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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?
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?
The value might increase if there's an artificially capped supply, but not otherwise. If demand increases they can just issue more tokens.
Earlier quoted context omitted.
Most of the benefit of doing an ICO is that investors are throwing a ton of dumb money into ICOs.
Exactly. And SEC regulations are designed to stop dumb money from going into risky investments. If you comply then you can't cash in on that dumb money and there's no point to doing an ICO.
Why do you think the SEC should be arbitrators of what and what is not dumb money?
Earlier quoted context omitted.
I don’t understand why being premined makes any difference? A company could easily create an equity pool and a new mineable currency, and make that currency worth a proportional amount of equity. That would very clearly fall under the umbrella of security. Similarly someone could create a premined currency and evenly distribute it to anyone who asked for it, in exchange for nothing with no guarantees about it being r…
Well, it is not about pre-mining specifically that makes it a security. You could, for example clone Bitcoin exactly, but make a change where you recieve a billion free coins. It would be dumb, but that wouldn't be a security. The problem is when ICOs premine and sell you a token for something that doesn't already exist yet. The token represents a future promise, as opposed to something that exist right NOW.
Earlier quoted context omitted.
I think that is a very considered and wide ranging statement. The proof is in the pudding though. He looks like he has called out some ICO's, but until enforcement proceedings start, it is still not clear. I can't see how any pre-mined ICO, like ripple, wouldn't be treated like a security given those statements. As a long time crypto investor, even i recognise that ico's are out of control. It is my opinion that if y…
I don’t understand why being premined makes any difference? A company could easily create an equity pool and a new mineable currency, and make that currency worth a proportional amount of equity. That would very clearly fall under the umbrella of security. Similarly someone could create a premined currency and evenly distribute it to anyone who asked for it, in exchange for nothing with no guarantees about it being r…
The issue is when A) people buying the token are doing so because they expect the value to increase, and/or B) the value of the network comes from a central party or promoter rather than from the network participants. If a currency is pre-mined, then it's more likely to be a security because the network participants aren't helping to secure the network. Similarly, if the product doesn't yet exist, then it's more likely to be a security because the network participants are unlikely to be creating value.
The fact that the token may be pre-mined or the product may not yet exist doesn't inherently matter except to the extent that they make it much more likely the token fails conditions A and B.
Similarly, if Ethereum goes to proof-of-stake then it's more likely to be considered a security, but there isn't a specific law saying that proof-of-stake tokens are illegal.
Earlier quoted context omitted.
A lot of that dumb money is being put in by wall street, so not sure you're right.
This is not my impression. It seems to me that the dumb money is people who made early fortunes in crypto or regular people looking to ride the next pump and dump. If Wall Street money is coming in it's mostly to take advantage of the dumb money for a quick profit, for example by getting preferential pricing or timing so they can sell to later investors).
Not a simple question, I guess.
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?
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?
The difference is nobody would attempt to buy this participation to resell it later for a higher price
Earlier quoted context omitted.
If you buy bitcoin you aren't buying it from the author of the bitcoin client to fund further development. I'm going to say not a security transaction.
the founder of bitcoin gave himself/herself a mining headstart with low difficulty, this can be seen as a founder reward