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SEC charges Impact Theory for unregistered offering of NFTs

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Re: SEC charges Impact Theory for unregistered offering of NFTs

#191

Post by ameister14 »

dcow wrote: post #182
wpietri wrote: post #173

Earlier quoted context omitted.

The burden of proof to prove a crime still falls on the accuser. Nothing has changed there. I also don't think the interpretation has changed at all. We're still using the Howey test. The SEC took no immediate position on the cryptoetcetera community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn. I'll note how much the more socially legitimate end of that…

I have very little skin in the game and certainly haven't dabbled in the NFT world. And I “don’t like” the idea that a regulator can essentially leverage ambiguous language to prosecute after the fact just to leave innovators on their toes. This is required to achieve your goal of innovators asking “should I be doing this”, because otherwise there are clear guidelines and nobody is left wondering. Nothing has changed…

I honestly don't think a year and a half from conception and marketing of the assets to charges by the SEC is all that slow, especially in a new market.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#192

Post by pclmulqdq »

IanCal wrote: post #186
pclmulqdq wrote: post #180

Earlier quoted context omitted.

The good news is that judges can read the law and interpret it without having a myopic focus on specific wordings. They also don't use investopedia as a legally-binding source. Whether an NFT (or any other crypto token) is a security is still very much up in the air, and I am assuming is not able to be uniformly defined. People making noises like "you are investing in a project" and "there will be airdrops to NFT hol…

> The good news is that judges can read the law and interpret it without having a myopic focus on specific wordings Hmm, sort of but the specific set of requirements here are important. That's the point of a test like this. > They also don't use investopedia as a legally-binding source. Sure, but it's literally a quote from the supreme court case, I was pointing out that I got that from investopedia. https://supreme.…

The test does not include any specification of what must be an investment contract, though. Things like fields of orange trees have failed to pass the Howey test.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#193

Post by Animats »

wpietri wrote: post #173
dcow wrote: post #161

Earlier quoted context omitted.

Not trying to kill the vibe of your comment, I just want to point out that the burden of proof historically has fallen on the accuser, the regulator, the plaintiff, (point is: not the defendant,) to prove that some behavior is illegal and problematic. So I’m not sure I agree that it’s good to foster a regulatory regime where everyone trying to innovate is questioning whether the political winds will change in the fut…

The burden of proof to prove a crime still falls on the accuser. Nothing has changed there. I also don't think the interpretation has changed at all. We're still using the Howey test. The SEC took no immediate position on the cryptoetcetera community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn. I'll note how much the more socially legitimate end of that…

> The problem is that they now have clarity and don't like it.

Yes. Any hope for looser rules from Congress went away when Sam Bankman-Fried went to jail. (He's currently complaining about the jail food in Brooklyn.)

If you want to know if the SEC will allow something unusual, you can ask the SEC for a "no-action letter". Three token issuers have obtained such letters.[1] Those are for game tokens, not Make Money Fast schemes.

There's also the route of registering your new thing with the SEC as a security. A few companies did that.[2] The STX token is a registered security. Didn't do much, but it's legal. Registration is no guarantee of success, but it forces enough disclosures and auditing that a "rug pull" is less likely. Enough is on record that the people ripped off know who to go after.

[1] https://www.kramerlevin.com/en/perspectives-search/the-secs-...

[2] https://www.axios.com/2023/03/06/crypto-register-sec-securit...

Re: SEC charges Impact Theory for unregistered offering of NFTs

#194

Post by Animats »

dcow wrote: post #182
wpietri wrote: post #173

Earlier quoted context omitted.

The burden of proof to prove a crime still falls on the accuser. Nothing has changed there. I also don't think the interpretation has changed at all. We're still using the Howey test. The SEC took no immediate position on the cryptoetcetera community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn. I'll note how much the more socially legitimate end of that…

I have very little skin in the game and certainly haven't dabbled in the NFT world. And I “don’t like” the idea that a regulator can essentially leverage ambiguous language to prosecute after the fact just to leave innovators on their toes. This is required to achieve your goal of innovators asking “should I be doing this”, because otherwise there are clear guidelines and nobody is left wondering. Nothing has changed…

> But would it really have hurt to have the SEC say “we’ll be applying the Howey Test to NFTs, if you plan to sell one we’d recommend consulting a lawyer versed in securities law before proceeding”.

They did that a few years back for ICOs, sending out "You seem to be doing an ICO. Tell us why you don't need to register this as a security". The ICO market mostly evaporated. A few ICOs did a securities registration.

