
SEC Issues Report Concluding DAO Tokens, a Digital Asset, Were Securities - uptown
https://www.sec.gov/news/press-release/2017-131
======
mifeng
If you read the actual report
([https://www.sec.gov/litigation/investreport/34-81207.pdf](https://www.sec.gov/litigation/investreport/34-81207.pdf)),
you may notice that the SEC is careful to apply securities law DAO
specifically.

In particular, they apply the security test: "did investors invest money with
a reasonable expectation of profits derived from managerial efforts of
others?" Since DAO was a wisdom-of-crowd VC fund, the answer is a clear YES.

On the other hand, they are careful to say that other token sales _MAY_ be
securities but will be treated based on their specific facts and
circumstances.

My takeaway is that this doesn't change anything. The SEC is proceeding
cautiously: applying securities law in clear-cut cases, "studying the effects"
generally.

It's also not a bad thing to comply with securities regulation. FileCoin is
doing quite well selling only to accredited investors on CoinList.

~~~
sillysaurus3
Is it still ok to use ICOs as as glorified Patreon or Kickstarter without
worrying you'll run afoul of the securities laws? As long as no one is
expecting profits from the tokens they buy from you.

Where it gets strange is if your tokens are picked up by an exchange. What
happens if someone buys your tokens with the expectation that they can sell
them to someone else? Then the price of your tokens might rise, and they've
made a profit. Does that count as expectation of profit?

~~~
wmf
Is there any advantage of using ICOs as as glorified Patreon or Kickstarter
compared to just taking orders in ETH? Why are you issuing a token to begin
with?

~~~
rficcaglia
there are secondary community engagement and customer/user retention (lock-
in?) benefits to using a token

if the token is part of or essential to a yet-to-be-developed app, but not
themselves traded, I cannot see why there would be any sense of an investment.
but I would in such cases never market the sale of such tokens as an ICO or
crowdfunding. I would offer them up for sale, as a product pure and simple.
buy now. use later.

i see it as selling an atari 2600 with no game cartridges, and then selling
games later when available.

~~~
wmf
All tokens get traded. This is the point that I think a lot of people are
missing.

~~~
rficcaglia
yes, i am missing that...why must all coins be traded? why not just have a
coin that is issued once and then spent by the owner?

where does it say that exchanges and trading are required? (serious
question...is there any such requirement?)

~~~
wmf
Some exchanges compete to support the most tokens (I guess to earn fees on the
trading). If it's possible to transfer a token, exchanges will starting
trading it immediately.

------
joeyspn
BOOM! the game just changed...

 _> In light of the facts and circumstances, the agency has decided not to
bring charges in this instance, or make findings of violations in the Report,
but rather to caution the industry and market participants: the federal
securities laws apply to those who offer and sell securities in the United
States, regardless whether the issuing entity is a traditional company or a
decentralized autonomous organization, regardless whether those securities are
purchased using U.S. dollars or virtual currencies, and regardless whether
they are distributed in certificated form or through distributed ledger
technology._

~~~
Animats
Yes. The SEC is indicating that they're not going to apply this retroactively.
Any upcoming Initial Coin Offering to US persons, though, is in trouble. Like
all the ones listed here.[1]

[1] [https://www.icoalert.com/](https://www.icoalert.com/)

~~~
modeless
I would not count on them not applying this retroactively. The DAO is safe
(along with Bitcoin and Ethereum themselves) but everyone else is not. I've
heard interviews with some ICO people and it's clear that they know what
they're doing is legally questionable. They're doing it anyway because of the
obscene amount of money on the table. The SEC will not look kindly on these
people.

~~~
hudon
Are we sure Ethereum is safe? Bitcoin never did a premined token sale but the
Ethereum Foundation did, so it looks much more like theDAO than Bitcoin does.

~~~
52-6F-62
I think there might be a gotcha there. SEC rulings only apply to dealings
within the United States. Being that Ethereum is [at least in general, if
arguably not] decentralized, and largely pegged to a Canadian, and started in
Switzerland it might not be so simple. The Ethereum Foundation itself is a
Swiss nonprofit.

Of course, it remains to be seen what this will turn into. Even if it comes
crashing down in the United States, that has little effect on the viability in
the rest of the world... especially as of late.

I just wouldn't want to try and run an ICO in the US as a resident of the US!

~~~
hudon
It doesn't matter if Ethereum is a crypto-decentralized-
blockchain-p2p-network-thingamagig. If the Ethereum Foundation sold their
thing to US residents, it is under the purview of the SEC.

The only question is if the Ethereum Foundation's token sale passes the Howey
Test. An analysis of this must be done like was done in their report of the
DAO. I'm not qualified to do this analysis, which is why I ask. I know they
said Bitcoin was not a security but that's all I know.

