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SEC Charges Kik With Conducting $100M Unregistered ICO

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Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#321

Post by icebraining »

CryptoPunk wrote: post #311
icebraining wrote: post #309

Earlier quoted context omitted.

> Imagine if anyone could buy $5 worth of stock for the product they're buying at 7-11. Yeah, and in ten years they might get $14, which will just give some extra profit to their creditors when they file for bankruptcy for unpaid medical bills, or be captured in a civil forfeiture. And if somehow they managed to keep it and actually save a couple grand, that just means they'll become ineligible for SNAP and lose much…

>>Yeah, and in ten years they might get $14, which will just give some extra profit to their creditors when they file for bankruptcy for unpaid medical bills, or be captured in a civil forfeiture. And if somehow they managed to keep it and actually save a couple grand, that just means they'll become ineligible for SNAP and lose much more in benefits. How is that any different than matching two numbers on a lotto tick…

> How is that any different than matching two numbers on a lotto ticket and winning $10, or $1000?

That's immediately spendable; it doesn't sit somewhere where it can be taken (by illegal or legal means). That's also one of the reasons why people join susus instead of just saving, for example.

> With real-world investing, especially in micro-caps, they have a chance to hit it big as well, and make millions.

There's no change of making millions in a day, or week. The few "rags-to-riches" trading millionaires progressively amassed their money over at least a few years. But that means losing benefits, which people can't afford to risk. Like I said, the system is designed to keep them there, and they know it.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#322

Post by otw »

nostrademons wrote: post #296
otw wrote: post #240

Earlier quoted context omitted.

Can you sketch what you mean by there being a good chance some type of cryptocurrency will replace the financial system of today? Is the idea something along the lines of the double forces of greed and fear causing the perfect bubble? The one that doesn't pop because it eats its own downside on the way? Why won't governments just shut down the on-ramp exchanges if the space ever looks like more than a way to gamble o…

Over the long-term (40-50 years) I would only call it a bubble in the sense that humanity's a bubble: yes, it may pop, but a bubble that lasts > a lifespan simply becomes reality. Over the short term (4-5 years), I think we're going to see some very bubblicious behavior and many people are going to lose their shirt, but that averages out. My reasoning is this: Fundamentally, the financial industry is about time, risk…

I read your thinking as being centered around transaction costs, is that right? That cryptocurrencies can lower the transaction costs associated with the funding of productive endeavors.

This seems right to me. We can avoid things like accredited investor status and allow small amounts of capital to be invested without needing much legal overhead. And (for better or worse), ventures funded this way will also have a market price and never be private in the sense of today.

Of course, ICOs or whatever they morph into will need to be much more like securities than they were 2 years ago. Investing without actual equity makes little sense to me. To make these more reasonable, companies will need to know they aren't breaking securities laws when they issue. Once they know that, the ICOs can look less insane.

I buy the transaction cost argument in this sense. But I think there might be too many other issues for this to come about. Though I'm currently not confident enough in bill or bear status to bet either way.

Let's grant that scaling can be solved and volatility will not remain incredible like today. I think there are maybe deeper issues.

There's a lot of emphasis on 3rd party risk mitigation in the crypto world. But this new world reopens more 2nd party risk than it minimizes 3rd party risk to my first approximation.

Governments exist as dispute resolvers and preventers (military/police and laws/rules being the functions a government must have to be a government). They protect citizens from outside threats, but much more often from each other. In crypto, the permanence of a transaction is a primitive. But this makes scamming and various forms of theft even more attractive. People like the comfortable feeling of a government protecting them from financial fraud. If cryptocurrencies became the main currencies, I think they won't be able to look as loose and free as they do today. Even ignoring the funding of criminal activity, people want a way to reverse bad faith transactions. They'll demand oversight I think.

It's hard for me to imagine the hypothetical end state crypto financial world being anywhere near as libertarian-feeling as today's cryptocurrencies. Digital money is a government's dream. A government issued or one in which governments have a back door allows perfect monitoring of transactions and monetary policy controls.

The whole thing just seems too early to be predictable or investable to me. It's just for momentum trading today in my current view.

Though this is an idea space that forces me to change my mind back and forth. It's too complex to remain a settled, comfortable member of the landscape.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#323

Post by andrew311 »

vasilipupkin wrote: post #208
sonnyblarney wrote: post #165

It's ridiculous that the SEC can't tell you what is and what is not going to work up front. My god, why should companies have to risk so much in this. Either they provide perfectly clear guidelines or they can screw off. Anything vague is extremely bad for business as it causes undue risk, confusion, lawyers galore. Also - timeframes matter. This event took place quite some time ago, it's totally unfair that the proc…

this is not true, you can get a No Action letter from the SEC upfront. https://en.wikipedia.org/wiki/No-action_letter

Unfortunately, getting a no action letter can take years and there is no guarantee you wilk ever get it. So far only one has been issued among probably numerous requests within the last year or two.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#324

Post by kaicianflone »

dangero wrote: post #290
penagwin wrote: post #113

Earlier quoted context omitted.

ICO is a fancy word for "Kick Starter" or crowdfunding. That's why all the crypto people are disagreeing with you. Are most ICO's scams? Yeah sadly. Are there lots of scams on Kickstarter/indiegogo/etc? Yes sadly. But an ICO itself isn't necessarily a scam (although I concede 99% of them are)

Kickstarter creates no expectation of profit by purchasers.

The question is no longer if you have been scammed on Kickstarter, it's how many times have you been scammed.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#325

Post by kaicianflone »

village-idiot wrote: post #66
abalone wrote: post #41

Earlier quoted context omitted.

