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SEC subpoenas – The two most likely outcome scenarios.

I am pretty convinced one of major things weighing down this market is the SEC news of the last week or so. Just to quickly recap, the SEC and CFTC sent out about 80 subpoenas to various to ICO’s. The coins that got the subpoenas have not been disclosed so we don’t know exactly what coins or projects may be effected. However, I wanted to look at the two possible outcomes that could be the result of these subpoenas, or more importantly, what are the motivations of the SEC and what are the scenarios that could play out.

Scenario number 1 – The SEC is similar to most regulatory bodies in that they like to go after big fish in the hopes it scares all the little fish. Also, it makes it look like they are working hard because it makes bigger headlines. So based on this reasoning and past history, it’s very possible the 80 subpoenas went out to the larger ICO’s of the last year or so. If this is the case, it means quite a few projects in the Coin Market Cap top 100 could have been subpoenaed and are under some kind of current investigation.

This is also the worst of the two scenarios I am seeing. As this would mean some high profile projects and ICO’s would be under investigation and possibly brought up on federal charges. This would obviously be very damaging to the market and especially to the coins involved.

Scenario number 2 – Based on a conversation with a source that spoke with Coindesk, the SEC offered some of the projects an alternative to providing the evidence requested in the subpoena. Instead, they could simply schedule an appointment with the SEC to answer some questions. On the surface this may seem like a good alternative, but I am sure after talking to a lawyer, most projects won’t choose this option. The reason being that any wrong answer could land you in trouble. Even if the discussion is not under oath, you could end up giving them something to look into. It is never a good idea to have a casual conversation with federal investigators as every word you say could be used against you at a later date.

However, the reason this is scenario number 2 is because it is possible the SEC just has no idea how these ICO’s are even operating, and they want people to come in and simply give them an idea of what is going on out there. For example, the SEC would look foolish if they just came out and said they have no idea how ICO’s work and then ask for the power to regulate them. Instead, they send out subpoenas and offer an alternative and hope a few projects will sit down and talk so they can just learn what is going on in the wild west of crypto.

If this scenario is what is going on, it will be less damaging to the markets. If you want to be optimistic you could argue the SEC is just trying to get a handle on how these ICO’s are operating so they can then work on “sensible” regulation moving forward. However, this could also turn into scenario number 1 once they get the info they want.

At this moment my instincts are telling me scenario number 1 is the most likely.  I just can’t believe that the SEC is happy with billions of dollars in ICO money just going right past them on their watch. Regulatory bodies are very territorial and they take attacks on their authority very personally. I would not be surprised if people at the SEC see last years ICOs as a slap in the face and they will be out to make examples of someone.

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