Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ponzi Schemes Using Virtual Currencies (2014) [pdf]

sec.gov

Post reply on HN
Print view View original

31–40 of 67 posts

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#31

Post by wakamoleguy »

TaylorGood wrote: post #14

Ponzi aside, let's say it's the greatest cryptocurrency idea. The SEC has right to use their Howey Test to determine whether it's a security. Based on 1,2,4 below, is this not ICO's? Under the Howey Test, a transaction is a security (or investment contract) if: 1. It is an investment of money 2. There is an expectation of profits from the investment 3. The investment of money is in a common enterprise 4. Any profit c…

It seems that in practice, yes, most people who are buying into ICOs have an expectation of profits based on the actions/development/promotion of a third party team running the project. Matt Levine talked about some of the nuances of this back when the SEC released a report about the DAO[1].

A couple days ago, I stumbled across a blog post of the Colony.IO project[2], who are creating a token and blockchain platform for distributed organizational management (coincidentally similar in concept to the DAO). They go into detail about their plans for having an ICO only once they have a product actively functional. The hopes are that with a working product, people buying the tokens will do so with the expectation that it is a sale of services, rather than an investment security. Now, their perspective is that of the team and their lawyers, and not necessarily that of the SEC. But if there is hope that ICOs won't all be securities, I think that is the pathway.

[1] https://www.bloomberg.com/view/articles/2017-07-26/tokens-va...

[2] https://blog.colony.io/the-colony-token-sale-7ac14c845bc0

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#32

Post by lojack »

wakamoleguy wrote: post #29
whataretensors wrote: post #21

Earlier quoted context omitted.

Young Warren Buffet could. I can go to Vegas and lose all my money on dice. There aren't laws to prevent this. Why are there laws to prevent my ability to invest? The regulation makes more sense as a way to keep the opportunities exclusive to the powerful, while regulators get to claim a moral high ground.

In many places in the United States, there actually are laws to prevent gambling.

That’s clearly a straw man argument.

A) The federal government doesn’t ban gambling.

B) As far as I’m aware there isn’t a single place in this country where gambling is/isn’t allowed for those with specific net worths.

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#34

Post by wakamoleguy »

lojack wrote: post #32
wakamoleguy wrote: post #29

Earlier quoted context omitted.

In many places in the United States, there actually are laws to prevent gambling.

That’s clearly a straw man argument. A) The federal government doesn’t ban gambling. B) As far as I’m aware there isn’t a single place in this country where gambling is/isn’t allowed for those with specific net worths.

It's not a strawman. The parent is suggesting that we as a people have no problem with allowing low-income or low-net-worth people to gamble (pointing to the acceptance of Las Vegas as evidence). Then an equivalence is drawn between gambling and securities investing. By pointing out that, in fact, 31 states make commercial casinos illegal[1], I am refuting the suggestion that gambling is considered acceptable, which weakens the argument that securities investing should be acceptable as well.

[1] https://en.wikipedia.org/wiki/Gambling_in_the_United_States

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#35

Post by [deleted] »

wakamoleguy wrote: post #34
lojack wrote: post #32

Earlier quoted context omitted.

That’s clearly a straw man argument. A) The federal government doesn’t ban gambling. B) As far as I’m aware there isn’t a single place in this country where gambling is/isn’t allowed for those with specific net worths.

It's not a strawman. The parent is suggesting that we as a people have no problem with allowing low-income or low-net-worth people to gamble (pointing to the acceptance of Las Vegas as evidence). Then an equivalence is drawn between gambling and securities investing. By pointing out that, in fact, 31 states make commercial casinos illegal[1], I am refuting the suggestion that gambling is considered acceptable, which…

[deleted]

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#36

Post by baby »

wakamoleguy wrote: post #31
TaylorGood wrote: post #14

Ponzi aside, let's say it's the greatest cryptocurrency idea. The SEC has right to use their Howey Test to determine whether it's a security. Based on 1,2,4 below, is this not ICO's? Under the Howey Test, a transaction is a security (or investment contract) if: 1. It is an investment of money 2. There is an expectation of profits from the investment 3. The investment of money is in a common enterprise 4. Any profit c…

It seems that in practice, yes, most people who are buying into ICOs have an expectation of profits based on the actions/development/promotion of a third party team running the project. Matt Levine talked about some of the nuances of this back when the SEC released a report about the DAO[1]. A couple days ago, I stumbled across a blog post of the Colony.IO project[2], who are creating a token and blockchain platform…

So wouldn't that be more of a pyramid scheme rather than a ponzi scheme?

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#37

Post by elmar »

TaylorGood wrote: post #14

Ponzi aside, let's say it's the greatest cryptocurrency idea. The SEC has right to use their Howey Test to determine whether it's a security. Based on 1,2,4 below, is this not ICO's? Under the Howey Test, a transaction is a security (or investment contract) if: 1. It is an investment of money 2. There is an expectation of profits from the investment 3. The investment of money is in a common enterprise 4. Any profit c…

Under this "Howey Test" Bitcoin would be considered a SEC registered security.

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#39

Post by DennisP »

wakamoleguy wrote: post #34
lojack wrote: post #32

Earlier quoted context omitted.

That’s clearly a straw man argument. A) The federal government doesn’t ban gambling. B) As far as I’m aware there isn’t a single place in this country where gambling is/isn’t allowed for those with specific net worths.

It's not a strawman. The parent is suggesting that we as a people have no problem with allowing low-income or low-net-worth people to gamble (pointing to the acceptance of Las Vegas as evidence). Then an equivalence is drawn between gambling and securities investing. By pointing out that, in fact, 31 states make commercial casinos illegal[1], I am refuting the suggestion that gambling is considered acceptable, which…

Meanwhile 44 states run lotteries. Apparently gambling is acceptable in principle, just not competition with the states' games.

https://en.wikipedia.org/wiki/Lotteries_in_the_United_States

Re: Ponzi Schemes Using Virtual Currencies (2014) [pdf]

#40

Post by danharaj »

elmar wrote: post #37
TaylorGood wrote: post #14

Ponzi aside, let's say it's the greatest cryptocurrency idea. The SEC has right to use their Howey Test to determine whether it's a security. Based on 1,2,4 below, is this not ICO's? Under the Howey Test, a transaction is a security (or investment contract) if: 1. It is an investment of money 2. There is an expectation of profits from the investment 3. The investment of money is in a common enterprise 4. Any profit c…

Under this "Howey Test" Bitcoin would be considered a SEC registered security.

Bitcoins aren't issued, they're created by mining and they are used to participate in the blockchain. In particular, there's no third party trying to valorize my BTC.

However if I created a coin the possession of which entitles you to a cut of my bitcoin mining operation, yes that would be a security.

Post reply on HN