They “delivered” only because they sold wheelbarrows to the 49ers. As gold rush history will tell you, most fortunes were made by merchants not miners. Name a non-ICO-infrastructure ICO that isn’t a scam.

Ethereum as infrastructure is also a dicey proposition. It works, slowly, but it doesn’t seem like there’s a lot of demand for “dapps” outside ICO tokens, gambling, and the odd Ponzi scheme. The smart contract revolution at this point is complete vapor ware.

I will try to not laugh at this the next time I pay escrow and other closing fees. We are in Web 1.0 in terms of the technological application of programmable consensus.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#326

Post by elliekelly »

andrew311 wrote: post #299
elliekelly wrote: post #129

Earlier quoted context omitted.

The major issue with Howey has always been that it doesn't account for situations where investors are investing for some benefit other than profit from appreciation or dividends. Howey is particularly difficult to apply when that "other benefit" is personal consumption or when investors are investing for a combination of profit and "other benefit" as is the case with Kin. For example, what if Mr. Howey had purchased…

100% agree on this assessment and the difficulty of applying securities law. The application of the Howey test is so open for debate that it becomes uncomfortably subjective. See my comment here: https://news.ycombinator.com/item?id=20101984

Even if tokens aren’t a security (and although I understand both sides of the debate it’s my professional opinion that they are) they are most certainly a commodity. So the battle over jurisdiction is really between the SEC and the CFTC, not between the SEC and no oversight at all.

Interestingly, most of the points you raised (financing innovation, alternative to VCs, etc.) would put tokens such as Kin squarely in the “securities” bucket instead of the “commodities” bucket.

Regulation is coming for cryptocurrency and regulation is needed for cryptocurrency. And the industry would be far better served by working with their future regulators to establish reasonable guidelines rather than fighting them in court.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#327

Post by nostrademons »

xwolfi wrote: post #308
nostrademons wrote: post #296

Earlier quoted context omitted.

Over the long-term (40-50 years) I would only call it a bubble in the sense that humanity's a bubble: yes, it may pop, but a bubble that lasts > a lifespan simply becomes reality. Over the short term (4-5 years), I think we're going to see some very bubblicious behavior and many people are going to lose their shirt, but that averages out. My reasoning is this: Fundamentally, the financial industry is about time, risk…

But there's a difference between a public ICO and a public IPO: the ICO doesn't require transparency of the account, doesn't give legal ownership of the company's capital shares, and doesn't give a formal right of voting on classical issues, like electing a board member. The ICO is a way to raise money out of chumps without giving anything in exchange, but it's not more efficient, faster or better in any way than an…

The value proposition for the investor in an ICO is that if the currency sees adoption for real transactions, its value will rise. The value of a currency is fundamentally determined by supply (total units in circulation) and demand (what you can buy with it). If you start being able to buy more things with it, and supply remains constant, the value of the currency rises. This is why the Fed is constantly injecting money into the economy: economic growth means that you can buy more things with a dollar, which means that if the money supply remained constant (as it did under the gold standard of the late 1800s), the value of the dollar would continually increase and prices would continually decrease.

With an ICO, you lock up some of that money supply in speculators' wallets, in exchange for the initial capital infusion. As the normal use-value price of the currency rises, they will sell and take their profits, injecting money back into the economy.

The wrinkles right now are that a.) nobody really knows how to value a currency with few-to-zero users and b.) a lot of these projects didn't deliver. That meant that a number of people lost their shirt in 2017 (actually, I suspect that number is less than commonly reported: I think most ICO investors were early Bitcoin and Ethereum hodlers who had already cashed out their initial investment into the bubble and then had some play money to diversify). But if you can pick winners now, when all the initial hype has disappeared, you stand to make a fair bit as people start using these platforms for real commerce.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#328

Post by abalone »

kaicianflone wrote: post #325
village-idiot wrote: post #66

Earlier quoted context omitted.

Ethereum as infrastructure is also a dicey proposition. It works, slowly, but it doesn’t seem like there’s a lot of demand for “dapps” outside ICO tokens, gambling, and the odd Ponzi scheme. The smart contract revolution at this point is complete vapor ware.

I will try to not laugh at this the next time I pay escrow and other closing fees. We are in Web 1.0 in terms of the technological application of programmable consensus.

One, don’t mock people on HN. Two, you’re going to need to cite real examples to support your claim, not just spout a bunch of buzzwords.

Quick search of “ethereum escrow” returns no real implementations that avoid fees or human intermediaries. Every single blog post I’ve read that tries to sketch an alternative is incredibly poorly thought through and still vulnerable to fraud. That is why they are just blog posts and not real, not because it’s “still early days.” I think it’s fair to say trustless escrow is vaporware.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#329

Post by jki275 »

fastball wrote: post #246
jki275 wrote: post #23

Earlier quoted context omitted.

Eth and BTc are quite different and Eth is absolutely a security. Eth meets the Howey test. BTc arguably does not due to its manner of distribution and initiation.

What entity are you investing in when you purchase ETH?

Vitalik Buterin and the other whales who started it.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#330

Post by jki275 »

DennisP wrote: post #40
jki275 wrote: post #23

Earlier quoted context omitted.

Eth and BTc are quite different and Eth is absolutely a security. Eth meets the Howey test. BTc arguably does not due to its manner of distribution and initiation.

According to the SEC chairman, ETH may have been a security at first but it's not anymore. https://coincenter.org/link/sec-chairman-clayton-just-confir...

Yes, the SEC has handwaved it out of being a security.

That doesn’t change facts, they simply aren’t going to do anything about it.

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