
Blockstack’s token offering is historic, but its dance with the SEC is not over - euphemized
https://decrypt.co/7839/blockstack-token-offering-historic-but-dance-with-sec-far-from-over
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rolltiide
its sad that the operational risk is so damn high though.

you have to:

1) like the idea

2) trust the management team

3) hope infrastructure gets built around it so that there could be perpetual
demand for these tokens

4) hope the regulators play ball

and if any thing incompetent happens with the management team, all liquidity
evaporates permanently, no matter if the problem and solution were sound ideas

when really you just want to be able to "like the idea" and let it flourish on
its own, where a management team doesn't need to exist, or a management team
can be hotswapped for anyone

~~~
arcticbull
Correct. That's why we have an established, well worn process for raising
funding for your business. You raise from accredited investors by selling the
highest-risk equity, then as you become more mature, you raise from bigger,
less risk-tolerant entities. Eventually, you're in a position to publish
financials regularly, and raise money from a broader audience ("go public").
Your itemized list is why we do it that way. This "tokenize everything" end
run around the SEC is a just a way to bilk low-income individuals of their
hard-earned savings.

The crypto community continues to speed-run the history of finance.

~~~
seibelj
Yet letting Uber's bag holders dump their stock on the public was ethically
correct? Don't pretend our current system of only letting the rich get richer
by banning access to early-stage ventures is the best society can do.

~~~
arcticbull
All of the data necessary for anyone to make an informed purchasing decision
about $UBER is available per SEC regulation. It's up to each individual to
decide based on that whether or not it represents a good value, and to hit
"buy" on their preferred trading platform, and at what price. Nobody was
forced to buy $UBER, and nobody was lied to, and if they were, they've got
plenty of recourse via the SEC. Everything of value was in the S-1 for months
before the first trading day.

Nobody is banned from investing in early-stage businesses except by virtue of
their level of risk tolerance, and some of us angel invest regularly. However,
just opening up access to everyone doesn't change the fact that a legitimate,
well-funded company with great traction and a great idea (the kind of equity
you want) has no interest in selling to some random small-time individual with
no experience to bring to bear. As a founder, in early stages, I'd want smart
money. Just as nobody was required to purchase $UBER nobody is required to
sell shares of their startup to small-time investors who have no idea what
they're doing and provide no value. I predict if accreditation rules were
removed, the same pool of smart money continues to get all the wins, but now
dumb money holds all the bags.

Yes, it's possible to make bad investing decisions. That certainly doesn't
mean ICOs are a good idea.

~~~
seibelj
Thank you for describing our current system to me. I am advocating for a new
system that lets people take more risk even if they are not wealthy. There is
nothing magical that happens when you make $200k per year, if you make
$199,999 per year you are not an idiot that needs the government to protect
you from bad investments.

~~~
arcticbull
To be clear the system you're asking for exists, it was brought in by Obama as
part of the JOBS act. Anyone can buy equity under the JOBS act and the company
has far lower documentation requirements. The 'good' companies (in-demand
equity) don't do it because they won't want to pollute their cap tables with
'dumb money' and the ones who are okay with that are terrible investments.
It's adverse selection. [1]

Getting rich isn't easy and opening up unregulated access to crap securities
isn't going to change that.

[1] [https://www.finra.org/investors/alerts/crowdfunding-and-
jobs...](https://www.finra.org/investors/alerts/crowdfunding-and-jobs-act-
what-investors-should-know)

