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Statement on Cryptocurrencies and Initial Coin Offerings

sec.gov

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Re: Statement on Cryptocurrencies and Initial Coin Offerings

#171

Post by rficcaglia »

brucephillips wrote: post #55

Can someone explain to me how his "book of the month" club example is not a security? The managerial efforts of the club managers will increase demand for participation in the club, increasing the value of the token. What am I missing?

I think their key concern is this:

>It is especially troubling when the promoters of these offerings emphasize the secondary market trading potential of these tokens

So let's say we had an ICO for participation in a rare book club of the month. And the books themselves were trading on the secondary market. That would be ok as I interpret this.

But if the token itself is being traded and is the asset, I think that's where the SEC gets involved.

Where I am unclear is if I have a presale for the Rare Books, and the means of currency for the future delivery of the yet-to-be-acquired rare book is a token, and that token may rise in value and transfer ownership is that a security? All the token provides me is the right to receive a rare book in the future.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#172

Post by runeks »

Jd wrote: post #100
jessriedel wrote: post #97

Earlier quoted context omitted.

No, your definition is based on the textbook definition of speculation, i.e., that the owner values the thing not because of its intrinsic value to him but only insofar as he can sell it to someone else later. As Kadin points out, the actual definition of a security is (basically) a claim on property or future profits, which is logically distinct. A tulip can be speculative, but it's not a security. A non-transferabl…

The textbook definition of a security is expecting to profit based on the efforts of a third party.

With what money will you buy the security unless you, yourself, have exerted an effort? You’re profiting from the money you’ve earned through exerting an effort, followed by foregoing consumption, resulting in surplus capital with which you can purchase the security.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#173

Post by runeks »

mrb wrote: post #8

This is not a statement from the SEC, but from chairman Clayton. See footnote [1]: « This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product. »

So the chairman is using sec.gov as his personal blog? That doesn’t seem right...

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#175

Post by complexmango »

zemo wrote: post #80
modeless wrote: post #30

Earlier quoted context omitted.

I think this is more negative for ICOs than your quotes imply. Look at this: > By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Basically, almost all ICOs so far are illegal. He says that it's possible to make…

> almost all ICOs so far are illegal. a lot of them are offering to sell you an asset that they advertise as being sure to appreciate, with the subtext that you will sell the asset at a later point for a gain. Selling something purely to be a store of value and appreciation is basically the textbook definition of a security, isn't it?

Forget about technical definitions for a second, and consider a practical view from a businessperson.

A share of stock in a publicly traded company is a legally recognized right to the earnings/assets of the company. Of course, the company may choose to distribute the earnings, or reinvest them for greater future earnings/assets. However, all ICOs I've seen so far bestow no legal right to $$ denominated earnings/assets of any sort.

So an ICO to purchase a cashflowing asset (e.g. an apartment building) gives the owner of the token ZERO legal right to claim any of the cash from the rent collected or proceeds from a sale of the apartment building. However, the owners of stock in the corporation that purchased the building definitely have legal rights to the cashflow/proceeds from sale etc, even if their purchase was facilitated by the sale of virtual tokens. They have no legal obligation to pay the token holders anything whatsoever.

This is an over-simplified example to drive the point home.

Re: Statement on Cryptocurrencies and Initial Coin Offerings

#176

Post by drumdance »

bufferoverflow wrote: post #88
zemo wrote: post #80

Earlier quoted context omitted.

> almost all ICOs so far are illegal. a lot of them are offering to sell you an asset that they advertise as being sure to appreciate, with the subtext that you will sell the asset at a later point for a gain. Selling something purely to be a store of value and appreciation is basically the textbook definition of a security, isn't it?

How many ICOs "advertise as being sure to appreciate"? I've looked at like 40 different ones, bought into none, but none of them promised any return on investment. That's some straw man argument.

They don't advertise that because their lawyers told them not to. There are lots of ways to dance around this and imply appreciation without stating it.
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