charts are up in the nest.
So please do review them.
Go ahead, Patrick.
Thanks. Well, look, yeah, I nested three, three charts, but I think the most important one right now is the finance chart, which is I retweeted a previous chart I did for FTX after the FTX debacle.
But look, like everybody's pricing in the probabilities of certain events or risks, stuff's happening.
FTCX chart, you had a clear sell single like six months, way before that huge meltdown.
Look, I'm not going to get trapped like last time saying the gold predicted COVID.
What I'm trying to say is bad events, bad storylines impacting the price.
Right.
are more susceptible once the price action has lost upwards momentum
and the capital flows are neutral or starting to drift sideways,
then any type of bad news events could trigger, like you said, a watershed,
something like just falls down the cliff.
So I'll bring your attention to the Binance chart.
You could look at the FTX chart, pretty much the same topping pattern.
Binance is a clear sell signal back in 2021 or early 2022,
below it's when you're moving average, clear topping pattern.
Why would you hold this token?
I have no idea.
The momentum's done.
The move's done.
And this Gensler, is how you pronounce his name?
Gensler dude there from the SEC.
If he would have done his whatever news he's doing now back in late 2020 when the price was
appreciating, it might not have the impact that it could have right now because right
now there's a clear, clear breakdown line set up.
So if the markets want BNP, the BNP token to fall, this is the time.
The momentum's drifting sideways.
It could fall.
So the market is going to tell us really shortly if they want that thing to fall.
And if it falls, there's a thing called reverse image to move.
Because it went up so fast, not a lot of hands, not a lot of transactions when the price vacuumed up back in 2021.
It could fall really, really fast.
So this is no man's land.
I put a wall.
So until it closes above 374, you got to stay clear of this thing because that thing could drop really fast.
Yeah, Tom.
Yeah, I don't want to bud.
I want to fud the B&B chart, but I definitely agree.
I've been watching this chart for a while.
And, uh,
the move up it had in 21 left such inefficiency below it.
And I could see if B&B trades maybe below 180,
especially on whatever fud bad news or real bad news.
I mean, it doesn't really have any kind of support to like $32.
That's like a really large, really large fall.
I think it's at like 263 right now.
I'm really not trying to fund it,
but I've been seeing the same thing.
I just want to kind of agree with Patrick there.
Interesting. I mean, so it seems like, if I'm going to summarize, Patrick, it seems like the market is waiting for news. We know that that's true. But if the news is negative, we expect BNB to have a ton of room to drop. If the news is positive, it may not go up as much because the FUD will continue. Is that a fair estimation of what you're saying?
Yes, well, the capital flows like the money just pouring in is not, has been exiting B&P, but to contrast it, I was looking at the XRP chart.
Like I don't know for me, like crypto's XRP chart on the flip side looks ready to break out.
It's looking really strong.
So this is not a, it's a mixed bag right now in the crypto.
There's stuff going up.
There's stuff trying to base and go up while the Binance chart looks terrible and a whole bunch of other out coins.
They also look terrible.
But if I just take the Binance chart in a vacuum, it's a no man's land.
There's no uptrend.
And that thing could fall just like FTX did.
Fascinating.
It's insane that in the year of our Lord 2020, 3, we're going through this all over again.
Tom, tell me about what the sentiment in the crypto world is right now.
I mean, is there, is this, or does it, you know, I was talking about,
the trough of disillusionment for VR a couple of days ago.
Are we literally, is this the worst, is this the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the,
I can speak to that very expertly.
Thank you for asking me.
So I live streamed for people who don't know me regularly last four years.
And I will say that this is a trough of disillusionment.
I would say even like interest capitulation.
I have never seen crypto so dead sentiment wise.
And if you look at Google trends, cryptocurrencies at,
three-year low for search volumes worldwide.
It's relative to about December of 2020,
which was the end of the bear market.
It was, I would say, the peak disinterest in crypto at the time.
We're there.
I see it in my own analytics.
I see it across the space.
I see it in Google Trends.
I have a hard time imagining there being less...
interest or even honestly lower sentiment right now it is in the pits for sure tom were you here in
2019 because i would argue that this is far from as bad as that was oh definitely was but uh i guess
i thought that maybe it's the the length i mean i was digging in recently i mean we're really i
think since the all-time high here we're 500 something days right now that was like 1400 days
or something, you know, until we reached a new all-time high.
So, I mean, yeah, I agree with you that we are there, but I think we can stay here for a very, very long time.
We've got some breaking news.
I think that we have.
So the SEC has filed a declaration from a certified public accountant employed by the SEC
and chief assistant accountant in the Division of Enforcement.
It is 27 pages.
I am working my way through it, but I will, I'll tweet it out in a moment.
Hang on one second.
What is it regarding...
It's new evidence in support of the temporary restraining order request.
This is specifically for Binance U.S. and freezing the funds.
And the international entity.
I'm catching it.
And the international entity.
Understood.
So, Joe, can we just count on you to dig into that really quickly and then come back and cover it when you feel comfortable with it?
Yes, I have to get to court in a little bit, but I will come back.
As long as I'm not sitting on the other side, that's perfectly fine.
Tom, you were saying, go ahead.
I was just agreeing with you that just because it's at this, in my opinion, low of interest,
doesn't mean it has to go up, right? Things that are down, don't have to go up right away.
I just can't believe, honestly, how I've seen the traffic just across the internet,
and specifically on YouTube, completely capitulate around, I'd say like April of this year.
Maybe that's anecdotal.
But, I mean, my viewership has probably halved.
down 50% just since then.
I've never experienced anything like it as a creator to this degree at least.
It's pretty wild, but it can stay there.
You know, like you said, for like 2019,
it could easily stay at this low level for, you know, any amount of time.
Really, there's no timer on it.
I can anecdotally say basically exactly the same, obviously, for viewership on YouTube.
I think that platform in general probably is a pretty good indicator because the people who generally, I think, watch YouTube videos about crypto are the speculators who are there to get rich quick.
and so they're very easily washed out and you see them as the first to somewhat go.
Because we can also flip that switch and say,
hey, guys, we have a crypto news show, which by the way,
we're going to be pivoting here, obviously, from Finance Daily.
Usually we restart the crypto town hall,
but it's been so interesting here that we've just kept it going
from the space that Donish and I were hosting earlier.
But we had a million people tune in yesterday.
A million people to a crypto news show.
Right? So yeah, go look at it. It's absolutely astounding. I think it was 868,000 when we cut. It's about 1.1 million now. We had about 20,000 people at a time given. Listen, let's be honest. We are a breaking news show. We are there when things happen to cover it. And this is some of the biggest news that we've seen. So part of it is that. But there are definitely a million people who are willing to listen for hours about what's happening in crypto still.
that's a good thing and a bad thing, I guess, if we're talking about the Trump of disillusionment,
right? If that goes down to 10,000, they will really know that we were at the bottom here.
I'm catching up, obviously, on the conversation here. And I think you've probably, guys,
have you thoroughly covered Coinbase and Binance, I would imagine? Or if we dug into the fact that the
Those are still ongoing and we're seeing kind of new news there.
I mean, Joe, are you still there?
Because do you think we're just going to keep seeing just more and more every single day action coming,
being fired at these companies, more filings?
I mean, why didn't they file all of this in the initial?
Is this part of that shock and awe campaign?
Well, the center stage is going to be the TRO proceeding.
And I'm monitoring the docket for the court very quickly, very closely.
I mean, as soon as that gets heard, that's going to be the big bombshell, right?
Like there will be a presentment.
There will be a hearing date.
It will be accessible to the public, hopefully.
You know, that's going to be the next real watershed moment.
And I don't expect it to continue at this pace, but I also have said publicly, you know,
there will be more suits coming in the next couple weeks.
So I think we've also mentioned this, but do we think that this is more suit specific to Coinbase and finance?
Or do you think we're about to see?
No, other entities.
A wholesale charge of everyone.
Other entities.
I mean, it makes me question what entity would be safe from the SEC at this point.
It's almost like you're not even in crypto if you haven't been sued.
Yeah.
I mean, does anybody have any thoughts or information on who they think might potentially be next?
Tom, I saw you lifted your mic.
Go ahead.
I was just laughing at it's almost like a right of passage at this point.
If you're not being sued or not in crypto.
My thoughts go, honestly, I mean, Cracken already had some issues.
Bittrex had issues.
Gemini.
Gemini had issues.
Yeah.
I'm just thinking of like U.S. exchanges.
There's not that many that are well known.
Yeah.
Robin Hood, I wonder what's going to happen with Robin Hood.
I'm not guys out there just tuning in.
We're not fighting it.
But Robin Hood also selling these things.
I'm curious if the war will cross over into Robin Hood's territory.
I can only guess.
And so, guys, this is never, you know, we try to present fact,
but we also have to present what we think is likely to happen.
My guess would be that Robin Hood will get ahead of this in D-List.
I have no idea, but I think that they'll probably take down the assets that are being listed in these cases and distance themselves from this completely and try to proceed otherwise.
But, yeah, I don't know there.
Does that all protect them?
Yeah, I...
Yeah, I don't think people are going to specifically enjoy this one,
but I wouldn't be surprised if at some point Ethereum got roped into all of this.
And the only reason I say that is because the SEC has been clearly trying to walk back
on the previous guidance given to Ethereum by Bill Hinman.
And we've now seen Ethereum staking show up in a couple kind of side shots in some of these exchange cases.
So I really do question if pretty soon the SEC is just going to go completely try to reverse that
previous guidance and call Ethereum a security. And I think what they'll base it off of is the upgrade
where it essentially switched consensus mechanism. And the SDC will say that that was a game changer
for Ethereum status forward. So folks, perhaps some are more familiar with this. This is more,
not as much a legal question, more factual question. I just tweeted out the declaration. I'm making
my way through it. It,
It talks about various entities, U.S. entities, banks, anyone who wants to comb through it with me and assist.
I mean, Silver Gates mentioned extensively, Signature Bank and large withdrawals from signature bank.
It's fairly detailed.
It's not as much legalese as more just facts about what the CPA for the SEC has uncovered about finance and finance U.S. accounts.
I'd be interested in anyone's assistance on this.
I was just pinning you're in the nest and I actually missed the final end of that question.
So could you just reframe that? I'm sorry.
Yeah, no, I was just an invitation for folks if they want to give commentary about the various institutions mentioned in this declaration.
I would appreciate it.
Yeah, I think we'll have to dig into it a bit and do that later as you go through it.
But we were talking about Robin Hood as you went on with that.
I do not think, Tom, to your point, that that will necessarily protect them, but I don't think they have another choice.
There's a reason for Coinbase to stand and fight and defend their position.
It's their entire business. It's their entire ethos. It's what they've been from the very beginning.
Robin Hood could cut crypto completely and still survive, right?
And so I just think it, and publicly traded, of course, but might be a different scenario.
Is anybody else have any thoughts about the Robin Hood situation?
Seemingly nobody.
So, hey, guys, what do you want to talk about?
Patrick, I saw that you were sort of breaking down the market.
Maybe we should go deeper into that.
I was actually surprised that Coinbase stock dropped more than B&B coined on the Binance news.
What do you make of that?
The Binance, the coin, I only know about the coin.
There's another instrument covering Binance?
Yeah, no, I'm telling you that when Binance news dropped on Monday,
Yeah.
Coinbase, even in advance of the Coinbase news, the Coinbase stock dropped as much or more than B&B coin at certain parts of the day on the Binance news.
Does that mean that somebody knew what was coming for Coinbase?
Well, look, when capital flows, they start leaving their...
They just outflow right from the, like when you look at the cryptos, when one goes down,
let's say they all go down pretty much like in harmony.
And when you zoom out, you overlay even Bitcoin, ETH and all these cryptos, you take a,
look at the market cap, they all track the same chart pattern.
So on the smaller timeframes, they could have different aptitudes.
When you zoom out, they're pretty much driven by growth stocks.
outperforming inflation and capital just loves going to that there when uh you know all these uh it could be
meta it could be in video all these tech stocks all the whole crypto the whole growth sector just loves it
when they're outperforming inflation so yeah on the smaller time frames we could have fun you know
you know how my stance is on that there but uh all this news but
It's not that it's predestined where their price charts are going to go, but it's practically the capital flows deciding where their price charts are ultimately going to land no matter what the news is.
Like Coinbase and all the second, like I said, all that bearish news, if it would have happened at the beginning of a bull era, it could probably get shrugged off after a few days.
And then the price is just continuing, continue to go up and people forget that bad news.
So...
Well, Kathy Wood scooped up $21 million in Coinbase stock either today or yesterday.
I'm not saying that she's being proven to be the legendary investor that people believed,
but do you think that that's a meaningful development?
What's the ticker for Coinbase?
Coin.
C-O-I-N.