~~~
vasilipupkin
If you read the sec document carefully enough, they singled out the DAO
because it's unambiguously a security. Shares in a thingymajig blockchain blah
blah corp are still shares, therefore, securities. Most tokens are not shares
and have uses other than profit motive, therefore, they are not securities

~~~
hudon
More like, if you read the SEC document carefully enough, you'll see that they
applied the 4 prongs of the Howey test to theDAO token and defended each prong
with arguments and evidence. They'll probably do the same thing for Ethereum
(but not necessarily come to the same conclusion on each prong).

Saying "it has other uses than profit" is not sufficient since you'd have to
back it up with meaningful evidence (what are the actual uses that investors
are getting out of it?)

~~~
maehwasu
> Saying "it has other uses than profit" is not sufficient (does not address
> all 4 criteria) and you do not back it up with evidence (what are the actual
> uses that investors are getting out of it?)

This true, but the 4 criteria are an AND, not an OR.

------
Cshelton
There was no doubt in my mind this was coming.

Still waiting for them to come down hard on a company as an example. In this
article it says they won't bring charges in this instance, meaning The DAO,
however; if you have taken part in an unregistered sale of securities recently
as a U.S. "company", you may want to seek legal advice on how to proceed right
away. Maybe a deal can be made with the SEC for "ICO"'s that have occurred
recently. Or you may be advised to leave the U.S., which may be the best
option.

~~~
JumpCrisscross
> _Or you may be advised to leave the U.S., which may be the best option_

If you were in the United States and/or sold securities to an American
investor, the deed is done. Skipping town to avoid the SEC only serves to turn
your potential civil liability into a foreign fugitive case.

------
ilaksh
The SEC should show that it protects everyone's rights and not just large
firms with piles of cash to pay to them and to pay expensive lawyers.
Otherwise we have to assume that this is largely about trying to tax things.

The way they can do this is by making a real effort to update their technical,
documentation, and regulatory programs.

Is there a straightforward way to do an Edgar filing that doesn't require a
bunch of training? Is there a web page that clearly lists the requirements for
these types of securities in plain English?

How much do the company registrations and filings actually cost? What is the
basis for these costs? Because an ICO can be created at no cost. Are the
excessive fees due to a lack of modernization or streamlining of the
processes, or they simply bribes that line officials' pockets and protect the
incumbent firms from poorly funded startups?

In recent cases, how would fees and filings have actually protected anyone?
Does the SEC have technical staff or software capable of evaluating Ethereum
contracts for validity or safety? If not, how does their regulatory effort
provide any benefit, except as an opportunity for them to collect a type of
tax and make it harder for startups to compete with large firms where SEC
officials have friends working?

~~~
KirinDave
> Because an ICO can be created at no cost

Except the cost to the participants who later have wasted money because the
ICO contract was exploitable...

At the current rate major losses are as perceptible as all successes. Maybe
the industry needs some externally imposed speed bumps from SOME authority
until folks can get their acts in gear?

~~~
DennisP
I doubt the SEC is a good fit for improving smart contract security.

~~~
saosebastiao
I'd trust the SEC that one other agency capable of doing so. The SEC actually
has a ton of technically capable people who understand and audit
technology...they do as much for e-brokers, stock exchanges, high frequency
traders, etc.

The only other agency capable of doing so would probably stockpile the
exploits and use them to surveil the dark web to catch a million drug dealers
and an occasional low level disposable terrorist.

------
rdlecler1
Ironically ether & bitcoin started dropping last night around midnight. Makes
me wonder if any SEC folks were involved in insider trading. Anyone care to
speculate on what this will do to ether/bitcoin values? Does this concentrate
interest in the existing players or does it hurt demand and speculation
therefore depressing prices?

~~~
sosa2k
I'm sure those that work at the SEC are under pretty tight monitoring for
insider trading.

~~~
throwaway91111
What exactly does this mean in terms of monitoring? You could cash out to
another virtual currency and sit on it for however long you'd like without any
trail tied to you.

------
EGreg
This is a serious question to the lawyers on HN. In your non-advice way, can
you tell us your _opinion_ on the following?

So given that now we have a serious precedent for considering all ICOs aa
securities, what are the steps a company needs to take to make sure their ICO
is legal under US LAW??

1\. Does it need to register the ICO somehow? If so, how exactly are the
securities registered?

2.!What regulations apply now? Do the 1933 blue sky laws apply and Regulation
D and the usual exceptions - including JOBS act crowdfunding provisions -
apply?

3\. Can anyone buy the ICO or does the company now need a private placement
memorandum?

