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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

#231

Post by quickthrower2 »

playday wrote: post #35

When you buy a restaurant lunch, you are expecting to increase your work income via the efforts of the cooks. And you clearly invested money since you pay for the lunch before you ate it. That’s all 3 prongs if the Howey test. Why isn’t the SEC enforcing securities laws against lunch fraud? Lunches must publish their financial statements so lunch buyers can make informed decisions! Personally I am angry that restaura…

If the restaurant calls the lunch a "Stonk Special" and talks about how the restaurant is growing fast and that people who have purchased the lunch before "did really well", then maybe.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#232

Post by EGreg »

joshuamorton wrote: post #229
EGreg wrote: post #223

Earlier quoted context omitted.

Sorry but it's not about what you do. Even if it fails prong 2 and 3 for you , the SEC can still successfully argue that the vast majority of sales are securities. This was the dangerous precedent set in their victory over LBRY in December 2022. They argued that if at least some people bought the utility tokens with expectation of profit, then the utility token sales were securities -- and the judge bought it! https:…

But this is where judges come in, who can analyze things like real world intent. And stuff like "At launch, LBRY retained 400 million LBC for its own use" doesn't to me imply that these things are the same. TCGs do not function like securities. If I am a securities issuer, I make money primarily when the security goes up in value. If I am a TCG producer, I make money when people buy more of the product, irrespective…

Can you provide any link at all which defines “common enterprise” in some authoritative way? Otherwise it is just a bunch of words.

https://blj.ucdavis.edu/archives/vol-5-no-2/why-the-common-e...

Gensler said Bitcoin is not a security because there is no common enterprise. But no one ever explains what it means. Vertical? Horizontal?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#233

Post by phire »

csomar wrote: post #196
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…

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 cons…

Bitcoin is getting a pass mostly because nobody has any control over Bitcoin. There might be a loose community project, but Bitcoin is basically frozen in its current state, with no innovation. It's really hard to argue there is a common enterprise when there isn't really an enterprise at all.

> ETH foundation ICO might be the biggest mistake they ever made

It doesn't really matter if the Eth foundation did an ICO in the past or not, the simple fact that they are a coordinated project with a strong leadership structure who exercise quite a bit of control over the future of Eth is a strong indication that an "enterprise" exists.

The main reason why SEC are hedging their bets over ETH is that they don't actually know if it's a security. It's not the SEC who defines what's a security or not (though they often offer advice). The definition of "security is actually defined by the courts, so the only way to know either way is a court case.

And the SEC clearly wants to create some legal precedent by prosecuting cases that are much more obvious.

Also... the status of something being a security isn't necessarily static.

Just because Bitcoin is considered not a security now doesn't mean it will never be considered a security. If the bitcoin miners decided to band together and take active control over the direction of bitcoin innovation, then its current excuse would evaporate. If they transformed it into something that was obviously a security, then no amount of "But the SEC previously said bitcoin wasn't as security" will protect it.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#234

Post by ivalm »

freeone3000 wrote: post #168
ivalm wrote: post #136

Earlier quoted context omitted.

OP is missing “common enterprise” part of definition, which covers commodities. Security futures are securities (jointly managed by SEC and CFTC), commodity futures are not (as they are a derivative on a non-security). The main inconsistency is that bank loans are not securities.

Bank loan derivatives and packaged loan products are, however. It is simple debt sales that are not, which is reasonable.

Is a business loan syndicated to 50 institutional investors that different from a bond offering?

Re: SEC charges Impact Theory for unregistered offering of NFTs

#235

Post by csomar »

phire wrote: post #233
csomar wrote: post #196

Earlier quoted context omitted.

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 cons…

Bitcoin is getting a pass mostly because nobody has any control over Bitcoin. There might be a loose community project, but Bitcoin is basically frozen in its current state, with no innovation. It's really hard to argue there is a common enterprise when there isn't really an enterprise at all. > ETH foundation ICO might be the biggest mistake they ever made It doesn't really matter if the Eth foundation did an ICO in…

> Just because Bitcoin is considered not a security now doesn't mean it will never be considered a security. If the bitcoin miners decided to band together and take active control over the direction of bitcoin innovation, then its current excuse would evaporate.

This is a messed up logic. Of course, if you changed the fundamentals of Bitcoin, the consequences will also change. But saying that "Bitcoin is considered not a security now doesn't mean it will never be considered a security" implies that the same Bitcoin can potentially be considered a security. Which is an entirely different premise.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#236

Post by ameister14 »

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…

So it's clearly not horizontal, right, and your argument is that there is a vertical common enterprise?

I don't think it's all that poorly defined, but either way, for a vertical the 11th circuit required that you must "show that the investors are dependent upon the expertise or efforts of the investment promoter for their returns."

That's just not the case here. The show could end completely and "investors" (I don't think they are investors, either, but I'll go with you on this) continue to see returns.

You've also got issues of control over the cards and the fact that people purchase them without intending to profit from them, both of which strike against you.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#237

Post by [deleted] »

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…

[deleted]

Re: SEC charges Impact Theory for unregistered offering of NFTs

#238

Post by [deleted] »

bboygravity wrote: post #213
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…

Yeah, well the SEC also has rules from the 1930's stating that brokers who sell shares to clients and fail to deliver them should have their license suspended. Guess how often that rule was applied since the 30's? Zero. And that's not because fails to deliver don't exist. So yeah, there's a massive regulatory crisis going on and SEC rules are applied however the future employers of the SEC decisionmakers want.

[deleted]

Re: SEC charges Impact Theory for unregistered offering of NFTs

#239

Post by Gormo »

lukev wrote: post #24
yieldcrv wrote: post #21

Earlier quoted context omitted.

The Federal Trade Commission is fully equipped to handle consumer fraud.

But if it's not a security, is it fraud? If I sell you a hand drawn stick figure for $100, and you buy it because it's "art", then there's no rug to pull. You bought it, and it doesn't matter to the artist whether the resale value goes up or down. If it goes down, it's still not fraud. But if I sell you a hand drawn stick figure for $100, and you buy it with the mutual expectation that it will eventually be worth mor…

By that definition, anything purchased with the intent of reselling for a higher price in more favorable market conditions would be a security -- real estate, product inventory in a warehouse, etc.

Re: SEC charges Impact Theory for unregistered offering of NFTs

#240

Post by Gormo »

jermaustin1 wrote: post #7

The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? S…

> The concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins.

NFTs are/will be really useful to account for transactions involving unique assets or bundles of rights associated with unique assets. They're perfectly suited for things like writing digital deeds to real property, transferring ownership of IP, validating chains of provenance for various items, etc.

The problem is that the current use cases are all spurious. NFTs used for "artwork" are neither transferring ownership of a unique fixed form of media nor used to convey any IP rights associated with the artwork. In these use cases, the NFT itself is non-fungible, but it encodes a reference to an external item that is both fungible and intangible, which makes it little more than a novelty.

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