Yeah.
Coinbase global.in.
Yep.
Oh, man, that charge just terrible.
Oh, my goodness.
Obviously.
Nothing but down since the day of inception with the direct listing.
But I would argue it's still ranging, so you could view it as reaccumulation.
Yes, but you have to wait.
Exactly.
So this is where people, they try to...
front run a move.
You don't know how long the market is going to need to consolidate.
So right now, I have a clear breakout line at about 68.
So until that closes above 68, the market is going to need time to digest, all that selling.
It's going to create a beautiful base, create a new, low risk, high reward opportunity.
But why front run that?
Why hog up your capital for five, six, seven, eight months a year, two years?
Who knows how long it's going to take, right?
Because when you know proper risk and money management, buying at the low,
doesn't mean you'll make more money than the guy buying the breakout.
Because the guy buying the breakout,
he'll be able to manage a bigger position size more securely
because he knows he has a higher probability of the move being sustained upwards.
So when you're buying low, you can't put in all your chips.
You don't have the upwards momentum to justify a hefty position there.
So yeah, she could buy now, but...
I don't know. Maybe she's hedging with something else that she's not telling about, right?
Well, yeah, I mean, you might not know her history, but, man, she's been all over the place with this stock.
She sold some at lows, bought back higher days later and has bought lower.
So, you know, the history isn't that clear.
But clearly she still has conviction in it long term.
Mick will go ahead.
Yeah, no. In terms of buying fear, this is typically where I would love to make an investment.
Obviously, no financial advice. My problem with Coinbase is I really just have a hard time enjoying the exchange space.
It really just does kind of seem like a race to the bottom on fees.
Now, I understand they can add other products on top of that.
But with the SEC going after your throat for every single new product you try to bring,
It's just a really hard thing to get excited about right now.
And if I'm looking to invest in a cryptocurrency related space,
I mean, Coinbase just really isn't the most exciting place right now.
So although from a typical perspective where it has a lot of hair on it, things are ugly,
it's really buying the blood, for me, it's just kind of looking at that versus some of the other opportunity,
especially where we are in the crypto market.
And it's hard for me to get excited about Coinbase specifically.
That makes perfect sense.
Just guys, I want to reset that we're moving on from the finance daily now, and we're going to transition into the crypto town hall.
And we have a lot happening here.
Bala Jis Bala Rizhnervasen will be joining in the next 20, 30 minutes.
Arguably, in my mind, the...
most brilliant machine and greatest thinker that we have on this planet, probably.
He was the only person that was invited up on stage with RFK and Elon Musk the other day during their spaces to give you any context,
but also effectively the guy who is running Coinbase and their strategy for many, many, many years.
So he's willing to come in here and discuss what's happening with Coinbase.
So you guys definitely do not want to miss that.
I'm talking to him right now.
So, yeah.
we're making that transition.
Bruce, man, how are you doing?
What's on your mind after sort of absorbing all this
over the past 48 hours?
Hey, how's it going?
Yeah, you know, there's been a lot of interesting debates in some of the chat rooms and stuff about kind of this, you know, the proper play.
And I know, I've seen you participate in some of them sort of the proper place of, you know, regulation.
You know, there's a, there's a new wave of bitcoins that's surprisingly different from previous waves of bitcoins in that they are, you know, there's a lot more people who are pro regulation, pro-SEC, they're in favor of the Coinbase action.
I think that's an interesting conversation to have because, you know, I think the origins of this space, I did a video on it yesterday, you know, the origins of this space are very libertarian anarchist. And I, you know, personally, I think that's at odds with it. And, you know, I get if people don't like alts or whatever, that's fine. I could argue that. That's a separate debate, though. Let's just assume they're all terrible. They're all scams. They're all horrible. Worst things in the world. I still don't think government is the answer.
You know, I just don't.
I don't drink.
I don't do mess.
I don't allow cocaine on my property, but I don't think that the government should be the one to stop those things.
I don't think it's a whole bunch of things that I think are bad, but I don't think should be illegal.
Because for the simple reason that I just don't think government's the one to solve it.
So I think that's an interesting, you know, and very relevant, you know, thing that people are discussing right now.
And then, you know, all the rest that you know what's going on with the,
you know fallout from binance and coinbase and everything it's uh definitely never a dull moment here
i know you have strong opinions on this but we seem to have been in this i mean i'll call it cognitive
dissonance but uh some people are being kinder about a supposed libertarian community obviously of
bitcoins who have now seemingly become statists and think that that aligns because it will kill these
other assets i mean
I would love to hear your thoughts on that because you've been tweeting about it extensively.
Yeah, I mean, it's like, okay, so it's a nuanced argument that there's kind of two parts of it.
You know, argument number one is everything other than Bitcoin, a complete scam.
And that's a common narrative.
Everything other than Bitcoin is a scam.
Everything other than Bitcoin's a security.
And then you progress that argument and therefore it should be wrong.
you know i disagree with that you know on many fronts i think there is nuance for one thing no not
everything is a scam lycoin is just not a scam you may say it's a stupid idea you may hate it
but it's not a scam you know and and and neither is a bitcoin fork for example you know i mean
bitcoin is open source code that's the mit license that's what we all support as cypherpunks
it's forked something like two thousand times and a couple hundred of those have been actual
operational chains
and a couple dozen of them have achieved market cap.
That's part of the open source code.
If I go in, I've done it myself.
I've made force.
You can go into the GitHub and you can make a fork and you can run those binaries
and you can change it to Billcoin or Bruce coin or whatever.
That's not a scam.
And honestly, even if you have something with a pre-mine,
especially if you disclose it, that's not a scam.
So there's nuance. Securities aren't a scam.
You know, when overstock, a publicly traded company that was worth a billion dollars at the time took some of their stock and tokenop.
And those are shares in actual company that's doing real revenue and trading in real public markets.
There's no way that's a scam.
You could say you don't like the stock or you think it's going to go up or down.
But you need more nuance.
So, you know, first of all...
all goofy view to say
everything other than Bitcoin is a scam
I get the pure Bitcoin narrative
I get the Bitcoin is money narrative I get the
you know, sort of safety and sailor narrative.
I get all that, believe me.
But it's just not nuanced enough
for the people who take it and say,
everything's a scam.
But again, like I said,
even if it's true,
even if they're all scams,
let me just, what do they call it in law,
dispense?
Let me dispense with your argument,
or let me, you know,
accept your argument.
Let's assume it's all junk,
it's all scam.
It's as bad as heroin.
It's the worst thing in the world.
Well, I don't think heroin should be illegal either.
I think heroin's horrible.
I've seen it destroy lives.
It's a horrible, horrible, horrible thing.
Right.
way, way worse than any alt coin.
But I don't think that heroin should be illegal.
Again, for the simple reason,
these guys aren't effective.
They don't know what they're doing.
There's not a person listening out of the thousands of people.
There's not a person listening who would trust government to do the most basic things.
They had the national department of feeding your cat.
Nobody would want them to feed their cat because you know your cat would die.
Nobody government doesn't do anything right.
They don't know what they're doing.
They're a bunch of clowns.
Nobody should look at the world.
By the way, guys, Bruce ran for Senate.
Yeah, I would, I tried to be one of the clown.
A lot of people say, oh, you're a hypocrite.
How can you criticize government?
You tried to be part of government.
You know, I tried to go, if I would have won.
I would have done everything I could to reduce the power of the state.
And that's, you know, the thing is, it just doesn't work.
I wish that we could have this choice of saying, like, yes, governments of pain,
but at least they stop heroin and they stop scams and they stop fraud.
If they could, I'd probably be all for it.
I'd be happily paying my taxes like a good citizen and say,
yeah, there's no fraud in America's no, no drug problems, no fraud, no crime,
because those...
regulators have protected us.
But that's not the case.
They don't, it doesn't work and it's not effective.
So my plea to Bitcoiners over the last, you know, for a while,
but especially last couple days is,
You know, I get it. I'm not going to change your mind on ALTS or whatever. That's fine. I would suggest that for your own investment sake, as an investment advisor, that you have a little more nuanced. And you don't jump into a tribe because if you're a tribe, you end up being a slave to your investment and you end up losing objectivity. You should make your investment work for you. So as an investment advisor, I don't think it's a great strategy. I think the world is more nuanced. Yes, I get. I don't buy ALT. And I think most of them are junk and a lot of MARScan.
But have some more nuance.
But aside from that, what my plea is like,
don't look for nanny state government authoritarian tyrants
stealing your money as a solution.
They're not the solution.
They're part of the problem.
Don't look at the world and say,
I don't like this, therefore I need government.
I'm just baffled that there's bitcoiners
who come from a libertarian background.
They're in favor of drug legalization,
prostitution legalization,
letting people express themselves how they want.
But then they have this state of streak like, oh boy, you issue some code I don't like and that code hurts my feelings.
I'm going to get any state government.
It doesn't make sense.
It makes absolutely no sense.
Right.
Bill, Bill Barr.
Dude, I'm so glad.
Hey, Bill.
We got you.
Because I've been chasing you here for a couple days.
Listen, you run a licensed, registered, you can define it, a platform in the United States.
What do you make of what you've seen over the past 48 hours?
Do you find that it could be meaningfully impact your business?
Yeah, are you afraid of the SEC here?
Do you think that they could come after you for something, even though you're compliant?
What's your general take on this whirlwind of attacks?
Yeah, on behalf of all of our lawyers, thank you.
I mean, they're so happy right now.
They have basically job security for the next, I don't know, 15, 20 years at least.
And for some reason, the rates are going up, you know.
But I think the problem that I'm seeing right now is that they're really eloquent arguments being made by the likes of Brian Armstrong.
And I saw a couple of tweets from Brad Garley Pows.
And even CZ, who, you know, he's got his own way, but I could make the case the eloquent.
I'm not seeing eloquent arguments in favor of crypto right now being made from what I would call neutral third parties.
And this is really bothering me.
And I think until we start to see kind of the neutral public stand up and say enough,
this is not going to stop.
Because the average public, from my perspective, just doesn't care about these attacks.
They don't understand them.
They also don't understand the difference between, you know, no-coiner, bit-coiner, shit-coiner, whatever word you want to use.
It's all just zebras with different stripes and we all look the same to them.
So this idea of infighting, it just doesn't make any sense to anybody on the outside because
they don't understand what we're talking about in the first place half the time.
So we have a existential crisis in the U.S. where we've created this, it is a growing community,
but it's a closed community of people who think they're enlightened.
And regulators who, you know, are embarrassed and under siege who are now fighting back because of mostly what happened with SPF and their embarrassment on the Democratic side.
And we have no allies.
We really don't.
And...
I understand that there are a few folks in the Republican part of Congress who have been trying to take a stand.
But until there's a public groundswell of people who don't have the same vested interest that all of we do,
I don't think it's going to change, right?
Maybe we'll get a relief when, you know, the Biden administration is out.
But if that's what we're counting on,
That's a very precarious place to be, in my opinion.
And so the question in my mind is, how do we create a groundswell out of Joe Public,
who doesn't have the same vested interest that we do in making sure that freedom of choice reigns here
and that people understand that this technology is the future.
And it's just going to be adopted everywhere else but here, unless we do something.
And by here, I mean, obviously, the U.S.
That makes a lot of sense.
Francis, how are you?
Welcome.
Hello, everyone.
Good to be here from the other side of the pond.
The other side of the pond and maybe the other side of the argument,
although I don't want to put words in your mouth.
I would love to get your sort of initial takes.
I'm sorry, guys, we're obviously resetting the room here.
These guests are all incredible,
and I want to just sort of start with the broad strokes of everyone's sentiment
on what's happening over the past few days.
So, Francis, just please give us your thoughts.
Well, this is where I kind of morph into a Bitcoin maximalist.
I love it.
I love it. Every time we do this, I say I'm getting you one inch closer. Go ahead.
I knew that would happen.
And point out that what's being attacked here is actually a whole load of really very corrupt, centralized crypto trading platforms.
which are opaque in a way that traditional financial institutions are no longer allowed to be,
that get away with practices that traditional financial institutions are not allowed to get away with.
The playing field isn't leveled.
and what the SEC, and also I would add to that, the Fed and the F-TIC on the banking side as well,
are trying to do essentially is say the same rules have to apply to everybody.
And I broadly support that.
We can argue about whether the rules might need adapting to suit new technologies,
but what can't happen is that a whole group of companies are simply excluded from the rules
and said it doesn't apply to us.
Right.
the rules do need to apply to everyone.
But that's not an attack on the technology.
In fact, in some respects, if we can clear this up,
if we can make crypto a much safer place for investors to be,
particularly retail investors,
then actually that's a good thing for crypto, really.
