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SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

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Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#281

Post by DennisP »

jesseclay wrote: post #275
mifeng wrote: post #228

If you read the actual report ( https://www.sec.gov/litigation/investreport/34-81207.pdf ), you may notice that the SEC is careful to apply securities law DAO specifically. In particular, they apply the security test: "did investors invest money with a reasonable expectation of profits derived from managerial efforts of others?" Since DAO was a wisdom-of-crowd VC fund, the answer is a clear YES. On the other hand, th…

Jesse from CoinList & Protocol Labs here -- completely agree that following securities regulation is an especially great idea. Unfortunately doing that correctly can be really challenging. Despite several misleading doom-and-gloom articles written today ( http://fortune.com/2017/07/25/sec-says-digital-tokens-are-se... ) the SEC has not said that all tokens are securities. Rather, application tokens are a promising ne…

So I see CoinList uses AngelList, which I think verifies accreditation via financial accounts.

From what I've read, the SEC doesn't mandate any particular method to verify net worth. In this space, wouldn't it make sense to accept a signature proving ownership of a large ETH balance?

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#282

Post by kenko »

Jabanga wrote: post #207
throwaway2048 wrote: post #148

Earlier quoted context omitted.

There is a massive negative externality for allowing scammers to run free in a situation where the upfront ability to assess fitness-of-goods is lacking. https://en.wikipedia.org/wiki/The_Market_for_Lemons the money quote being The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence…

That's not an externality. An honest business is not entitled to any customer's business. If the customer wants to squander their money away at the casino, leaving them with no money to spend at the honest business, they have that right. It's their money, and they are not obligated to spend it at the honest business. And in any case, the market for lemons is a theoretical exercise. It does not actually happen in real…

> And in any case, the market for lemons is a theoretical exercise. It does not actually happen in real markets, because there are various market mechanisms that emerge to address it.

The "market mechanisms" you speak of are government regulations establishing minimum standards and forms of redress (e.g., and most on the nose, lemon laws).

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#283

Post by hudon »

vasilipupkin wrote: post #264
hudon wrote: post #225

Earlier quoted context omitted.

It doesn't matter if Ethereum is a crypto-decentralized-blockchain-p2p-network-thingamagig. If the Ethereum Foundation sold their thing to US residents, it is under the purview of the SEC. The only question is if the Ethereum Foundation's token sale passes the Howey Test. An analysis of this must be done like was done in their report of the DAO. I'm not qualified to do this analysis, which is why I ask. I know they s…

If you read the sec document carefully enough, they singled out the DAO because it's unambiguously a security. Shares in a thingymajig blockchain blah blah corp are still shares, therefore, securities. Most tokens are not shares and have uses other than profit motive, therefore, they are not securities

More like, if you read the SEC document carefully enough, you'll see that they applied the 4 prongs of the Howey test to theDAO token and defended each prong with arguments and evidence. They'll probably do the same thing for Ethereum (but not necessarily come to the same conclusion on each prong).

Saying "it has other uses than profit" is not sufficient since you'd have to back it up with meaningful evidence (what are the actual uses that investors are getting out of it?)

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#284

Post by will_brown »

sillysaurus3 wrote: post #248
mifeng wrote: post #228

If you read the actual report ( https://www.sec.gov/litigation/investreport/34-81207.pdf ), you may notice that the SEC is careful to apply securities law DAO specifically. In particular, they apply the security test: "did investors invest money with a reasonable expectation of profits derived from managerial efforts of others?" Since DAO was a wisdom-of-crowd VC fund, the answer is a clear YES. On the other hand, th…

Is it still ok to use ICOs as as glorified Patreon or Kickstarter without worrying you'll run afoul of the securities laws? As long as no one is expecting profits from the tokens they buy from you. Where it gets strange is if your tokens are picked up by an exchange. What happens if someone buys your tokens with the expectation that they can sell them to someone else? Then the price of your tokens might rise, and the…

Im curious why would the price of tokens (which are not equity backed securities) rise?

If I understand it right, your hypothetical is just a kickstarter project where a funding level reward is a "virtual token" and just as say a reward of a t-shirt this token doesn't represent equity in the project? Would anyone expect the value of the t-shirt to go up? Is it possible, yeah actually, imagine if Apple originated through crowdfunding, I bet that original crowdfunding t-shirt might sell on the secondary market, so it all boils down to if there was a subjective belief of a profit or a reasonable personable would have expectation of profit.

