The SEC Report on the DAO isn't surprising, but I would love to see the SEC draw a clear line in the sand by issuing another report on a better token offering that is determined to not be a security.
The ability to fund development of important network infrastructure with a related digital asset is too useful to remain in indefinite legal limbo!
The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us," said SEC Chairman Jay Clayton
Then it's a no-brainer to test whether it's possible to make a non-security token that still retains some of the benefits of crypto tokens.
I am working on a crypto token designed to avoid the bad incentives and legal issues with current ICOs that might make a good test case:
* Token provides immediate practical benefit (collaboration on important data using distributed storage, narrowing focus from Sia, Storj, Filecoin, etc) from day one
* Token sold in small tranches over an extremely long time period, ideally at stable price
* No intermediate ERC20 or similar token pre-sale
* Pre-mined tokens (eventually sold) make up small fraction of total supply
For the Howey Test, I think it's most reasonable to aim for either no expectation of profit or no common enterprise.
If anyone is interested in helping test this, contact me!
For your own sake PLEASE consult a lawyer familiar with securities law before making declarations that your token is obviously not a security and sufficiently avoids at least one prong of the Howey Test. The SEC is starting to crack down on these activities, so the consequences can be enormously bad for you if you aren't careful.
> I would love to see the SEC draw a clear line in the sand by issuing another report on a better token offering that is determined to not be a security
Better yet, issue guidance for how ICOs could be conducted in compliance with Regulation D [1] (or A). ICOs have potential. But right now they're replaying on fast forward the boom-and-bust scamapalooza of the pre-1930s. More disclosure, more discretion and an iota of personal responsibility will help, not hinder.
>issue guidance for how ICOs could be conducted in compliance with Regulation D [1] (or A).
But, reaching for that compliance essentially negates one of the key benefits of ICOs, namely that you've specifically not been required to comply with SEC regulations. That's kind of the open secret with some of these crypto offerings.
Have a look at the (non-crypto related) Reg A+ stuff, especially Title IV. It was supposed to open the flood-gates on crowdfunding, mini-IPOs, etc. But, the requirements are so demanding that the bar is still extremely high for any sort of substantial offering, and there has thus been relatively little activity that leverages that reg.
Take the same style of regulation and apply it to crypto (ICOs, etc.) and watch activity plummet there.
> See SEC v. Shavers, No. 4:13-CV-416, 2014 WL 4652121, at *1 (E.D. Tex. Sept. 18, 2014) (holding that an investment of Bitcoin, a virtual currency, meets the first prong of Howey);
That, by the way, is the Pirateat40 Bitcoin Ponzi of 2012.
The report also seems to mention buyers violating some Section 5. Does this mean that even so much as buying a token (edit: later found to be a security) could potentially land you in legal trouble?
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[ 14.7 ms ] story [ 197 ms ] threadThe ability to fund development of important network infrastructure with a related digital asset is too useful to remain in indefinite legal limbo!
[1] https://www.sec.gov/fast-answers/answersnoactionhtm.html
Then it's a no-brainer to test whether it's possible to make a non-security token that still retains some of the benefits of crypto tokens.
I am working on a crypto token designed to avoid the bad incentives and legal issues with current ICOs that might make a good test case:
* Token provides immediate practical benefit (collaboration on important data using distributed storage, narrowing focus from Sia, Storj, Filecoin, etc) from day one
* Token sold in small tranches over an extremely long time period, ideally at stable price
* No intermediate ERC20 or similar token pre-sale
* Pre-mined tokens (eventually sold) make up small fraction of total supply
For the Howey Test, I think it's most reasonable to aim for either no expectation of profit or no common enterprise.
If anyone is interested in helping test this, contact me!
Better yet, issue guidance for how ICOs could be conducted in compliance with Regulation D [1] (or A). ICOs have potential. But right now they're replaying on fast forward the boom-and-bust scamapalooza of the pre-1930s. More disclosure, more discretion and an iota of personal responsibility will help, not hinder.
[1] https://www.sec.gov/fast-answers/answers-regdhtm.html
But, reaching for that compliance essentially negates one of the key benefits of ICOs, namely that you've specifically not been required to comply with SEC regulations. That's kind of the open secret with some of these crypto offerings.
Have a look at the (non-crypto related) Reg A+ stuff, especially Title IV. It was supposed to open the flood-gates on crowdfunding, mini-IPOs, etc. But, the requirements are so demanding that the bar is still extremely high for any sort of substantial offering, and there has thus been relatively little activity that leverages that reg.
Take the same style of regulation and apply it to crypto (ICOs, etc.) and watch activity plummet there.
That, by the way, is the Pirateat40 Bitcoin Ponzi of 2012.