I love it. Thank you. It's nice to have that sensible. You have said, I sound like a Bitcoin
Maximilus quite a few times in our conversations. I'm not going to say that taking credit or
rubbing off on you. I mean, Justin, you would probably deem yourself as such in some direction,
right? I mean, from your perspective, what do you make of everything that's happening here?
And Francis, I do just want to, right before I jump to Justin Rizwani, I do want to say, I think
that Coinbase is pretty transparent.
I think you're that what you said about finance is true, but I think there are some very clear
separations between the accusations and what's happening with them.
I mean, they are audited.
They're publicly traded, right?
Yeah, the point.
I think the question there is actually not so much to do with finance as to the,
and this will be a fight, which will be interesting to play out,
because it's similar in a way to what's happening with Ripple.
It will be a fight between Coinbase and the SEC as to whose definition of a security applies.
That's where that will go.
And that brings me back to my comment about maybe the rules need to be,
adapted or clarified, as I'm going to equip to people who've been calling for that,
to make it clear what is the security in America, US law and what is not.
And perhaps more broadly, because I think we need to look at the principle,
rather than saying the narrow focus on what US law says,
really what investors need to know, and particularly retail investors, need to know what protections they need in order to trade things safely.
And how many of the things that are traded in the crypto space are things that people can reasonably understand, that are opaque, that are transparent, that are safer people invest in, and how many are much more risky?
Yeah.
That all makes perfect sense.
Justin, what are you thinking?
I think it's continuously to solidify the fact that Bitcoin is this commodity-based asset,
and it just makes it a lot easier, I think, for Bitcoin companies to now continue and build.
That, to me, is what is solidifying everything here.
It's why it's a much better asset to build on, and it doesn't add to this complexity
that this entire industry is now facing, considering all these lawsuits.
I do you think that this meaningfully impacts eye on your business at all.
I think anything that's regulation always impacts our business, but we're continuing to build and growing a lot faster now because I think it's just bringing a lot more attention to our industry.
positive attention or negative attention to our industry?
I think positive for us.
I mean, we've been very specific to be a Bitcoin-only company.
And I think it's creating great sentiment that this asset class actually does matter if you're focused particularly on Bitcoin.
Yeah, I'm seeing some speculation, and it's completely unwarranted from what I can see, that a lot of people have been saying tether will be the next target, but there are evil people who are saying that Ethereum would be the next target because it's much bigger, and the move from proof of work to proof of stake could have...
somewhat, I guess, you know, eliminated the argument that it was not a security that was made in the past.
Does anyone up here think that there's a chance the SEC could even attempt to go after Ethereum?
Bill, I mean, what do you think? You probably have thoughts on this.
Yeah, I think probably two things are true.
One...
Companies that are Bitcoin only that think that regulators aren't coming after them because they're Bitcoin only is a complete false narrative, right?
Generally, those companies are much, much smaller and the SEC and CFTC and state regulators and FinC and et cetera, they have to pick and choose their battles.
They have limited resources.
It may not seem like it, but they do.
And so they're going to go after the wins that represent either the biggest bank for the buck, the biggest shiny object, things like that.
And I think a lot of these
A lot of Bitcoin-only companies in our space just aren't big enough to have the eye of mortar focused on them.
That may change over time, but I think that's probably the most true right now.
And any actions that I've seen, point two, related to Ethereum have been what the regulators have called pooled investment contracts.
Actually, I shouldn't say that. That's my terminology.
But what I would call pooled investment contracts, not really attacking...
Ethereum and staking itself or proof of stake itself, but third parties basically trying to pool assets and coming up with investment schemes that would allow people to effectively invest in staking or stake Ethereum, but have someone else manage it for them and not call it a security.
We can debate all day, whether that's a security.
I have my own opinions.
That doesn't really matter.
What matters is so far.
The SEC has come down on third parties providing pooled spaking services, even pass through as some type of investment contract.
And I haven't seen anybody come down on proof of stake itself as a security offering.
And I think they would probably lose if they chose to fight.
And there's so many other fights worth having right now from their perspective, not mine,
that I think that's probably where this will stay for a while.
And yeah, I think regulators have to pick and choose their battles just like
just like companies do.
And I think this is, you know, where they're going to come out for a while.
Yeah, I mean, they're not infinitely staffed and they don't have an infinite budget.
We had an ex-SEC attorney on yesterday and he said, listen, when we talk about resources for the SEC in budgeting, it's human resources.
How many people can we hire to handle the caseload that we have?
And that's largely determined by the director and what direction they want to go.
Gensler has clearly made crypto his main focus.
I believe they hired about 30 more people making crypto effectively their largest enforcement
department within the SEC.
But they do not have infinite resources.
I mean, I'm a bit shocked that they can go after Binance, Ripple, and Coinbase all at the same
time and have the bandwidth to do that.
I don't think they do.
Just because they did it doesn't mean that they have effectively the bandwidth to fight all those battles.
And maybe there's an underlying assumption that they'll slow roll it and get to settlements.
I think there's also a disconnect between historically what happens.
And I'm not a securities lawyer, so I don't have real inside knowledge, but I've dealt with this enough to think I'm right.
I think there is a disconnect between the edict coming down of we need to kill this space in the U.S. and how enforcement traditionally works.
I think enforcement departments at the SEC, CFTC, maybe FinC,
Finsend, they kind of pick and choose their battles at the lawyer level, right?
Maybe they have people that do research, look at press releases, look at tweets now,
and they decide what clear-cut cases of securities fraud or illegal security offerings may be.
This is different.
This is an edict coming from on high, which says, go after these companies, figure it out.
Right. And so I wonder at what point individual enforcement lawyers go, okay, you're asking me to fight a case that we can't win and you're putting me into a corner here. And I don't want this on my resume, you know, that I was the one who chose to go that that it was forced to go after Ripple or Coinbase when.
We don't necessarily have a good argument.
And I do think this is happening to some degree.
I can't prove it, obviously.
But I'd be very surprised, given that it's a top-down approach
versus a middle-out or bottom-up approach in enforcement right now
that I do think is not going to end well, ultimately,
between the lack of resources and the lack of, you know, kind of groundswell
within the ranks of enforcement to support this approach.
Can I just take you back off that?
Yeah, please go ahead.
Yeah, just a quick comment
completely in line with what Bill was saying.
The judge in the Ripple case
specifically told the SEC attorneys
that they were acting hypocritical
and with a lack of allegiance to the law.
And those weren't on specific issues.
issues on whether or not XRP was in security. It was just on how they were litigating the case.
And I think this is exactly kind of what Bill was saying. And it falls right in line. A lot of these
cases are, hey, go after this company and find something. And the judges are seeing it. And for a judge
to even put that in an order is pretty significant. In terms of whether or not the government
has a favorite coin and they're going to push for this coin to get adopted over another, I really do think whether
whether or not they're going to come after it with a securities violation or at some kind of
carbon tax. I think we're watching a wide scale crackdown on the entire industry.
And to think one coin has some special status over another, I think the government is just looking
for different ways to corner the industry. And I think it's really more about working together
at this point rather than saying, oh, this is safe. This isn't.
I do think that Bitcoin has status over the others. And I think that that's exceptionally clear.
Yeah, I can give you an example of that, right? So Coinbase said,
that they've rejected, I think, something like 90 tokens as, you know, probably being either
securities or having other issues. Now, I'm sure the SEC knows that. And I'm sure the SEC knows
how many lawyers they had working on that. And yet, they think they know better with lawyers
who aren't completely focused on this topic, which of these assets are securities and which
aren't. And I have a feeling that when it comes to
their day in court that it's going to be very difficult for the SEC to make an argument that
is superior to the dedicated legal team that Coinbase would have had working on this,
not to matter other other exchanges that they may end up having to either subpoena or have
testify to the same issues. Right. So, so I do think that
This points to a very top-down approach to enforcement, which as an American, I find very disturbing.
That doesn't mean that none of their arguments are valid, ultimately, but it is very disturbing.
When, you know, a society based upon, you know, commerce and contract law is attacked from the top-down, we should all be very worried.
I'm actually quite happy here, to be honest.
I think I'm responding the same way the market is responding by saying,
you know what, it's time to go to battle.
It's time to get regulatory clarity.
Like Brian Armstrong says, we're going to go to the courts.
We try to do it without going to the courts, but...
But it's time to go to the courts.
And, you know, one way or another, we're going to get regularly clarity.
And then I saw another tweet by Ryan Salkers.
Ryan Salker said, Gary Gensler's got 17 months left in office.
Now, there's no guarantee that his replacement is going to be better.
In fact, I remember the day that Gary Gensler was appointed
We thought that he was going to be the best thing for crypto.
The markets rallied.
We all were so super excited.
And we got, to be honest, I preferred Jake Layton back in office,
even though back in the day he was the devil for this industry.
But I think it's great that we're finally going to go to court and get the regulatory
clarity.
And if it's going to take five years, so be it, let it take five years,
but let's get the regulatory clarity.
Also, if I were to pick a fighter...
and a fight that needs to go to court, my number one fighter would be Brian Armstrong,
and my number one fight would be the fight of the four charges or the four charges
that the SEC have got against Coinbase.
So I think CZ in this case is obviously the wrong fighter.
He's got 13 charges, and a lot of them potentially could be criminal in nature.
Brian Armstrong has a very, very, very, very clean record.
He has decent funding behind him and decent revenues behind him,
which I'm going to get back that in a second.
But he's the clean guy.
He's the guy that I think is the best fight.
And if I were to pick a fighter, that's the fighter.
And if I were to pick a fight, that's the fight.
There's also one part that maybe we're all discounting here,
and that is by squeezing...
the market, as hard as the SEC are squeezing the market, they are also destroying
coin base revenues.
And by destroying coin base revenues, they make Coinbase much weaker in the fight.
And I think they're very cognizant of that.
So I think one of the tactics that they're actually going to use is, you know,
if you make it very, very, very hard for U.S. investors and U.S. traders to actually squeeze,
to actually trade crypto.
What you're doing is you're actually weakening your opponent.
Now, the problem is that the SEC have got full line of sight,
and so is the rest of, so is every investor got full line of sight into Coinbase's revenue
and Coinbase's balance sheet.
And based on that, the SEC know how hard they can be pushing.
before they break Coinbase.
You know what I mean?
So I think there's a big fight.
I think that we have the best fighter in the fight.
And I think that that's the one that's going to get us the regulatory clarity that we need.
It's going to take years, though.
Yeah, but it's taken...
We've been here since 2017.
That was years ago.
You know, that was seven years ago, six years ago.
So, like, you know, it'll take three, four, five years.
Great.
And then we'll have clarity in three, four, five years.
And until then, we may or may not get clarity.
We get a regime change in the SEC.
Exactly what I was going to say.
Yeah, we get a regime change in the SEC.
You know, like...
Scott, you and I have been here for a long time.
We know that it was Jay Clayton in his last week of office that opened up the case against
Ripple, the XRP case against Ripple, right?
Yeah.
and it's still not resolved.
But I don't think that,
I think if Gary Gensler was in the,
was in office back then,
I'm not sure that he would have picked the Ripple fight as,
as the first fight,
so to speak. He inherited it.
And, you know,
the Ripple fight,
if Ripple beat him in this fight,
it's not,
it could weaken the next few cases because then there may be legal precedent against
salina codenomatic flow iCP um all of those right so i don't think that i think that if
what you can see with gary gansler strategy
is he's going for the tokens via going for the exchanges.
And what Jake Layton did is he went for the token via going for the token.
And it's a different approach.
And who knows who the next commission of the SEC will be.
Maybe it'll be Hester Peirce, if we're lucky.
I'm being facetious.
There's no way.
But I mean, if it, you know, we may get someone who's actually a little bit more
crypto-friendly.
We may get someone who's in the other camp.
especially given that next year's an election year.
I have something interesting to piggyback on that
because I wrote about it in my newsletter this morning,
which by the way, everyone is free.
But this is something I've written about extensively.
You took the one side of it,
which is that Gensler probably would not have charged Ripple
and Clayton did it on the way out.
Well, here's another interesting side.
Let me give you a little timeline.
Okay.
In May 4th of 2017, Clayton was in office.
December 17th, 2020, Coinbase filed for their IPO.
January 18th, 21, Biden announced his intention to nominate Gary Gensler.
10 days later, the SEC approved Coinbase's S-1 registration statement.
March 10th, Senate Banking Committee approved Gensler.
March 23rd, Coinbase announced that they were going...
public, April 14th, the Senate confirmed Gensler, and April 14th, Coinbase went public on the NASDAQ, the exact same day as Gensler was confirmed.
Coinbase was clearly in a rush to get it done under the Clayton regime where they knew that they could.
So it's the flip side of that, is that Gary Gensler probably would not have approved Coinbase if they had even gone a few weeks or months over.
I mean, look, I think that we've got to talk about this point of regulatory approval because I think there's a false narrative that's being put out into the market.