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#285

Post by DennisP »

KirinDave wrote: post #107
ilaksh wrote: post #82

The SEC should show that it protects everyone's rights and not just large firms with piles of cash to pay to them and to pay expensive lawyers. Otherwise we have to assume that this is largely about trying to tax things. The way they can do this is by making a real effort to update their technical, documentation, and regulatory programs. Is there a straightforward way to do an Edgar filing that doesn't require a bunc…

> Because an ICO can be created at no cost Except the cost to the participants who later have wasted money because the ICO contract was exploitable... At the current rate major losses are as perceptible as all successes. Maybe the industry needs some externally imposed speed bumps from SOME authority until folks can get their acts in gear?

I doubt the SEC is a good fit for improving smart contract security.

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#286

Post by DennisP »

JumpCrisscross wrote: post #193
smokeyj wrote: post #166

Earlier quoted context omitted.

Why shouldn't mom-and-pop get the choice to invest in SEC regulated companies? If you like what the SEC has to offer, you can keep it. Taking away that choice seems paternalistic at best, corrupt at worst.

> Why shouldn't mom-and-pop get the choice to invest in SEC regulated companies? When retail, i.e. unaccredited investors, get hurt (a) there are more of them and (b) it more often than not puts them into dire, sometimes existential, straits. The latter leads to political backlash and instability, e.g. the 1930s. Basically, you must have a nest egg to act as a safety cushion before you can invest in risky things. Thi…

And yet plenty of first-world countries allow non-millionaires to invest in these companies, and it seems to work just fine.

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#287

Post by KirinDave »

dnautics wrote: post #280
KirinDave wrote: post #184

Earlier quoted context omitted.

I do not understand. Sorry.

He's talking about how the government systematically Rob's from the future through inflation - in particular hurting the poor the hardest and creating lost decades and millennials along the way.

> He's talking about how the government systematically Rob's from the future through inflation

... What? Wait... what? I'm actually more confused by your response. So, the idea is governments create inflation to... rob the poor?

Also, who's Rob?

> in particular hurting the poor the hardest and creating lost decades and millennials along the way

Are you implying that millennials have... the government to blame for their current grim prospects in the job market? Because of inflation?

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#288

Post by drcode »

mifeng wrote: post #228

If you read the actual report ( https://www.sec.gov/litigation/investreport/34-81207.pdf ), you may notice that the SEC is careful to apply securities law DAO specifically. In particular, they apply the security test: "did investors invest money with a reasonable expectation of profits derived from managerial efforts of others?" Since DAO was a wisdom-of-crowd VC fund, the answer is a clear YES. On the other hand, th…

This is naive: The reason the SEC report is specific is because they don't know what the reaction to the ruling will be, what kind of political blowback they could get. Starting with "The DAO" is a politically safe move- If it goes over well with their acquaintances (revolving door and all that) they will start making broader rulings.

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#289

Post by maehwasu »

DennisP wrote: post #281
jesseclay wrote: post #275

Earlier quoted context omitted.

Jesse from CoinList & Protocol Labs here -- completely agree that following securities regulation is an especially great idea. Unfortunately doing that correctly can be really challenging. Despite several misleading doom-and-gloom articles written today ( http://fortune.com/2017/07/25/sec-says-digital-tokens-are-se... ) the SEC has not said that all tokens are securities. Rather, application tokens are a promising ne…

So I see CoinList uses AngelList, which I think verifies accreditation via financial accounts. From what I've read, the SEC doesn't mandate any particular method to verify net worth. In this space, wouldn't it make sense to accept a signature proving ownership of a large ETH balance?

Doesn't help--could just have your wealthy friend sign for you.

Re: SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities

#290

Post by maehwasu »

haldean wrote: post #169
brooklyntribe wrote: post #155

Earlier quoted context omitted.

Actually hung out with a JP Morgan Chase banker the other day. Big into crypto. He said the SEC had no clue what was going on. They leave at 5 PM, and head home to wife's and kids, and mortgages. While the "kids" are hacking, micro-dosing, and working 100 weeks. And they are all of 17. It's not in their world. A 55 year old banker is not hacking solidity contracts at 3 AM. No way.

Ah, the classic SV "he or she has a real adult life, and thus cannot understand my h4xx0r skillz" chestnut.

Real adult activities and hacking are extremely opposed endeavors.

One can make time for both, but the prior probability is quite low that a person with a real adult life will also be on the cutting edge of technology.

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