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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

#201

Post by pama »

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.…

Footnote in the Supreme Court opinion: “The term 'security' means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a 'security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing."

Re: SEC charges Impact Theory for unregistered offering of NFTs

#202

Post by Dylan16807 »

pclmulqdq wrote: post #192
IanCal wrote: post #186

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 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.

The orange trees are there for the purpose of producing and selling oranges.

In the case of a plain NFT, all labor associated with a piece of art is done before the NFT is sold. There is no enterprise generating profit for the owner. It's just an asset where they hope the value will increase.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#203

Post by paulddraper »

quickthrower2 wrote: post #184
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…

What if I call the NFT: i_will_buy_this_back_with_the_proceeds_of_the_company_sale_in_2025?

Is that a contract?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#204

Post by ninepoints »

xigency wrote: post #145

If the largest governments in the world agree that crypto-hashes are stores of value then it really seems like BitCoin won.

The Zimbabwe dollar was a currency. An awful one but it was a currency nonetheless. Did it "win" by your metric I wonder.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#205

Post by echelon »

Dylan16807 wrote: post #202
pclmulqdq wrote: post #192

Earlier quoted context omitted.

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.

The orange trees are there for the purpose of producing and selling oranges. In the case of a plain NFT, all labor associated with a piece of art is done before the NFT is sold. There is no enterprise generating profit for the owner. It's just an asset where they hope the value will increase.

> It's just an asset where they hope the value will increase.

If a16z invested in crypto / NFT companies that fail the Howey test, are they by extension culpable too?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#206

Post by Dylan16807 »

throwaway2037 wrote: post #198
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…

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?

Lots of things try to "evade" SEC rules by making them not apply, and many are successful. What does "never been defeated" mean, exactly?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#207

Post by pclmulqdq »

Dylan16807 wrote: post #202
pclmulqdq wrote: post #192

Earlier quoted context omitted.

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.

The orange trees are there for the purpose of producing and selling oranges. In the case of a plain NFT, all labor associated with a piece of art is done before the NFT is sold. There is no enterprise generating profit for the owner. It's just an asset where they hope the value will increase.

Sure it is. And all that language about how you are buying into a project or this will be part of a future game with an economy is all part of that art too, right? And all the promises of airdrops are part of the art done beforehand, as are all of the promises that early buyers will be the "1%" of the new ecosystem?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#208

Post by Dylan16807 »

ajross wrote: post #156
chrisco255 wrote: post #151

Earlier quoted context omitted.

> if it is marketed, bought, sold, and held as a money-making thing, it's a security No, sorry, no such legal language exists and how absurd of a law would that be. Anything which goes up and down in value could be bought or sold as "a money making thing" including collectible video games, books, Pokemon cards, .com domain names, pork bellies, houses, bar codes, imported goods, rare sneakers, wholesale products, golf…

That seems to reinforce the grandparents characterization of this as an evasion of the Howey test, not refute it. You really think the technical distinction of a unique number defeats the idea of "common enterprise"? Doesn't the fact that all the initial profit goes to one enterprise clearly make it "common"? Conversely, aren't traded shares of common stocks on NYSE merely "speculative flipping" unless they're specif…

> Doesn't the fact that all the initial profit goes to one enterprise clearly make it "common"?

Maybe, but you're not tied to the enterprise after the initial purchase.

> Conversely, aren't traded shares of common stocks on NYSE merely "speculative flipping" unless they're specifically paying dividends?

The value is tied to the company and can be extracted in a multitude of ways, and the company has a duty to the shareholders. The expectation of profit in a stock goes well beyond just dividends.

> I mean, duh. Of course these are securities. "Give us money for this thing and you'll get more money later"

That depends on where the money comes from.

The people selling gold say the exact same thing, and gold is not a security.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#209

Post by Dylan16807 »

smachiz wrote: post #165
chrisco255 wrote: post #151

Earlier quoted context omitted.

> if it is marketed, bought, sold, and held as a money-making thing, it's a security No, sorry, no such legal language exists and how absurd of a law would that be. Anything which goes up and down in value could be bought or sold as "a money making thing" including collectible video games, books, Pokemon cards, .com domain names, pork bellies, houses, bar codes, imported goods, rare sneakers, wholesale products, golf…

They were tryiny to thread a needle between a security and a commodity that acts like either, but is regulated like neither. Which is a great indicator it's a scam.

What commodity regulation are they trying to avoid?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#210

Post by joshuamorton »

EGreg wrote: post #197
ameister14 wrote: post #190

Earlier quoted context omitted.

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 bee…

> The show is what is spreading the memes and driving the demand for show related merchandise. That IS the business model!

I'm actually not sure how true this is. Given that there are non-pokemon examples (like magic: the gathering) that don't have cross-branding, and there exists a competitive pokemon TCG scene independent of the show, and the cards maintain a secondary market value as long as people want to play kitchen-table or collect them as collectibles, which will be true independent of the success of the Pokemon company, the common enterprise thing falls apart.

I don't purchase pokemon cards as an investment in The Pokemon Company^tm with the expectation of profit. I purchase them as a toy to entertain me. That fails prong two and three.

That a secondary market exists, and that particular objects have a high secondary-market value doesn't make the whole thing a common enterprise for profit, and I really doubt the majority of pokemon card purchasers do so with the intent to profit, same with MTG. Most people want some cool cards and entertainment, and throw them away.

(And this is backed up by data: with MTG, which has astronomically higher demand and card prices than pokemon, their market research shows that, by far, their largest consumer segment is entirely casual players who never attend sanctioned events. They buy packs or precons. So concepts like the secondary market value are immaterial for the majority of the consumers)

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