And it's being put out by us.
It's being put out by Brian, us being crypto Twitter, not Ryan, Scott and Mario.
It's also being put out by Brian Armstrong himself where he says, you know, the SEC approved our S-1.
And the truth is that by the approval of the S1, what they are approving is they're not approving the nature of your business and the products within your business.
That's impossible.
That's not saying that the SEC does.
What they approve is they approve they are proving the structure of your IPO.
So they're not approving the fact that you have a legitimate business or a good business or anything like that.
And I think that's...
It's a dangerous narrative which is actually flowing around the market.
Like when I listen to Brian Armstrong using that narrative,
I think it's a dangerous narrative because it's a narrative that can be debunked quite quickly.
So, cautious...
Let me make one point on that, Rand, you know, because I'm actually one who said that even before he said it.
You know, I've heard that argument for months now. People have been saying, hey, they got approved. Their business got approved. For one thing, SEC doesn't approve businesses, like you said, they will approve a registration statement, but they're only approving the registration statement. They're not making judgments on the business. So I've used, and others have used like the example of,
say marijuana business or a pharmaceutical business who says, hey, we're going to, you know, somebody
yesterday said, hey, you know, this business says, you know, we're publicly traded company who's
going to try and cure cancer and they end up killing everybody instead. You don't, the SEC's job is not
to make judgment on whether that business is legal. You know, if they're a weed dispensary in Colorado
and they want to expand to New Hampshire where the laws are different.
It's not the SEC's job to pass merit on that.
So that part is true.
However, there's more nuance in this because, you know, Brian does have a point and, you know, the SEC will stop these things.
So here's an interesting thing.
There was 70, I believe there was 70 SPACs that wanted to go public that were crypto-related.
Every single one of them was denied.
There's been other companies who have wanted to go public like Coinbase did, and they were all denied.
So the SEC, I believe now is doing, they're not supposed to pass merits on the business, the merits of the business.
But I think that they are passing those judgments now.
And right now and for the last, you know, well over a year, they've just been saying flat out no across the board.
I think if you.
where a major company wanted to go public, even if they check off all the other boxes.
I think that would be very hard if they're in the crypto space.
I want to actually, I think I may agree with you here because I don't know enough to disagree with you here.
I just know that they're not supposed to approve underlying businesses, but whether or not they do, I can't argue that.
But I'm interested to hear your view as to how and where we get legal precedent.
And I'll tell you what I mean here.
If you look at Binance and you look at Coinbase, both of them playing in both charges,
there's actually a good Venn diagram, which I use on my show today, which shows where they cross.
So Binance is Atom, BNB, BUSD, Cote,
Solana ADA, Matick, Filecoin, Sandbox, Mana, Algorithm, X, Infinity,
and Coinbase is Chili's Nearflow, ICP, VGX, Dash,
and Solana, ADA, Mattock, File, Coin, sandbox, and X infinity.
Now, question, one of these...
fights in court is going to have to create a ruling as to whether these are securities or not securities.
Or I believe that this is somehow how they're going to have to resolve it.
One of them is going to have to say, you know, in either the Coinbase listing, a Coinbase fight or the Binance fight,
the judge is going to have to make a ruling as to whether these things are securities and not securities.
Now the question is, which fighter do we prefer?
And how do we see it playing out?
Do we see, do we see the, is it a time thing?
In other words, Binance first, then Coinbase?
Is it a, how does it work?
How do you see it playing out?
The unfortunate thing from what I understand is that the...
suits don't specifically require the judge to make that judgment.
And, you know, Joe Carlis would be a good person.
You know, one of the really, really capable lawyers would be a good person to ask this on.
Not all lawyers would know, but some of the really capable ones would know the nuances of this.
But from what I understand, the judges generally don't, judges don't like to kind of overreach and make big broad precedent setting.
judgments unless they're really, really confident, you know, one way or another or, you know, in the law.
You know, from what I understand, they'd prefer, they don't want to, in other words, you bring a case
that mentions one thing. They don't want to go over and above what their requirement is to do under
the law. So, so unfortunately, it's not, from what I understand, it's not a clear cut case where
they're going to say, this is security.
you know as a layman it seems to me as a defense attorney if i was you know again i'm not a
lawyer but if i you know as a layman it seems like a good defense if i was coin based as lawyers
I'd go in there and say, hey, you're, you're accusing me of trading unlicensed securities.
Prove it. You know, prove their securities. You know, it's just, there's cases all the time with the ATF where people will get in trouble with firearms manufacturers or, you know, personal firearms owners where the ATF will come in and say, hey, that's a machine gun or that's illegal. And, you know, some of this stuff is gray air. They're like, no, it's not, it's not a machine gun. This is this is individual trigger poles each time, but it's,
greased up real fast. And then they get into this debate. Like is it, you know, and then they'll,
they'll have that, uh, handled in, in a court, you know, was this a machine gun or wasn't?
Or was it an illegal, you know, the barrel too short, too long, whatever. Um, but, but again,
you know, I think they, they try and avoid that. And these things, especially these big cases where
you have, you know, potentially 50 or 100 lawyers on each side. They're very, very complex.
And it's all kinds of, you know, legalese and nuance and they get settled, might not even go to court.
It sounds like both ripple and coin base because of the stakes.
Once the stakes get high, you know, neither party really wants to settle and neither, you know, both parties are kind of digging in and they're too far apart.
So it probably will go to core.
But unfortunately, from what I understand, it won't judge and say, you know, it would be great.
And I think a judge has this power, but I don't think it's likely.
I mean, it would be wonderful if a judge says, no, Ripple's not a security.
And neither are any of these other things.
Get out of here.
Case dismissed.
But I don't think that's going to happen.
Can someone give us an update, Scott?
I know you jumped in just after Danish was talking to Joe about it.
But can anyone talk about the...
The reports which are apparently confirmed about the SEC trying to freeze Binance US's assets in the next 48 hours.
Darnish did message me.
They are trying to.
They are trying to.
There is an injunction.
There is a...
So, hold on, let me actually get you, let me actually get the actual documents.
I just do want to say as we wrap this topic up, Bology will be.
He's already here, Scott.
He's already here.
Right, I just want to make it clear when he's here that I've told him that we're effectively going to speak with him and address him.
So if anybody else is on stage, we're going to focus on asking him questions, okay?
Yeah.
So just before biology comes on,
there is a SEC document that's a temporary restraining order freezing assets granting other relief
in order to show cause why relief should not continue.
And that is filed today.
Okay.
I think it's filed today.
So I think that's going to be heard.
But it is what I suspected that it's only against finance, US,
and it's not against finance.
So it's only the US entity.
Now, just for people to understand the relative size of the US entity,
In terms of clean assets, which is what the Defi Lama dashboard shows now, I mean, whatever the interpretation of clean assets is,
let's just use them as indicative numbers.
$51 billion is in Binance and only $330 million is in Binance US.
So it just gives you an idea of, you know, the size of it.
And then just before we go to Buddy, I think that's how important this fight is because if Coinbase win this fight,
They win the fact for all of us and on behalf of all of us,
But they also win a big prize, which is, I think they win the prize of becoming the Western and the North American crypto exchange from that point on kind of thing.
And I must have, I struggle to see how Binance.U.S. could ever catch up. I mean, I think it's almost impossible.
Yeah, I think that's right.
Yeah, please, apologies. So listen, I obviously, I think everyone knows your history. You've been writing somewhat extensively about this regulatory enforcement action and,
what it means on a grander scale and what it signals to you about the actions of our government.
So I know that you have quite a few thoughts.
I'm just going to let you go with it and then we'll jump in when necessary.
Okay. Can you hear me, Scott?
Perfectly, yes.
I can. You sound perfect.
Okay, great.
Yeah, so there's a post that you might be able to kind of share with the space.
The tweet that I share these called Reputation, Regulation.
Got it.
If you can pull it up.
I'm going to bring it up in about two minutes.
Okay, great.
30 seconds.
So I will just sort of, I'm just going to actually speak to that post and then maybe we can have a discussion because I think it gives broader context.
Like, we're in the middle of this giant fight right now, but just because just the fact that the SEC is fighting actually means it's losing.
And the reason is that the regulatory state, its power is a function of its reputation.
There's actually a book on this by this guy, Carpenter, who wrote, it was on the context of the FDA, but it also applies to the SEC.
And the thing is that for decades after this whole thing was set up, the regulatory state that FDR in particular set up,
but it just expected and obtained absolute acquiescence.
When a regulator even gestured at a company,
it was like a ring wraith in the Lord of the Rings,
you know, extending its finger.
Everything shriveled and died, you know, in like, you know, 10 feet around, right?
Employees left, investors sold, customers, veiled.
Regulators didn't even have to do enforcement actions or anything like that.
They were just sneeze in your direction and people would think you're guilty
because they're like the police essentially, they're like the regulatory police.
And they would collaborate with the media where the media would be a laser spotter for the right electricity.
It's typically an organization like the SEC would work with friendly reporters.
They'd leak an investigation beforehand.
They'd soften them up with a bunch of press articles that'd say how guilty their target is.
And then the state moves in.
And, you know, the goal was basically to strip all sympathy from their ostensible, quote, corporate criminal to try them in the court of public opinion.
And then, of course, to not incidentally advance a career of reporter and regulator alike.
Pulitzer's and promotions all around.
Who cares?
The target was framed.
No one would ever be able to find out because you didn't have a free media.
But now, you know, as I said, in the year of our Lord Satoshi, 2023, okay, things have changed.
So first, um,
The 20th century regulatory state was premised on concentration.
The SEC is built to regulate Goldman and Morgan, not a thousand crypto holders.
The FDA is set up for Pfizer and Merck.
It's not able to go after 1,000 biohackers.
The FAA is meant for Boeing and Airbus, not a thousand drone hobbyists.
And so the sheer number of targets in our decentralized era means that the archaic giant is like fruitlessly swatting flies.
Okay.
Number two, the IQic regulatory state has dropped off a cliff relative to its targets.
If you really understand a space, do you want to be a builder and an investor or do you want to be a hater slash regulator?
But I repeat myself.
Okay.
you know, there's much more fun and upside in building than destroying.
Our good fortune is that these regulatory arsonists get paid less than, you know,
the people actually building the houses.
Now, with that said, of course, abroad, actually, there are intelligent regulators
who are motivated to bring technology to their countries.
And so that's what we're seeing in places like the UAE or even the UK.
I heard good things even about France, El Salvador.
There's a bunch of countries around the world that want people to come in, but DC,
doesn't, okay?
Or at least half the D.C.
Third, the fact that agents of the state now need to argue their case on social media,
this has changed everything.
Now that we have at least partially uncensored social media,
thanks to along, thanks to, you know, others who have built things like Farcaster,
Nostr, like citizens can now talk back.
And so the corporate journalist message alone is not the only thing out there.
If you notice on many of these threads where, you know, Gensler or others post them,
there's hundreds and hundreds and hundreds of comments.
And there's hundreds of people, millions of people seeing those hundreds of comments
to see that these actions are not popular.
They are, you know, you can actually go and do a poll or whatever.
You can count it up.
But it's at least, you know, 70% against in general.
You know, just as I would guesstimate it.
And so the unelected agents of the regulatory state, they're finally facing digital democracy.
They don't have this manufactured environment where they can plant a story in the times, go and hit somebody, and then never get the contrary argument out there.
Then number four, the technologies themselves, of course, have been engineered for censorship resistance, incentivized uptake, global adoption.
I do believe that the exchanges are going to win these fights, but it's also something where the protocols are built for state resistance.
So it's a combination of things.
Moreover, jurisdictions inside and outside the US are diverging from DC.
So Texas and Florida and Wyoming and Tennessee, you have like, you know, the Dow laws of
Wyoming and Tennessee and you have the right to hold Bitcoin shall not be infringed in Texas
and you have anti-CBDC in Florida.
And you have crypto accepted for taxes in Colorado.
And you have essentially a lot of good stuff happening in the state level.
Then abroad, you have Micah and the EU and you have the UAE and you have El Salvador.
And you have even France's crypto regulations are better.
And of course, actually Japan is looking better these days.
So you have regulatory diversity.
It's not just D.C. anymore.
And finally, related to that, you know, foreign affairs now agrees that the world is no longer unipolar.
That's a, they're like a lagging indicator.
But the fact that they agree, they just did a poll on that among their own experts.
That means that D.C. no longer sets regulations for the world.
When you fully propagate out the implications of what multipolarity means, it means that, you know, other jurisdictions may make their own decisions.
And because the majority of global GDP and population is now outside the U.S.,
And because there's being all this domestic and foreign conflict, the regulatory state no longer sets the rules for the world.
And of course, there's other factors like, you know, there's this case, a Supreme Court case with a potential overturn of so-called Chevron deference.