Embarrassing questions have to be answered in a securities registration. Like "Who are you?" "Where do you live?" "What's your previous financial experience?" "Do you have a criminal record?". Crypto people are scared of that stuff.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#195

Post by mherdeg »

I hate to dunk on this type of art while it's down but

> Impact Theory agreed to destroy all Founder’s Keys in its possession or control

What does this mean practically -- like they delete the files that would allow them to transfer control of the NFT? What even are these things, are they just text files in a distributed file system that list the owner's name or what?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#196

Post by csomar »

pclmulqdq wrote: post #180
IanCal wrote: post #116

Earlier quoted context omitted.

> The Securities Act of 1934 has a "duck test" definition of security - if it is marketed, bought, sold, and held as a money-making thing, it's a security That doesn't seem right. You're missing a really fundamental part of what makes a security a security. Let's steal the cut phrase from investopedia > an investment contract, for the purposes of the Securities Act means a contract, transaction or scheme whereby a pe…

The good news is that judges can read the law and interpret it without having a myopic focus on specific wordings. They also don't use investopedia as a legally-binding source. Whether an NFT (or any other crypto token) is a security is still very much up in the air, and I am assuming is not able to be uniformly defined. People making noises like "you are investing in a project" and "there will be airdrops to NFT hol…

People are trying to over-complicate this even though the lines are clear. The intent is here what matters regardless of the implementation. Are you selling a "future expected outcome" or are you selling an art piece (or whatever other junk) with no strings attached. Of course, selling the art piece without a proposition to an increase in value will not attract "investors".

> Even tokens like ETH or BTC could be considered currencies/commodities rather than securities despite all of the "project" language.

BTC is, also according to the SEC. The problem with ETH is that they did an ICO early on the life of the project. I think that's why the chairman of the SEC refused to answer. They don't want to make it not a security so that they don't create a precedent. ETH foundation ICO might be the biggest mistake they ever made. It'll never go away...

Re: SEC charges Impact Theory for unregistered offering of NFTs

#197

Post by EGreg »

ameister14 wrote: post #190
EGreg wrote: post #183

Earlier quoted context omitted.

Actually, Pokemon cards fit all four prongs of Howey as does Yu Gi Oh etc. SEC would have a slam dunk against these sales (to children, no less!) but they just chose never to pursue that. 1. They buy the cards 2. The Pokemon show and franchise 3. They keep them in MINT CONDITION and don’t open them 4. If the show fails to entice more kids in the future then everyone will forget about that special charazard card, so i…

The purchase of the cards is not engaging in a common enterprise with the Pokemon show and the efforts of others aren't the cause of the rise in prices.

If not for the show, the cards wouldn’t be worth as much. The show is what is spreading the memes and driving the demand for show related merchandise. That IS the business model!

It sounds like your whole defense would hinge on hoping the SEC won’t be able to convince a court that it’s a common enterprise. I looked it up and “common enterprise” is not very well defined in either statutory law nor case law. I have been over this with many people and made them realize that you can’t possibly predict “this isn’t a common enterprise” defense would work in a court or law. SEC has argued many novel concepts, just this year with LBRY for instance. And they were successful. If they want to say it was a common enterprise, and the term is not even well defined, then they will make a strong case. It’s not up to you reading your own opinions into definitions, it’s whether a judge or jury makes a decision in a case, and / or whether the SEC exercises their restraint.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#198

Post by throwaway2037 »

IanCal wrote: post #116
Animats wrote: post #107

NFTs were supposed to be an end-run around the Howey Test. ICOs were clearly securities offerings, and the SEC shut down most of those. NFTs were specifically designed to evade that test, by claiming they were really "digital artworks". This one, though, was clearly marketed as Make Money Fast. The Securities Act of 1934 has a "duck test" definition of security - if it is marketed, bought, sold, and held as a money-m…

> The Securities Act of 1934 has a "duck test" definition of security - if it is marketed, bought, sold, and held as a money-making thing, it's a security That doesn't seem right. You're missing a really fundamental part of what makes a security a security. Let's steal the cut phrase from investopedia > an investment contract, for the purposes of the Securities Act means a contract, transaction or scheme whereby a pe…

This posts reads like you don't understand the Howie Test. Literally, that decision blew away any offering designed to evade SEC rules. The Test is incredibly general and has never been defeated. Why do you think this time is different?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#199

Post by kylebenzle »

paxys wrote: post #175
_trampeltier wrote: post #160

Some people argue with baseball, pokemon or whatever cards. I mean they have at least more or less a real usecase. But how about rare sneakers? The are really just for collecting and trading.

The difference is that no one selling baseball cards or sneakers is saying "if you buy this you get a share of my entire business".

Baseball cards are in every way exactly like NFTs. Collectibles for children.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#200

Post by [deleted] »

justin101 wrote: post #162

Not being from the US, this is probably a stupid question. But why can't people in the US sell willingly and freely sell things (legitimate or otherwise) to other willing buyers without government interference/participation? I guess I used to think the US was the "land of the free" I guess I understood that people used this phrase in a literal way. Im wondering, when American's use the phrase "land of the free" perha…

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