~~~
seibelj
To be clear, the moment one is accredited they can make all the dumb
investment decisions they would like. However, beneath a magical line of $200k
per year salary the government prevents you by legal force from doing so. When
you make above that number you are free to be dumb. I'm advocating letting
everyone make their own decisions, for better or worse.

~~~
arcticbull
You seem to have ignored the key points.

(1) A program that meets that vast majority of your requirements exists and
exhibits terrible adverse selection issues, so you propose... expanding it? In
the hopes it gets... better? Any thoughts on why that would happen?

(2) The $200K salary line is "magical" but does represent middle-class in 100%
of communities in the United States. IMO it should have been indexed to
inflation ($3-4M in annual income inflation adjusted), bringing it quite a bit
higher. You can also qualify on the basis of $1M in assets excluding your
principal residence. This provides adequate buffer in the event your
investments fail outright, which the vast majority of early stage investments
do. It's the same reason a 20.9 year old can't buy beer. You draw the line
somewhere, for better or for worse.

(3) To the best of my knowledge there are no legal repercussions for you for
investing as a non-accredited investor, though there may be for the company
for failing to follow proper procedure.

(4) These laws weren't brought in because too many poor were getting rich too
fast and there wasn't enough room for all the yachts in Boston Harbor. It was
due to large-scale speculation literally causing the great depression [1].

(5) Remind me who pays for the welfare programs when people who aren't in a
place to take financial risks, the most desperate usually, are pushed into
insolvency? Taxpayers. That's why taxpayers also get a say in who can invest.

(6) Your argument reads a lot like the people who want to kill off the EPA
because the rivers haven't caught fire in a while. There's a reason they don't
catch fire.

[1]
[https://www.investopedia.com/terms/n/nonaccreditedinvestor.a...](https://www.investopedia.com/terms/n/nonaccreditedinvestor.asp)

~~~
seibelj
It's a philosophical disagreement - I don't want the government picking who
can and can't invest their own money into what investments. Many developed
countries, such as Switzerland, have no such laws and the world isn't crashing
down for them.

~~~
arcticbull
Which developed nations are you referring to exactly? Australia, Brazil,
Canada, the entire EU, Israel, New Zealand, Singapore and the US all have
accredited investor rules. The US is among the least strict. [0] It seems like
Switzerland has a similar model [1, 2]:

(1) According to Art. 10 Para. 3 of the Swiss Federal Collective Investment
Schemes Act (CISA), qualified investors are considered:

(e) High net worth individuals

(3) A high net worth individual is someone who can confirm in writing that
they directly or indirectly have net financial investments of at least 2
million Swiss francs.

Either way, you've again side-stepped every salient point. It's fine to have a
philosophical disagreement but we should be able to discuss the facts at hand.
Philosophically I don't think the government should be able to tell people
what they can and can't dump into the rivers because it's in their interests
only to drop safe stuff in there. Reality, however, indicates that in fact
that's an awful idea and we shouldn't let them.

Sadly, facts get in the way of philosophy. That's why we have regulations.

Either way you fall prey to the classic libertarian fallacy, that an
individual doesn't affect the society around them in any way. Yeah you go
broke investing in the South Seas 2.0 company, or BTC at $19K. Cool. You own
and sell property at a loss, now you affect your neighbors property values.
Now you're on welfare, and on medicaid, and now all of society has to pay for
your poor investing decisions. The law is how society mitigates this risk.

[0]
[https://en.wikipedia.org/wiki/Accredited_investor](https://en.wikipedia.org/wiki/Accredited_investor)

[1]
[https://www.swissfunddata.ch/sfdpub/en/group/info](https://www.swissfunddata.ch/sfdpub/en/group/info)

[2]
[https://www.lexology.com/library/detail.aspx?g=a8e19e48-a4d0...](https://www.lexology.com/library/detail.aspx?g=a8e19e48-a4d0-4c15-97cb-84f4871b0826)

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oooshha
Token buyers in this offering are paying 1000x to 2000x more than what early
insider investors paid.

~~~
JaleDarvis
When I buy shares of lets say Uber - how much more than early investors am I
paying?

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tomc1985
Please... no token offering is "historic"

~~~
sdinsn
I disagree, I think they are historic scams

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wonjun
This is good for bitcoin.

~~~
arcticbull
I can legitimately no longer tell if this is sarcasm or not.

~~~
WrtCdEvrydy
It's become such a meme, it's generally sarcasm.

~~~
arcticbull
It’s a meme because so many people say it with a straight face haha

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slappyjoe2000
Still. Sounds hopeful for fundraising.