And of course, part of this is cultural where you have the return of the self-confident, self-made founders after decades of gelda general managers.
This, in a sense, is back to the 1800s when you had the capital industry like, you know, Rockefeller and Carnegie, as opposed to kind of the career MBA types of mid-century.
Now you have the self-made founders again who feel confident in being able to fight.
And one of my macro theses on this is, and this is a much longer thing, and I'll pause here, but history is running in reverse.
You know, one way of kind of thinking about events is 1950 was peak centralization with one telephone company and two superpowers and three TV stations.
But if you go forwards and backwards in time, 1991, the internet frontier opens, 1890, the American frontier closes.
You go forwards in time, you have COVID-19, backwards in time, Spanish flu.
And you keep getting, you know, very similar events with opposite outcomes.
And one of the things that I think is happening is if you go backwards in time,
you have the regulatory state set up.
You have the regulatory state defeating the entrepreneurs.
You have, you know, journalists like Ida Tarbell went after Rockefeller and harassed them.
And all of the great fortunes were pushed into trusts.
And all of the great entrepreneurs were demonized and beaten.
And now that's happening in reverse, where Alon is...
beating the churnos, right?
Where now founders actually have their own distribution, right?
So we're seeing the opposite outcome,
what if the founders had won?
What if the state lost?
And, you know, that said, you know,
the state is certainly fighting.
And, you know, because they're fighting,
I believe they're losing.
If you plot sentiment towards them,
the reputation and hence their power is down into the right,
where do I think it nets out?
Hard to say, but I do think that they end up
with more power over fewer people.
They will have harsh crypto regulations that are only obeyed in the bluest of blue states and the most authoritarian places.
They're actively disregarded by everyone else, both inside and outside the U.S., much like sanctuary city laws, override federal immigration law, and foreign countries have their own policies.
It doesn't mean we don't need to fight.
We do.
It just means I believe that we can win because the arc of history is long, but it now bends
towards decentralization.
Let me pause.
You alluded to the fact that there's incentive for other countries to get regulatory
clarity.
Is that in response to the United States cracking down or just because in a vacuum, they're
looking to woo innovation their way and further...
The one country you didn't mention was China.
And we can talk about Hong Kong or China.
I think they're effectively the same.
They're clearly going in an opposite direction of the United States after being at the other pole.
Yeah.
So do you think that the United States crackdown is actually opening opportunity for these others and they're seizing it?
Or do you think that this was happening regardless?
Like, I mean, here's the thing.
I am...
you know like the american ideals i deeply believe in them free markets free speech you know
civil liberties equal treatment under the law and um you know what what crypto represents is the
scaling of that to the entire world where anybody in any country can participate on equal terms
with an american in a free competition in a free market you can invest in them you can back them and so on
In a real sense, it is the opposite of both the sort of centralized control from DC and what the, you know, Communist Party stands for, which is top-down control.
I am, I can't parse every twist and turn of Chinese politics. I have, it is surprising that they have, you know, and it's unfortunate and bananas, actually, that Hong Kong is, you know, taking a better position on this than, than D.C. This is a freedom technology that, you know, the West should be embracing.
Right.
You know, it could be like let a thousand flowers bloom where it's like a honeypot or something,
but it's also something where, I mean, hundreds of millions of Chinese people are Chinese liberals or, you know, technologists, right?
They're like us.
China's not a monolith.
This is a gigantic, massive country.
And there's lots and lots of people there who are into cryptocurrency, certainly for the economics, but also for what it represents with respect to the freedom.
I mean, if you're living under a CBDC, you really want that.
So, you know, maybe the Chinese government has said, okay, look, we'll give an outlet for that political pressure in Hong Kong.
Again, I can't parse Chinese politics.
Who knows what the heck is happening there?
But yeah, it's it's embarrassing, frankly, for them to be...
to have a more free jurisdiction than DC, you know.
The other thing is you mentioned on terms of regulatory clarity,
and certainly that's part of it.
Like you want to have clear regulations,
but you also want to have favorable regulations.
In a sense, you know, people talk about regulations.
Right.
You know what communism was?
It was just regulations.
It was regulations that banned capitalism.
Most people don't understand this.
But, like, you know, you had the death penalty for capitalism in China or the Soviet Union.
Okay.
Like, literally entrepreneurs were executed when they liquidated the Kulox, when they hung the landlords.
Like, even into the 1970s, um,
Do you know about the Zhao Gang thing?
The NPR.
Let me give you an article, ready.
The secret contract that transformed China.
Have you heard of this, Scott?
Yeah, I've heard of it, but please share it and I'll pin it up.
Sure. So here is, you know, here's the link. I just paste it in here.
I just pinned this end. I just paced it to you. It's an NPR, the secret document that transformed China.
This is January 2012. So it's before the awakening or whatever. So it still had some decent, decent writing.
Point is just a level set about what China was.
And this will help understand how far it's come and what regulations are.
In 1970, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract.
They thought it might get them executed.
And the reason is they worked out a deal amongst themselves to actually keep some of the grain that each individual farmer had.
Because under communism, to even think about profit, even think about keeping some for yourself was like this enormous crime against society.
So, you know, they basically used to say that your teeth belonged to the collective.
And so there's no incentive to work hard, right? There's no individual benefit. So what happened was the farmers basically had the secret contract amongst themselves, which was totally illegal, that said, hey, if I work hard, I'm only going to give some to the collective and I'm going to keep some of the rest. And moreover, you know, you know, you know, clause they put in their scott? They're like, if the government kills us for practicing capitalism, then you'll take care of my children.
astounding.
Up above, but for everyone's curiosity,
wanted to read it.
Yeah, so the reason I bring that up is that's within our lifetime.
Okay, right?
Let's within a lifetime many people here.
That was China of 1978.
That was only 45 years ago.
That is how far that society has come.
I mean, it's still, obviously, you know,
you could do way more in terms of freedom
and it's going in the wrong directions in some respects.
But capitalism is literally punishable by death.
Okay.
That's bad regulations.
They had regulatory clarity.
It wasn't what you actually wanted, right?
So yeah, clarity is part of it, but favorability is another part of it.
And I think a big thing here is if you just get outside of the U.S. and China, 80% of the world is neither American nor Chinese.
Right.
It's not just a bipolar world.
That's like a Cold War hangover.
I think in many ways we're going into a decentralized world
where India is now rising and the Middle East is rising and so on.
Absolutely China is a factor there.
But, you know, Macron is talking about how Europe needs strategic autonomy.
South America, Latin America, after years of currency crises,
El Salvador, there's some points of light there, right?
And, you know, the South Korean president is actually pretty pro-crypto.
I haven't followed that closely, but I have seen what he said.
So I think you're just going to get a diversity of different kinds of policies out there.
And then what will happen is, and of course within the U.S., there's amazing things happening,
pro-freedom activism at the state level within the U.S.
So the ideal is you have a diversity of policies out there, and D.C. has more power over fewer people.
there are some jurisdictions that's still, you know, run by D.C.
But then you just kind of freeze them out,
just like you couldn't trade with communist China or the Soviet Union or Eastern Europe for decades.
You couldn't trade with those jurisdictions.
They just screw themselves in the same way that, unfortunately, all these
hotel chains and things, you know, stores are leaving San Francisco.
Hotel chains are pulling out of San Francisco.
Lots of these blue cities are now losing economics because they, you know, there's something
in New York, I don't know if you saw this where like they're going to sue Kia because their
cars are too easy to steal.
Do you see this?
I did not see that.
I mean, it is, it sounds insane.
Okay, but here, take a look at this.
New York sues Hyundai and Kia alleging their cars are too easy to steal.
I just share this in DM with you.
Ready?
Look at that.
Public news since you're-
I'm checking it out.
I just have to tweet them to be able to pin them.
They have to be tweets.
So I will do that and share it with everyone.
Okay.
So like, I mean, that's insane, right?
Oh, you know, the car manufacturer.
I mean, obviously these Asian car manufacturers didn't model a grand theft auto
society, right?
So, you know, how can they make the cars less easy to steal?
What does that mean?
You know, obviously they have locks and, you know, other things on them.
What does that mean?
GPS tracking, who the heck knows?
Clearly, it's not the car manufacturer's fault.
But what that may mean is the crazier these, quote, regulations get,
just that part of the world economy that was the richest
just cuts themselves off.
And people just leave because no longer,
you can't make a profit there.
Walgreens pulls out of San Francisco, right?
And I do believe that San Francisco is like a bellwether
for a lot of things in lots of ways.
Lots of technology start there,
lots of social movements start there.
And if you can't stop it there and you can't reverse it there, then there's some business model that's pushing it elsewhere.
Really what it is, it's like the NGO industrial complex.
What happens is these NGOs, obviously you've heard the term going public, right?
But NGOs have a version of that.
When they go public, they take their pet cause and they start getting public funds allocated towards it.
So it's written into law and they can't go out of business.
And now, you know, they are basically paid to destroy society.
And so it's like barnacles that are very difficult to dislodge from the city government because they get this tax revenue.
And they're literally paid to destroy the city.
That's what happened to San Francisco.
That's why you have the Lawsome Breed a thing in L.A.
And that is literally their business model.
It's like their startup.
Like you have a startup.
Their startup is this NGO that's set up to get government funds indefinitely.
It's difficult to dislodge that, you know, because it's that you have a very concentrated group of activists that benefit from it.
And that's what's happening in a lot of these cities.
Anyway, that's a little bit of digression, but that's why some jurisdictions will have, I think, pretty harsh laws on this and others are going to be very favorable, those that want the business to come to them.
Yeah, I certainly think that the industry is going to take advantage of regulatory arbitrage
into the foreseeable future. And obviously, we need to talk a bit about Coinbase. You were the
chief technology officer. It's the big news of the week, of course, alongside Binance. And I have to
imagine that at.
During your time there, you were fundamentally involved in the decision of what to list, how to list it, how the platform would approach these things.
So what do you make of this action now after having listed and made all of those decisions in the past?
And do you think that now their business is fundamentally at risk, or do you think that this will likely just be sorted out over years?
Well, so first of all, I don't speak for Coinbase.
You know, I'm friendly, obviously, with many of the people there and so on.
But I have no information or anything like that.
You know, they're doing their own thing.
Okay, A, all right.
B is there's a whole like committee process for approving assets and whatnot.
And all of that is something that, you know, Coinbase has talked about or what have you.
So it's no one person's decision or anything like that.
that. With that said, some of the stuff that Columbus has talked about publicly is they have a whole legal process for approving assets. And, um,
And so to many other exchanges, Cracken and others.
People don't just list these, you know, in willy-nilly.
What you have is something where there's literally no consistent criteria by the government,
like Gensler himself.
There's videos where he's talking about how most of the market cap is not.
Do you remember that video from a few weeks ago?
Well, there's the one certainly of him talking about Algarand, and there's one of them talking about Eos.
It's very clear that he has a different position as a politician than he did as a private citizen.
Yeah, exactly. So if he can't figure it out, who else could?
Right. Obviously, you know, it's like the, the duck going backwards and forwards, you know, kind of thing.
Like, it's so cynical, right? Like, to be, you know, for it when, you know, he was, he might have been an advisor to Algrant and against it when he's like a, you know, like a public official.
I mean, it's obvious. It's like, it's like cartoonishly cynical, right? And now that we have social media, people can point that out. And so what that, what that means is that, um,
Like, you know, it can be resisted, right?
Like, the good thing about this is there are now many different venues in the world.
And where I think...
So long as they cannot ban crypto and harassed crypto and harassed Bitcoin from every jurisdiction in the world, if even 40%, 50% and so on, keep it just like, you know, communism versus capitalism in the 20th century, it really is like that, right?
It is centralization versus decentralization.
And so long as there's some percentage of jurisdictions that are pro that, you know, then, you know, this space will make it through and freedom will have a voice.
I know that's a broad comment.
The main thing is like the specifics almost don't matter.
And the reason the specifics don't matter is...
You know, the SC has declared war on the entire space, right?
It's, you know, it's Coinbase, it's Binance, it's Salon, it's Crack.
You know who they didn't get?
FTCS, I mean, obviously.
100%.
By the way, this gets to a deeper point.
Really what you want is a regulator to be a high-quality binary classifier.
Do you know what binary classifier is?
Have you heard that concept?
I've never heard the term.
It comes from like machine learning and statistics.
And the basic idea is it's like a diagnostic test.
You wanted to have both a low false positive rate and a low false negative rate.
Okay, because, you know, for example, you could have,
let's say, you know, you think of a regulator,
and there's a bunch of companies coming by on a conveyor belt, right?
And you want to pick out the bad ones and pick out the good ones, okay?
And so if you say a good one is good, that's a true positive.
If you say a bad one is bad, that's a true negative, all right?
