SEC seen having clear case against Coinbases lending program

There are historical cases of regulators allowing new ways of funding outside of traditional regulation, he said, mainly when there was a compelling need. For example, money market mutual funds became an alternative way for customers to earn returns during high inflation when banks had restrictions on the interest they could provide.

Wilmarth does not see a compelling need today.

Steven Lofchie, a transactions lawyer with Cadwalader, Wickersham & Taft LLP, saidsome people believe that if you do something and it involves digital assets, you are out of the securities laws, and that is clearly not true.

The SECs authority in the Coinbase case was never in doubt, he concluded. There are difficult cases, this is not one of them, he said. In a blog post on his firms website, he said it was a question of whether the company can borrow from retail investors without coming under the securities laws. The answer is no, he said.

Kevin Werbach, professor of legal studies andbusiness ethics at the Wharton School of the University of Pennsylvania, said the 4 percent that Coinbase offered is in line with some other crypto lending services, and even less than somedecentralized finance platforms.