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Annmarie Fertoli: The culture wars are hitting corporate America, leaving CEOs with some tough decisions.
Lauren Weber: This is what we heard from a lot of people who consult with organizations, help them develop crisis plans, is you need to think these things through and then really kind of have a backbone about it. If you’re going to do something, stand by what you’re doing. Otherwise, you just end up making everyone angry.
Annmarie Fertoli: And regulators ramp up scrutiny of crypto platforms; what it means for the market.
Plus how a surprising merger in the world of golf came together.
It’s Tuesday, June 6th. I’m Annmarie Fertoli for The Wall Street Journal. This is the PM edition of What’s News?, the top headlines and business stories that moved the world today.
US federal regulators are taking a tougher stance on cryptocurrency. Yesterday, the Securities and Exchange Commission sued Binance, the world’s largest cryptocurrency exchange, accusing it of operating an illegal trading platform. Today, the SEC took action against Coinbase, accusing the company of violating rules that require it to register as an exchange.
There’s a lot to unpack from the past two days. And joining me now to do just that is our cryptocurrency reporter, Caitlin Ostroff.
Caitlin, the allegations in each of these cases are different, but in both the SEC appears to be questioning the way that we classify these platforms and what regulations they should be subject to in the first place.
Caitlin Ostroff: Yeah. So if you step back to the origins of crypto, the way that a lot of these companies have always thought of themselves is, “We’re offering cryptocurrency. That isn’t a security in the way that the SEC defines it.”
So the SEC says, “Are you creating an investment contract in a common enterprise with the expectation of profit?” This winds up applying to stocks and bonds. Stocks, as an example, pays out dividends to shareholders, bonds pay coupons to investors. And crypto sat there and they went, “Well, these are just tokens that everyone’s trading. They’re not securities. We don’t think that these are the same thing.”
And so these companies pretty much opt in not to register as securities platforms in the early days of crypto. And they’ve held that line through the present, even as Gary Gensler of the SEC has increasingly said, “We think you’re offering securities. You guys need to register the tokens, but you also need to register yourselves as a securities Exchange. And if you’re not doing that, you’re basically operating a black market offering illegal tokens.” And crypto companies have pushed back against this and said, “We don’t think that’s an accurate interpretation of what we’re offering.”
And now the SEC, which has been probing these platforms for many years, in Binance’s case since 2020, they’ve kind of come out now and said, “We’re bringing down the hammer. We’ve been telling you we think these are securities. You have to register them.”
Annmarie Fertoli: How do the cases against Binance and Coinbase differ?
Caitlin Ostroff: So in Binance’s case, they’re alleging that it’s in-house token BNB and another coin it offered that was branded as Binance were securities, and also that they were not presenting the US Exchange that they had set up in a accurate fashion, that they were saying, “This is an independent entity,” when in reality, Changpeng Zhao, who is its founder and CEO, actually pulled a lot of the strings, was onboarding market makers that he owned and controlled, was directing a lot of the day-to-day operations. And so part of the allegations there is that there’s a lot that wasn’t transparent within Binance’s US operations.
Coinbase, they’re arguing that they were offering trading for more than a dozen tokens that the SEC says are securities. And so that one’s a little bit more clear cut in that Coinbase was offering assets that were securities; it should not have been, and therefore, it is a securities exchange.
Annmarie Fertoli: So given that reality and the past two days, is this an inflection point for efforts to regulate crypto?
Caitlin Ostroff: It feels like an inflection point, but it’s going to be a long road. You know, the SEC sued Ripple years ago over its token XRP. That’s been in litigation for many years and doesn’t seem set to conclude anytime soon. And so you could be looking at the exact same thing with Coinbase and Binance, assuming that there isn’t some sort of settlement in between.
But certainly this is the most aggressive I think we’ve seen the SEC on crypto to date.
Annmarie Fertoli: Investors did pull money out of Binance after the SEC took action this week. What does all of this mean for crypto markets?
Caitlin Ostroff: I mean, what we’re watching to see is whether people start moving funds to different platforms, whether they decide to hold funds themselves through self custody, basically not putting it on an exchange, whether crypto companies respond by moving operations out of the US.
There’s a lot of different ways that this can play out that we’re still trying to get a handle on what’s happening.
At a minimum, I think we’ve definitely seen people within the market as a little bit more skittish.
Annmarie Fertoli: The Wall Street Journal cryptocurrency reporter, Caitlin Ostroff.
Caitlin, thank you so much.
Caitlin Ostroff: Thanks.
Annmarie Fertoli: Now onto a fairly unexpected tie up in the world of golf.