You can define positive negative in different ways, okay?
And then if you say a bad one is good, that's a, you know,
That's a false positive.
And then if you say a good one is bad,
that's like a false negative.
You could flip around the definition of the positive.
The point is you want to avoid the so-called misclassifications,
the off-diagonal terms.
And when people talk about, oh, the regulation should be super harsh
or conversely, if they say, quote,
no quality control whatsoever.
And the quality control doesn't need to be
by a centralized regulator, by the way.
I'll come back to that point.
But very harsh regulation just means,
Oh, push everything off the conveyorable.
You say no to everything and then you will have, it's like calling, saying everybody has cancer.
You're not going to miss a case of cancer.
You're going to have a bunch of false positives.
Make sense, right?
So you want to be both sensitive and specific in the technical sense of those terms.
If you Google sensitivity and specificity, right?
And what's good about this is that is not simply like a vague analogy.
You could literally go and score their decisions on the basis of sensitivity and
specificity and say, did this turn out to be bad and did they mark it as good?
For example, FTX turned out too bad.
They marked it as good.
There were a bunch of other projects last year that blew up that they did not go after in advance.
Right.
and instead they're going after the good actors, right?
So they have almost like 100% false positive and 100% false negative rate.
It's like the worst.
You know, it's like you can invert their decisions in some ways and, um,
and kind of come with like a good regulatory system.
So the reason I bring that up is that is a more sophisticated objection
than simply saying, you know, no regulation or 100% regulation.
People, if you take a sophisticated view,
people actually want a, quote, regulated marketplace in the sense of
some form of star ratings and bands of bad actors.
But that doesn't have to be from a state regulator.
Okay.
And in particular, this is not necessarily obvious,
but I've got a whole paper on this.
I should probably put this out there.
But if you think about Amazon, eBay, Google, Apple,
any of these large tech businesses,
they're essentially cloud regulators.
Is that already obvious or should I explain that for a second?
I don't think it's probably obvious to the general population.
So, for example, in Apple, in the app store, you've got star ratings on every app and you have bans of bad actors, right?
Google with Android, you have star ratings, bans of bad actors.
Google Search has ranking of every website and they also ban malware from the results.
Okay.
Okay, eBay and Amazon, they have star ratings of, you know, products and they exercise quality control and they ban scammers and so on, or at least they're supposed to.
Okay.
And the thing is, whenever you assemble tens of millions, hundreds of millions of people online, where actually a lot of the value comes from is setting up a, quote, regulated marketplace.
Right.
except it's international cloud regulation,
not national state-based regulation, okay?
Yeah, that makes sense.
That makes sense, right?
So what that means is you can share signal from a buyer in Canada and a seller in the UK.
You have a larger set of data.
So it's like an internet first approach.
First of all, you have a larger set of data.
Second, you actually have data, right?
Another example is a very clear example is compare Uber and Lyft to taxi medallions.
Okay.
Like the taxi medallion regulatory processes may be a biennual inspection of somebody's windshield wiper.
Whereas Uber and Lyft, they track every ride.
They make sure the rider can pay, that the driver can accept payment, that the driver is going directly to the destination.
They have a bunch of dispute resolution services, and they have real-time star ratings of both sides, because either the driver or the rider can be misbehaving in a given situation.
Yeah. And that is just fundamentally, in a sense, a more, it's both a more intrusive regulator in a sense than the tax medallions because they're tracking way more things.
but it's also more consensual because driver and rider can opt in to Uber or opt in to lift or abroad.
There's like Grab and D.D. and Gojack and other services, right?
And, you know, this is actually, this comes from a libertarian concept that was impractical for a long time called polycentric law.
And the idea was that,
You could have multiple legal systems coexisting at the same X, Y location, and you can just opt into them, right?
And this is actually how things used to work before the modern era of the nation state.
You had communities, for example, the Jewish community might practice like Halaka, right?
And they would have, they'd be bound by their own law in their own community, and another community might have, you know, be like the Amish, and they'd be bound by their own law.
And, um...
And then, you know, you could basically pick which kind of law you wanted to be governed by, right?
And this is coming back to the future where now you can pick it by just swapping which app.
You pick Uber, you pick Lyft, and you opt into, in a sense, a different jurisdiction,
as opposed to having to move from New York to Texas to opt into a different kind of law.
Okay?
With me so far?
So, right, so your law, your legal system is like triggered by the network rather than the state.
Does that make sense?
It absolutely makes sense.
I would love for you to apply that forward to how this could obviously be utilized for a coin-based finance SEC situation.
Sure.
So there's the current conflict is between the state and the network.
And fundamentally, it isn't really, I mean, the dumbest way of thinking about it is, is this a security or not?
That's like saying, you know, the 30 years war was, you know, between Protestant and Catholics was about whether, you know, the, the, the, um,
the wafer of, the wafer was actually the body of Christ, right?
Like there's, that's like a very specific, you know, kind of thing that actually is a proxy for a larger power struggle.
And the power struggle is, does the network determine the rules or the state, right?
Are free people able to go and do what they want, but quote victimless crime of, you know, buying something from X, selling something from Y?
Can the rules be set by a smart contract that is across borders?
or is a violence-backed state regulator going to set those rules, right?
It's really like that.
Just like Protestant versus Catholic was, in part ostensibly theological,
but rather does the Pope run this territory or does, you know, a Protestant king, right?
And, you know, so that's like one way of parsing it.
Another way of parsing it is just purely technological, which is, you know,
Larry Page has actually said, you know, Larry Page, founder of Google, he said,
If you've got, you know, some law that was written before the internet, you need to examine it.
It's probably wrong, you know, or it could be, right?
At least you're, you know, here, let me find the exact quote.
So you're implying that the Howie test and security's law from the 1930s might not apply to an asset that was created in 2010.
Yeah.
I mean, it's like, it's like, oh, man, there's so many, there's so many silly things like this.
It's like, you know, it reminds me of his, um,
The Aereo case.
Do you remember that from like several years ago?
I don't.
So I may be getting this wrong, but here's how I remember it.
There was some law that was written that allowed people to record TV over the air on antennas.
Okay.
And, you know, this was, there was a fight in the cords or whatever, some regulation on this.
And, you know, people, media companies didn't want people to be able to do this, but there's some wrestle on it.
And then later, antennas got so small that you could just do over-the-air recording of live TV in, like, solid state.
And Aereo tried recording this and then tried serving it up to people, right?
And so the thing is that the regulation was written based on a technology that was X.
And then later, it was Y and it was just totally different.
In fact, actually, there's an even better example of this, which is,
somebody, you know, a while ago, here we go, maybe you can tweet this, ready?
Somebody was actually saying, oh, well, you know, the new technology doesn't obviate old laws.
And so this guy, I'm not trying to dunk on him or anything like that.
He was like, not sure how often it needs to be repeated, but you don't get to be exempt from
regulation because you built the same product using a different data structure.
And my counter argument is you don't need a stamp to send an email.
You don't need a TV license to broadcast on YouTube.
You don't need a radio license to do a podcast.
And fundamentally, you don't need to use old regulations to constrain the future.
You know, we recognize that automobiles differ from horses, that airplanes are distinct from birds, that submarines and surface ships are not the same.
And so when you change the fundamentals, old ways of thinking do not directly apply, right?
Right. And so that those are those three examples, but they're not, they're not trivial examples. You don't need a stamp to send an email. You don't need a TV license to broadcast on YouTube. You don't need a radio license to a podcast. The reason they're not trivial examples is we actually have truly free media and free speech now in a way that we really didn't 10 or 20 years ago or 30 years ago when you kind of had to inherit a newspaper or own a TV license.
I mean, you had freedom of speech in the sense of you could talk to your neighbor,
but you certainly couldn't set up like a multinational broadcasting thing.
We couldn't do what we're doing right here, you know.
So those were very material changes where you took away this licensing and these controls over speech,
and now we have much more free speech.
And we're taking away these, in my view, antiquated controls over markets to have much more free markets.
With that said, I do think we can do way more in the sense of star ratings, quality control, and so on on these assets.
But that's something which can be done in a consensual and decentralized way.
It doesn't have to be in this kind of legacy way.
Okay.
That makes sense. So it can be, but what does that mean for the actual situation that we're in now? I mean, is this simply a function of regime change that gets us an answer? Is it literally that we just wait years to have this litigated and solved for us? Because we all know that the industry is going to move far ahead everywhere else, as you said. The technology is not going to be stopped.
So is this literally just Americans miss out for a while and we move on?
This is difficult to handicap, but I'd say there's at least three or four dynamics here.
The first is the overall decline of the regulatory state.
Again, one of the reasons I tweet all the stuff about like multipolar world and so on is now that connects with technology.
Basically, the limit on technology, the reason we're not on Mars, the reason we don't have flying cars is because of the regulatory state.
Just period.
There's something called harmonization.
Do you know what that is?
It's basically the mechanism.
Regulatory harmonization is a mechanism by which just like a small company might outsource its login to Facebook.
A small country might outsource its regulation to the FDA or the FAA or the SEC.
That's called harmonization.
So how does...
Of course. Go ahead.
No, I was just agreeing, I think, that we, that everybody understands.
Yeah, okay.
So basically, you know, 10 years ago, I wrote this thing, which is like, regulatory harmonization is the single most important problem to solve in the world.
The reason, even though it's a very arcane thing, the reason is you have an unelected, usually anonymous, unfireable bureaucrat in Maryland.
You don't know what their name is.
You never voted for them.
And they practically usually can't be fired because they have career tenure.
And they're writing regulations for the FDA or FA or SEC,
which in turn regulate the entire world,
say choke point the entire world,
all the physical technology gets choke pointed.
This is why we've mainly only been able to innovate in the cloud.
Okay.
Now, today, that whole thing is finally breaking up
And we're starting to get jurisdictions that defy, that do their own things.
UAE is doing its own thing.
France is doing its own thing.
China is certainly doing its own thing.
India is doing its own thing.
They may not necessarily do everything that an entrepreneur wants, but they're at least doing
something different.
And if you have 10 different answers, you know, three of them may be to your favor.
And then you go and innovate there.
This is the drone jurisdiction.
This is the biotic jurisdiction.
This is the crypto jurisdiction.
So that is kind of coming back to your question.
That is what has changed.
What has changed is the regulatory state,
in its kind of, I don't quite call it death throws,
but certainly its decline is exerting more power or a fewer people.
And what could happen?
Well, first is, could it go to the Supreme Court?
Absolutely.
They've shown a willingness to examine things like, you know,
to do the Chevron deference case and so on.
We'll see.
Maybe the agency's wings get clipped.
It could go to, it's already in the courts.
Okay, so it's coin flip there.
Who knows?
It all depends on the judge in the venue.
I'm not a lawyer.
So, you know, look at that.
So A is, you know, could be Supreme Court or the courts.
B is, you know, the House, you know, has some regulations that they're proposing this kind of new law.
There's congressional hearings and so on.
Just the fact, by the way, that this is being brought in for congressional hearings shows it's very contentious.
C, at the state level, you have essentially sanctuary city type things that are already happening,
where not in the sense of immigration, but sanctuary states for regulation, where, you know,
maybe these regulations aren't even enforced at the state level. You know, that's something where
the governor has to agree about it, right? And if you can, if you think about it, this is happening on
many other issues on not just crypto, but it's on education and immigration and many other issues,
you know, quote, make America states again. States are diverging to the left and the right of the
feds. And finally, you have foreign countries and you have lots of other companies around there, right?
So my feeling is this is a, this will be a bruising battle, but I'm pretty sure that decentralization
wins in the sense of having
many favorable jurisdictions worldwide and possibly winning, you know, in the courts or legally, but not everywhere.
That's to say there's going to be some places that just are, you know, like very hostile to crypto and they just count themselves out.
Just like, you know, they've counted themselves out in, you know, in the 20th century, these jurisdictions that went communist.
I will say, did you watch the congressional hearing with Gary Gensler and obviously where he was under attack by McKenry and Emmer and all of them?
I was pretty shocked at the aggressive tact that they took with him.
Like, I doubt that we see an end to the regulator as maybe Bruce over here would like to see and has talked about quite a bit.
But I would not be surprised if we do see regime change to see them kneecapped because the rhetoric has been aggressive from the other side.
Well,
Well, I mean, that's the thing.
Before you answer, I mean, you call it aggressive.
You call it just factual.
I mean, McEverry just asked him as security or commodity.
And the thing about that is it collapsed the way function, right?
Like, or I mean, that's something the matter of the so much of what the regulatory state does is essentially lying to the public.
They'll say, oh, you could just come in and register.
Oh, the rules are clear, right?
This is something they've done for decades.
It makes it seem like it's nothing more than filling in a web form.
Okay.
And of course it's not like it's coming into the DMV or something like that.