Once bitter rivals, the PGA Tour and Saudi backed LIV Golf have agreed to merge.
The deal consolidates the biggest assets in pro golf and ends a feud that (inaudible) the sport since last year.
Sports reporter Andrew Beaton has more.
Andrew Beaton: For the last year, golf has been a divided industry. When LIV Golf first teed off a year ago, many of the top players in the game, some of the most famous, some of the most well-known, some of the most talented players on the planet joined this Saudi-backed upstart. And the game was divided. You played on one tour, not the other, and there was no straddling the line.
And what today’s stunning news says is that the great battle for golf is nearing its end. Parties that had been at each other’s throats for the last year in courts across the country and across the Atlantic Ocean in Europe have now agreed to essentially merge and pool their commercial assets together and end this great battle that had divided an entire professional sport.
Annmarie Fertoli: And the news of this agreement comes at a time when the Justice Department is investigating golf bodies, including the PGA Tour, for antitrust violations. The DOJ declined to comment on the merger announcement.
Coming up: as more companies feel the pressure to speak out on social issues, CEOs are trying to balance perspectives and rethink how and when to weigh in.
More after the break.
Companies are under more pressure than ever to take a stand on social causes. Some customers, employees and investors are demanding more of corporate America when it comes to politics, LGBT rights and other issues.
From Disney to Budweiser to The North Face, CEOs are rethinking when and how to weigh in on divisive matters. It’s a tricky balance. After all, you can’t please everyone.
How are CEOs navigating this? Joining me now to talk more about it is our workplace reporter, Lauren Weber.
Lauren, it feels like in the past few months we’ve seen a couple of decisions from big companies that have taken a decisive stand and been met with a lot of backlash. This is not an easy thing to do, and we’ve already seen some fraught decisions as we begin Pride Month.
Lauren Weber: That’s true. It’s been a few years, I would say, and in some cases even longer, that companies have sought to show their support for, let’s say in this case, LGBT issues, often with marketing campaigns tied to Pride Month, which is June every year.
And they’re encountering a lot of backlash. And in some cases they’re not doing anything different than they’ve done in the past. It’s just that the backlash is louder than it’s been.
And what’s particularly fraught these days is anything related to transgender representation or marketing to a transgender audience or transgender rights.
Annmarie Fertoli: And those repercussions are not just on businesses’ bottom lines, but they’re also on reputation.
Lauren Weber: Yeah. And in some cases, I don’t think there really is a bottom line issue, but Bud Light is the exception there. They did a sponsorship of a transgender influencer where they sent a transgender woman a can of beer with her face on it and in exchange she did a couple of videos that went on Instagram and TikTok. And there was just a real firestorm about that, and Bud Light’s sales did go down quite significantly.
But in some of the other cases, you’re not really seeing much of a bottom line impact. In these days it’s just so easy to amplify a message. And so when some people kind of get hold of something and go on Twitter or on social media about it, things can just blow up really quickly. And I think that’s a big piece of what companies don’t quite know how to respond to and how to prepare for that.
Annmarie Fertoli: Lauren, what’s changed now according to executives and corporate advisors that you spoke to? We know we are living in this reality where people are demanding more of corporate America.
Lauren Weber: People are.
Not everyone. Not every investor or customer or employee wants a company to speak out. But there is a big enough contingent that do. And in some cases, many executives feel like they don’t have a choice, or in some cases they want to be vocal and out front on issues.
But I think for all of them, it’s a challenging moment, because we’re very polarized as a culture and you can’t make everyone happy.
I think a great example of this is the Dodgers, where they were sponsoring a Pride Night during June for their fans and invited organizations from the LGBTQ community to win awards, and one of them was an organization that a lot of people objected to because it’s a drag group. They also do community service projects, but they’re called the Sisters of Perpetual Indulgence and they dress as nuns. This is deeply offensive to some religious people, especially Catholics.
And so the Dodgers ended up dis-inviting this group. Then that made many groups and people supporting Pride Night and supporting that organization very upset. So then they re-invited the Sisters of Perpetual Indulgence.
So no one ends up being happy in these situations.
I think one thing that has really come through, and this is what we heard from a lot of people who consult with organizations, help them develop crisis plans, is you need to think these things through and then really kind of have a backbone about it. If you’re going to do something, stand by what you’re doing. Otherwise, you just end up making everyone angry.
Annmarie Fertoli: So what are some of the factors that CEOs are taking into account when they decide their approach, whether it’s even to step in at all, especially given if an issue isn’t related to the core business?
Lauren Weber: We spoke to one company that was an interesting example of this, called PPG. They sell paints. And they were saying, “We’ve created a rubric.”
First of all, they had a very clear process for this kind of thing, almost like a framework or formula for understanding when to speak out on an issue. And it’s things like, “Does this relate to our core business? Does this affect the geographies where we do business? Which of our stakeholders are most invested in these issues?” And it helps them figure out which issues to come out and speak up about, and some make the cut and some don’t.
And obviously it’s not just LGBT issues. A lot of companies faced this when Russia invaded Ukraine. It’s come up around voting rights, it’s come up around immigration policy.
So one thing is kind of create a set of guidelines to help make decisions about that and then perhaps have a crisis communications plan in place in case things do blow up. You know, prepare as much as you can.
Annmarie Fertoli: Wall Street Journal workplace reporter, Lauren Weber. Thank you, Lauren.
Lauren Weber: Thanks for having me.
Annmarie Fertoli: In other news, we continue to follow the fallout after the destruction of a major dam and power station in a Russian occupied part of Ukraine. As we reported in this morning’s show, it led to serious flooding and the evacuation of thousands of people. Ukraine said Russia was responsible while Moscow accused Kyiv of sabotaging the dam. A Western official said intelligence agencies, including in the US, are working to determine who’s responsible for the dam burst, but are leaning toward Russia. Analysts say the dam’s destruction could give Russia time to reconfigure its defenses, depriving Ukraine of some options for its counteroffensive.
Canada’s wildfire season has led to air quality alerts for millions of Americans in the Notheast and Midwest. Officials say smoke is moving south from more than 400 active Canadian wildfires that have burned through more than 8.1 million acres of land. Canada’s Natural Resources Minister says the wildfire season, which lasts from May to September, could be the most severe in the country’s history if the current trajectory continues. Residents under air quality alerts are advised to limit outdoor activities.
In Florida, a federal judge has temporarily blocked a new law that prohibits gender-affirming medical care for transgender minors. There’s now a preliminary injunction barring enforcement of the ban, which was signed by Governor Ron DeSantis last month. US District Judge Robert Hinkel said Florida ban treatments that are widely accepted by the medical community. More than a dozen states passed laws this year prohibiting gender-affirming healthcare for transgender youth. Lawmakers who support the bans argue the procedures could be harmful to children.
Jackson Mississippi is set to receive 115 million in federal funds to rebuild its aging water infrastructure after it failed last summer, leaving residents without reliable running water for weeks. The money comes from a 1.65 trillion spending law Congress approved in December. In August, Jackson’s mayor said the city’s water infrastructure was long neglected and would cost at least one billion dollars to repair. The Justice Department sued Jackson in November for failing to provide safe drinking water. Local officials said the city’s water crisis was decades in the making and residents had long complained about boil water notices and poor infrastructure.
In business news, venture capital firm Sequoia is splitting into three independent firms, in the US and Europe, India and Southeast Asia, and China. Sequoia Capital told its investors in a note today that it decided to embrace what it called a local first approach to running a global decentralized business. The three companies will operate as partners, but will be separate independent firms by March of 2024.
And drugmaker Merck is suing the US government over its plan to negotiate drug prices, calling it unconstitutional. Under the Inflation Reduction Act, Medicare now has the power to negotiate the prices of certain medications, including expensive drugs. That could mean big sales losses for drugmakers like Merck, which called the program ‘tantamount to extortion’ in its lawsuit. Lawmakers, patients and other supporters of the program argue it’s needed to reign in rising drug costs.
And finally, it isn’t just you. Seasonal allergies have been especially bad this year. And if you’ve stepped in an office anytime over the past month, you may have heard a cacophony of sniffling, sneezing and coughing. Doctors say seasonal allergies started early this year due to a mild winter, which made trees release their pollen ahead of schedule. According to a 2021 study in the journal Proceedings of the National Academy of Sciences, researchers found that the North American pollen season starts earlier and lasts longer than it did in 1990 and with higher pollen concentrations.
Our reporter Alyssa Lukpat says allergy suffers still have to wait a while before getting some relief.
Alyssa Lukpat: It varies depending on where you are in the country, but pollen levels should start to taper off after the beginning of the summer. There could be another peak at the end of the summer when other plants start to pollinate, but it looks like we should be in the clear hopefully after June.
Annmarie Fertoli: Meanwhile, shoppers across the US have reported that allergy remedies are in short supply at their local pharmacies with first time allergy sufferers contributing to a run on cough drops, decongestants and antihistamines.
And that’s What’s News for this Tuesday afternoon. We’ll be back tomorrow morning.
If you like what you hear, please rate and review us. I’m Annmarie Fertoli for The Wall Street Journal.