And unless you've got an alternative media outlet to say, oh, yeah, what form is it?
Oh, yeah?
Okay, and what exactly is the rule to actually show that they buckle if you ask them one follow-up question, right?
And until recently, there's been a compliant, essentially, state media, like in China, frankly, except it's just totally subservient and aligned with the regulatory state.
Social media.
and, you know, like the dissident representatives are now actually able to ask questions,
and we can see those clips on social media.
So it's not even being, quote, aggressive.
It's just being realistic.
Anyway, but it's kind of a remark on your point.
Go ahead.
Scott,
Scott, before you carry on, as a non-American,
by the high, this is run.
Yeah, I'm saying, as a non-American,
when I watch these Gary Gensler testifying
in front of Congress and whatever else,
I kind of ask myself, what's the point?
And I think there's a lot of us non-Americans
that maybe don't understand very well
how the legal system works in the States.
It just felt to me like,
He was avoiding the questions.
He was dodging the questions.
He couldn't answer basic questions.
And he didn't really have much accountability when he was testifying.
And as a non-American, look at this and I go, explain to me how that process helps.
And it feels like it's a little bit of a waste of time.
Oh, the process is actually extremely helpful in the sense that you and the rest of the world are getting a visual into the fact that the SEC is misrepresenting things.
Right.
But I think that, I mean, if you look at the sentiment around the SEC right now, you can't tell me that anyone is actually standing up with a head held high saying the SEC is protecting investors, not only crypto bros, but I mean, you're talking about stock market accredited investables and whatever else.
So what?
So what if I feel that way?
So what if we've embarrassed Gary Gensler?
So what?
Okay.
He clearly becomes untouchable.
He clearly believes that he is untouchable because he's protected.
So I can answer that in a sentence, but I will answer that in a book.
You know, Scott, I just DM'd you two links.
The first is against the one.
And the second is reputation and power.
Maybe you can just add those to the chat.
So Ron, the long answer to your question is reputation is power for the regulatory state, meaning they are like the police.
Okay.
And if, you know, the, if you have a city of 10,000 people.
And you have 10 police officers.
Those 10 police officers, if the 10,000 people simply defy the police officers, the 10 police officers don't have enough guns to bring all of them to submission.
Instead, what the 10 police officers, if they are considered illegitimate by the population, they cannot coerce them.
Okay.
What the 10 police officers rely on is that those 10,000 people think of them as fundamentally legitimate.
And if the 10 police officers accuse one guy of a crime in the city, the other 999, you know, whatever, 9,000 something people say, oh,
Well, policemen, I think you normally get it right.
You accuse him in a crime.
I will cooperate with you.
I will help you arrest this person.
I will test whatever, all this type of stuff, right?
And this is like, you know, if you talk about a different scenario,
it's like invading a country, you know, like the U.S. wants to win hearts and minds, right?
If it doesn't have hearts and minds, it's eventually going to lose.
Right.
And it's lost hearts and minds.
That is a huge, huge deal.
It means that it has to use force.
See, the regulatory state, one way of thinking about it is they used to, you know, for example, the FDA in 2010, okay, like 10, 10 years ago or whatever.
They would do things like they would just post a letter on their website, which said, we have concerns.
Why would they do that?
They didn't do something where they go to the effort and energy of putting to their full lawsuit.
Simply stating public that they had concerns, nobody had heard anything that was critical of the FDA.
So everybody gassed and they're like, oh, my God, this company, it must be like poisoning babies.
It must be really bad if the FDA accused them of something.
And without doing anything, the company that they'd accused would lose their investors.
It would lose their customers.
Employees would quit.
Everybody would say, oh, my God, the FDA has said something.
You're under a cloud.
And that's so much less effort and risk for them than getting into a court case where they could lose and getting publicly dragged by congressmen who could, you know, like pass laws against them and publicly dragged by governors who can just defy them.
They're in a fight now.
And so the reputational thing is so, so, so important because it means that they've lost deference.
Does that make sense?
It does, but in this case, who do you believe is losing reputation?
So, like, I think I get what you're saying, but when the American public see this,
Who's losing reputation?
Well, if you graph it over the longer term, and I'll give you some graphs like this, but basically it is the state.
And for example, here's another graph.
Scott, can you tweet these as I'm just DMing them to you?
For example, public trust in government, right?
It's near historic lows.
Trust in media is near lows, right?
Half Americans now believe that, you know, news organizations are misleading them.
Trust in institutions in general is crashing, right?
And it's not like trust is really high in lots of other things,
but actually, if you look at, for example, the Edelman Trust Verometer,
trust in...
in businesses, it's actually the highest of the lows, right?
So, you know, meaning like that's actually, you know, the,
if you think about Congress or you think about government and so on, media,
those are in like the 10% range or something like that,
but business is higher than that.
At least there's some CEOs that you might trust.
And that they haven't actually included Bitcoin in it,
and they haven't included, you know, cryptocurrency,
but that might be higher still. I don't know, okay?
The point is that who's losing trust,
if you take the long view, yeah, in the short run,
it's never great for any company to get in a fight with the state.
In a long run, it's not great for the state
to be fighting so many companies,
especially when a different-
So if we're losing trust in the state,
as a nation, if the Americans are losing trust in the state,
which is a very, very, very long process.
I mean, you lose trust in the state over tens of years,
if maybe, I don't know, it's decades, certainly not years,
What happens when a country like America loses trust in their state?
And I just want to give you a viewpoint.
I live in South Africa.
We lost trust in the state 25 years ago.
We're still exactly in the same place as we were 25 years ago.
It just keeps getting worse and worse.
25 years ago, we had electricity.
Today, we have 10 hours a day without electricity.
So the reason why ask is when you lose trust in the state, what do you do?
Because it doesn't feel like...
If you keep voting Democrat, Republican, Democrat, Republican, Democrat Republican, and, you know,
I'm not going to take a side here, but I'm going to say that, you know, neither have been trusted in the past.
What happens in the long term when people lose trust in the state?
And how long does it take?
Well, so it takes you.
Well, I think this question is, I think, unnecessarily abstract because the SEC has lost that legitimacy already.
And you can see it playing out right now.
which is that, you know, back in 2018, 2019, when they went after Ripple, right, remember, that was the first big security case.
Everybody was like, oh, my God, Ripple is a top 10 token.
And everybody assumed that the SEC knew something they didn't know.
And when they read the complaint, they're like, oh, there's this, you know, they were
market making the token, they were making calls and when it would go up and down, they
owned whatever, 70% of the token supply.
They said, oh, wow, okay, maybe XRP is really in a different category than the other
tokens that I think of as being legitimate tokens.
And so everyone delisted XRP.
And at that time, people kind of assumed, okay, the SEC is the cop on the beat.
They're protecting the town of 10,000 people, right?
Like, we're going to pay deference to their decisions.
And then they kept going and they kept going.
And then, you know, people were trying to comply.
They were trying to be good actors with what the SEC was doing.
People started, you know, with all the public rhetoric, the SEC was giving, they were like,
okay, well, SEC needs to think all this is illegal.
And then in the last couple of days, they've now claimed that almost every single token on coin market cap,
besides Bitcoin, ether, and stable coins are securities.
And basically, it's like, look, the entire town, all 10,000 of you, please report to prison
tomorrow.
You're all breaking the law.
And what did you know?
There's not been nasty listings.
We don't have just a bunch of Bitcoin brokerages now.
People are like, okay, well, well, shit, just prove it in court then.
Because we don't agree.
If you read the SEC complaint about Solana or about NIR or about Ada,
and it basically just says, oh, there's a team and the team has tokens.
Yeah, we know that.
We all know.
There's nothing here that we don't know and that we didn't already underwrite collectively as investors.
Hasid, I'm thinking about it much bigger.
And Balajia, I really want to understand your view.
I mean, back to your point, Hasif, I think that the SEC certainly hasn't lost power.
If anything, if I recall correctly, they're getting an increased budget to do what they need to do.
So it looks like they're getting more money to do.
what they need to do.
But I'm interested in Balagy's point.
Yeah.
On a more, I'm not, I'm actually not really talking about crypto.
I'm talking about a much bigger zoom out thing.
If we have lost faith in the state and the institution, what usually happens and how...
Maybe what usually happens and how do you kind of see it playing out in the U.S.
Okay.
If you're saying that people lose faith in the state.
Yes.
Okay.
So first of all, I actually think both of you have made, make excellent points here.
I think essentially what Haseeb is saying is absolutely right that, you know, when everybody is a criminal, nobody's a criminal.
Obviously, the police, the government has made an error, and they're just trying to use raw force.
And this is like end of Soviet Union times, right, where they have some like residual strength,
but they're just trying to use raw force and they're getting pushed back by too much of civil society.
But, Mary, your question is also actually a very important one.
I think the difference between South Africa versus the U.S. is that with no offense to South Africa, I have South African friends.
I wish the best for the country.
It is, it's a spoke, not a hub, right?
That's to say, it's not like the center of the Western financial system and regulatory system and so on, right?
So because of that, right?
Okay, so meaning no offense to South Africa, I wish the best.
There's a lot of great people there.
No worry. You don't have to be political. We get it.
Well, yeah, no, I'm just saying that. The reason is because basically, yes, South Africa has been in a significant decline, unfortunately, for a while.
But it really hasn't gotten international headlines because, in part, it's a spoke, right?
It's like it's not something which is central to the world economy. If it's going down, then you know, only really South Africans care and so on and so forth. Okay.
Tell me what happens in a hub.
Tell me what happens in a hub.
And maybe if you have got examples of past hubs where you're saying like this has happened,
because I really want to understand how this plays out.
Okay.
So the thing is, let me preface this.
I can talk about this at some length.
But let me preface this by saying, you know, my view on this is, is Dumer Optimist.
Or I've got an essay coming called The Pragmatic Apocalyptic, right?
Which is to say...
You know, Ray Dahlia talks about us also, changing world order and so on.
You know, one model is, oh, nothing is ever going to change and it's just going to be fine and it's just going to be the same state but just worse or whatever, the same set of affairs.
The second is we're in for radical change and everyone's going to die.
Oh, my God, it's going to be terribly bad.
And the third is, you know what?
Like the world order has changed in the past.
And, you know, it was massive, the fall of the Soviet Union is massively disruptive for the people who lived in the Soviet Union.
But the rest of the world, not so much.
And we've even made it through world wars and Great Depression and our things.
And even COVID, for example, like, if you had said in January 2020 that,
700 million people would get infected and 7 million would die and a million Americans would die.
That was more radical than even anything I was saying or whatever.
And yet, at the same time, three years later, people like, you know what, we lived.
It's kind of over whatever, right?
So the reason I preface with that is I actually think we're on route to some very important political geopolitical changes.
but will live, but they'll be particularly disruptive to people in some jurisdictions, just like the fall of the Soviet Union was particularly disruptive to people who lived in the core USSR and less so to those the further way you were.
Okay. Does that make sense so far at a macro level in Shaggen's specifics?
It does make sense.
It does make sense.
I just want to, before you carry on,
and I like where you're going on,
I can ask you a question.
Do you think NetNet America,
and I mean NetNet, there are many factors to consider,
but do you think Net Net Net America is better than it was four years ago?
For you, always.
I mean, see, the problem is one thing I'm actually trying to do, by the way, also in vocabulary is America, the American flag, the USA, this is like a contest, you know, it's like like a border in social space, right?
Those are like contested terms.
terms. But if you say, because people think different things when you say them and if you
criticize X, if you talk about D.C. and the federal government, you talk about Blue America
versus Redmond? Federal, Federal USA, do you believe that it's declined in the last four years?
I think it's been in decline for the last 30 years.
Okay. That was my question. That was my question. And again, the reason why I asked that question is,
I've lived, granted it's in a spoke and not a hub,
but I've lived in a country that's been declined for,
you could argue, 30 years as well, right?
So the countries are declining at 30 years.
It just feels that when countries decline in 30 years,
it takes a very, very, very long time for people to have a USSR moment,
to have a Soviet, a USSR kind of moment.
And that's why I'm kind of wondering.
What I'm wondering is,
Are we going to be here in eight years with complaining and saying, you know, eight years ago when we spoke America was better or the U.S. federal was better.
And eight years before that, U.S. federal was better.
And it's almost like a downward spiral.
Option one.
Option two, is this just how people generally feel about governments?
People always complain that governments are bad.
People always complain that governments get worse and worse.
And people very rarely actually do anything about it.
When I say very rarely do anything about it, I just want to preface that.
I find that people are very loyal to political parties, despite...
I think that politics is like religion and football.
And, you know, in football, you can support a football team.
And even if they have the worst season in the world and they put the wrong strikers on and they lose every single game,
ultimately, for some reason, you still go and support the same football team.
It's the same thing I think with religion and I think it's the same thing with politics.
Right.
I think that I hear all my U.S. friends complaining about the state of where they're at,
et cetera, et cetera.
And then when I ask them, what is the path to change?
Nine out of ten times they're casting the vote for the same party.
Right.
Or maybe even the same candidate.
So let me make a couple of quick observations there.
So the first is, can you hear me?
Yeah.
Let me just very, can you hear me there?
Mara.
Good much.
Perfect.
Okay.
Yeah, yeah.
Very briefly.
Anthony, Skaramwitch, do you want to say something?
Anthony, you're muted.
I did.
I did,
as you mind,
it'll just take 30.
Yeah, go, go.
Pleasure to have you,
Anthony.
Thanks for jumping on on short notice.
Okay, so just,
so just 30 seconds.
So there's three things
that I just want to say.
Number one,
please do not overlook the lobbying
by the sedimentary forces of,
of traditional finance in Washington. And just overall lobbying in Washington,
$70 billion U.S. dollars, they're lobbying 535 people with 70 billion U.S. dollars.
Of course, they'll also lobby the White House. And so those in Trent's interests like what
the SEC is doing to Coinbase and finance. And so don't underestimate that for a moment.
Number two,
To Ron's point about the decline, the United States is in decline because we will not make an adjustment or an upgrade to our social contract.
And let me just give you this quickly. There are 27 amendments to the U.S. Constitution. The Constitution was ratified in 1789. You're picking up
an amendment once every eight or nine years.
Yet the last amendment was in 1993, the 27th Amendment.
That was a procedural amendment.
That's 30 years ago.
And the last big transformative amendment was the Voting Rights Act in 1965.
That's 58 years ago.
So the United States...
is no longer amending the Constitution.
And I'm going to just explain to you why we're not doing that.
We're not doing that because we let the politicians control the vote.
Number one, gerrymandering.
Are you in a real democracy if the politicians are picking the voters?
I thought it was the voters were supposed to pick the politicians.
Number two, the citizen united ruling from the Supreme Court,
which allows unlimited PAC money to be spent under the guise of the First Amendment,
is literally the Plessy versus Ferguson for the democracy.
And for those people that study the Supreme Court or the Constitution,
What Plessy v. Ferguson said was that you could have separate but equal schools, separate but equal lunch counter, separate but equal bathrooms, et cetera.
And it led to massive racial discrimination in the country.
It was reversed by Brown versus Board of Education in the 1950s.
But I'm telling you guys that the United States will stay in the climb.
unless the United States can find some transformational leadership.
And there's a lot of entrepreneurs on this call.
So I just want to just mention this to people.
It's not a big number.
We could form a coalition of 50 politicians, Democrats and Republicans,
that were seeking reform and you could crush this extremist behavior that goes on in Washington.
So you have guys like McHenry that want to do a good job.
Emmer want to do a good job.
I'm not saying everybody is completely cynical, but at the end of the day, most of these people
really just want to stay in power.
And unless the 77 million people that own cryptocurrencies in the U.S.,
act is almost like a decentralized lobbying organization. This will continue, and it'll continue
whether a Republican or a Democrat gets in the office. Remember, Donald Trump hates crypto.
He has said that publicly. The other political candidates on the Republican side, they don't really
understand it. And therefore, if no one's agitating them, they will not be forced to address it.
So without real reform, you know, I don't want to, I'm not a pessimistic guy. I'm classically an optimist, but we have to find a way as a group of people to come up with proposals politically.
Right.
entrepreneurial proposals to create reform.
And two of those things would be end gerrymandering and flatten the system once again
so that we have one vote for one person as opposed to the billionaire having way more influence.
And by the way, in the last 11 years since Citizen United, take a look at the laws.
The laws are slanted towards the very, very rich.
Right.
And this is the reason why we have so much distrust in all of these different institutions of the establishment.
You know, thank you guys for letting me speak. I'm going to put my mic off now.
That was great, Anthony.
Thanks, I appreciate it.
Bology, back to you.
I really want to just go deeper into what we spoke about in terms of how the change actually happens.
Sure.
Okay, well, so first is, Anthony's points, by the way, are good because essentially they're printing the money to give to the banks, I mean, by buying that.
It's a high value.
Can you guys hear me?
Ryan, yeah, I'll fix it up for you, but Ryan.
You're glitching.
Go ahead, Bollogy.
Okay, can you hear me? Okay, yeah.
So basically just, you know, Scaramichie's point is they're printing the money to essentially give to the banks by buying assets at high value for the banks turn around and then spend on lobbying.
So it is amazing that our freedom movement has any traction at all against the money printer, right?
It's actually bananas.
They can basically just devalue, dilute, print, and then fund themselves.
It's bananas, actually, that we have any traction at all.
But while I really appreciate everybody who's working within the system, and I think that's going to be a, it is a necessary thing.
I think it's also useful to think about how one can build the next system or work outside the system.
So what would that look like?
So I wrote this book, the network state,
you know, whatever, you can, you know, look at it, read that.
We just did a pop-up network state,
the Talek hosted one in Zuzaloo in Eastern Europe.
But just to kind of describe the concept,
You know, a startup company, you start with a small amount of capital, right?
You don't assume, okay, I start off as a billionaire.
What can I do?
You say, what can I do on like $10,000, whatever, 25K?
What can I bootstrap?
And so a startup community would be bootstrapped on a small amount of political capital.
You don't assume that you have Alon Musk's, you know, Twitter following.
You don't assume you necessarily have a huge, huge, huge amount of distribution.
And you don't assume that you are president and you have all the political power.
Instead, you build political power and community bottom up by building a following
and then in-person communities of increasing scale.
Okay. So in short, I think the startup community is actually how we do grassroots, quote, reform. And it's not political in a normal way. It is it is metapolitical because you're building the community first and the laws layer on top of that. You build a people, you build a nation first and the state comes second. So that's like,
abstract in concrete, you want to move from a two-party system to an N-city system.
That's to say, you move from jurisdiction to jurisdiction and you have different laws.
It's already happening where you have Florida and Texas and so on within the US and El Salvador and others outside the US.
And that's working, you know, so it's like V1 might be let's change the laws in Washington, right?
Which I think is, it's good that some people are doing that, but that's like price to perfection.
That is like the, that is where everybody thinks that they want to go.
They think it's the lever of the whole world.
When I say price to perfection, what I mean is you can spend an enormous amount of effort there to get like one line and one bill once.
Okay.
Then I think you get higher, you know, bang for your buck in a sense, in a sense of your time spent, by working at the state and local level, which increasingly no longer listen to the feds or you work with small governments.
You work with like red states, purple states within the U.S. or foreign states outside the U.S.,
And they no longer really, you know, they don't really respect D.C. anymore.
Over the last 30 years, there's just been a decline.
Every incident from the Iraq war to the financial crisis to, you know, coronavirus to the endless political fighting, all those things.
They have knocked down the ability of D.C. to just harmonize the entire world.
And so other jurisdictions are listening. Okay.
So like v1 might be, oh, let me go to DC.
Okay, fine.
Maybe some people are going to.
V2 is work with red states and foreign states, purple states, and, you know, positive states.
And then V3 is...
Can you start your own?
And I know that sounds crazy, but we've been able to start new companies.
We've been able to start new currencies.
Can we start new cities or even new countries?
Now, can we start new cities?
The answer is yes.
If you go to cul-de-sac.com, C-U-L-D-E-S-A-C.com,
me, Scott, you can tweet some of these.
Okay, here, ready on.
Okay.
And, Mary, you asked about this.
So that's why, like, this is like the macro kind of, I think, answer, right?
Look at cul-de-sac.com.
Look at prospera.h.n.
Look at Cabin, which recently launched.
Okay.
I must just say that where do you store all this data, bro?
Where do you get all this data from and where do you store it?
Every time I hear you speak, I'm fascinated by.
Just how much you've got stored in you.
It's incredible.
I'm sure that the audience said the same sentiment,
but every time I listen to speak,
how do you know so much about so much?
Well, I appreciate that.
I don't know.
I read a lot and I just hold references.
And if I don't know something,
I will try to say I don't know and I'll try not to talk.
I mean, I'm not going to...
I don't know, I'm not going to talk about aviation engineering.
I don't have a set of references on that.
The boom arrow guy should talk about that.
But this is just an area I've studied.
And, you know, Scott may be able to tweet some of these things.
The reason is this just kind of suspension, but thank you, Ron, it's very kind.
No, they're up.
I apologize.
I put them up.
Okay.
They're up.
Great.
So these are three things.
Okay.
So cul-de-sac, Prospera, cabin.
There's another one, Kift, for example.
It's at kift.com.
Okay.
And Scott, if you tweet these out, right?
These are four, and I'll give you one more,
Zuzaloo.City, okay.
H-TPS, zoosolu. city, okay.
These are four or five examples.
Let me just kind of go through them just to give you a sense with our.
Coldesack is a city built in Arizona, which is car-free.
Okay.
What does a walkable community look like?
Well, one answer is you try to get elected and you wrestle with all of these, you know, officials and so on.
The other is you go and do it like a startup and you actually build
from scratch somewhere, in this case they picked Arizona, a car-free community, where now you're
actually in control, and so you can't just complain, you have to actually build, and you have to
pick all the parameters, and they've done it, and they've sold units, and people are moving in,
right? The people are living in cul-de-sac now. Okay, it's a real thing, okay?
A totally different version is kift.com. As opposed to being car-free, people are doing van life.
That is, they're literally living in a car, except...
They're in the great outdoors.
So they're like driving around the Midwest and, you know, upper Midwest.
And they've got these sort of base stations where you can park every once a while.
You, you know, fill up with fuel.
You get a meal with people there.
And you save enormous amounts of money.
Okay, so you're just on Starlink internet.
And otherwise you have like no expenses.
So you can save and do remote work.
And for people in their 20s, this is like kind of a cool, adventurous thing.
You can see kind of much of the U.S. around these base stations, right?
And what's cool about that, by the way, both cul-de-sac and Kift start with a, it's not a tech innovation.
It's like a social innovation.
It's a moral innovation.
Kaldesak starts from walkable communities are good.
And Kift starts from...
cutting expenses living in a van is good, right?
Or rather, you know, like seeing the great outdoors is good.
Okay.
And what's funny is both car free and the only thing you have is a car actually kind of would
both appeal to the same type of person.
You know, it's funny.
It's not really about the car per se.
It's about the social innovation.
Does that make sense?
You know, just talk about some of the others.
Prospera is in South America.
That is like a like a startup city in Roiton,
the English-speaking island there.
Cabin just launched.
It's like a thing of it as almost like a college town type thing in Austin.
And Zuzaloo was like a pop-up network state in Eastern Europe.
There was, again, almost like a two-month or three-month conference.
So that's less permanent than the other ones here.
The other ones here are permanent in Arizona and Austin and South America and the Midwest.
Zuzul was like a pop-up, right?
But the point is that...
you know, using the internet to assemble communities in the physical world is, in my view, the next step.
And the reason is, if you can do that, if you can assemble a community of a thousand people,
whether it's in the middle of nowhere, okay, or whether it's just on the outskirts of an existing city or some combination, then
It's like being CEO except you're president of that community.
You can incorporate territory.
There's actually a path to becoming mayor.
In the U.S. and other countries, if you have land that you get people to develop,
and I mean, you develop it yourself, you take the shovel just like your ancestors did.
and you carve it down the middle of nowhere.
Well, guess what?
You can incorporate a town.
Now you're your mayor, right?
And now that's like building up, quote,
political power from scratch, right?
Now, the thing is,
you also don't necessarily need to change
all of the laws at once
You can have private law, right? What is private law? For example, the car-free city is just like a convention that all the people who came there are abiding by, right?
The, in another example, stuff I talked about in the network state book, you could have keto kosher, for example, where you have a town where people are only keto.
So there's no carbs. There's no high fructose corn syrup. There's none of that stuff added in any of the sauces, you know, drop the cookies at the border, right? You could have
a digital Sabbath town where the internet goes off from 9 p.m. to 9 a.m.
so that people can't surf the internet or play video games at night.
Okay, some colleges have actually done this by the way and it's had seemingly good effects.
Another example, you might have like a formal wear town.
Just like if you look at the old movies or old, you know, videos of what the 30s or 40s look like,
everybody was so well dressed. They had suits and ties and, you know, skirts and everybody was like,
you know, well dressed at all times, partly because they didn't have, you know, comfortable, flexible clothes.
But you can imagine rebooting that somehow.
Maybe with something like Mizan and Maine.
Misen and Maine has like very comfortable, stretchy garments that still look like suits and stuff.
Okay.
But you have a formal wear society and why would you do that?
Well, maybe there's a psychological effect.
Everybody's dressing up all the time.
They're more polite to each other.
I just need...