4\. And even so, isn't the secondary market for the tokens constitute
"transferring" of securities? What does a company need to make sure all that
is legal, short of fulfilling all the reporting requirements of a Public
company?

Basically what happens now to all the ICOs done so far by companies like
Brave? What are they going to do?

Look at the title of this article and tell me - is it accurate?

[https://www.forbes.com/sites/laurashin/2017/05/18/want-to-
ho...](https://www.forbes.com/sites/laurashin/2017/05/18/want-to-hold-an-ico-
coinlist-makes-it-easy-and-legal/amp/)

------
m777z
I'm not terribly happy with the decision, though I can't say I'm surprised. I
enjoy the drama of the Wild West that is Ethereum and the rest of the
cryptocurrency ecosystem. Minimal regulation encourages innovation, while
regulated markets can exist for people who want stability and certain
guarantees to prevent fraud (or at least make it difficult).

I wonder what would happen if financial regulations became more "optional".
I.e. the SEC exists to provide guarantees if a given company wanted to get the
SEC's seal of approval but does not enforce most regulations on entities that
don't seek SEC approval (and thus investors would know such entities are
riskier). I suppose eventually a "too big to fail" company would avoid
regulation and consequently go under, and that would be the end of that.

~~~
Cshelton
The regulations put in place by the SEC are not to help companies, but to
protect U.S. citizens from being scammed all the time.

Sure, the wild west is fun, but if you are in an economic ecosystem where a
large percentage is comprised of scammers/fraudulent companies, then it will
be detrimental to long term success.

~~~
Jabanga
>but to protect U.S. citizens from being scammed all the time.

US citizens shouldn't be treated like children that need to protected from
their own stupidity.

~~~
Cshelton
Very smart people are scammed and conned all the time.

~~~
Jabanga
Of course. We don't restrict the rights of the entire population to engage in
voluntary interactions to preempt crime. We punish actual criminals to deter
other would-be criminals, and leave everyone else to be free.

We don't require a publishing license because someone might use their right to
free speech to libel someone else. We punish the libeler.

~~~
dgacmu
You realize that's not in the slightest bit true, don't you?

For example: Under contract law, there are certain rights that _you are
legally not permitted to give away_. You can't actually sell yourself into
slavery. You can't contractually disclaim gross negligence on your part. You
can't have a contract that unilaterally benefits one party without
consideration provided for the other. You can't accept a contract while
intoxicated. You can't contractually agree to something that is a crime. ...
the list goes on.

~~~
Jabanga
>You realize that's not in the slightest bit true, don't you?

What isn't true?

>For example: Under contract law, there are certain rights that _you are
legally not permitted to give away_. You can't actually sell yourself into
slavery.

A court will void contractual provisions like this, based on a comprehensive
body of case law that establishes what constitutes consent. This is a universe
away from what you're defending here, which is a federal agency prosecuting
individuals because they entered into some investment transaction without
'permission' from said regulatory agency.

~~~
dgacmu
You wrote:

> _Of course. We don 't restrict the rights of the entire population to engage
> in voluntary interactions to preempt crime._

I gave one example of many of the ways in which we absolutely do restrict the
rights of the entire population to engage in voluntary interactions to preempt
crime. We limit the types of contracts that everyone can engage in, to prevent
a subset of them that would be used abusively. As another example, we place
restrictions on freedom of assembly -- voluntary interactions of groups of
people -- based upon location and time of day because of the _potential_ to
create a disturbance, not the fact of having done so. And so on.

~~~
Jabanga
>I gave one example of many of the ways in which we absolutely do restrict the
rights of the entire population to engage in voluntary interactions to preempt
crime.

Yes I can see how you interpreted my comment that way. I meant we should not
do that. In writing it, I was thinking along the lines of "you don't do [some
unethical thing]" as a normative statement, not a description of what you
don't do. The wording I chose doesn't make that at all clear, so your
interpretation is understandable.

>We limit the types of contracts that everyone can engage in, to prevent a
subset of them that would be used abusively.

Like I said: _A court will void contractual provisions like this, based on a
comprehensive body of case law that establishes what constitutes consent. This
is a universe away from what you 're defending here, which is a federal agency
prosecuting individuals because they entered into some investment transaction
without 'permission' from said regulatory agency._

------
joshuaxls
This is why we've built CoinList: [https://coinlist.co](https://coinlist.co)

We have seven years of experience running regulatory-compliant online
fundraisings via AngelList. Now we're bringing that knowledge to ICOs.

------
will_brown
When DAO originally made the HN Front page I made this comment [1] calling DAO
snake oil and suggested people could lawfully operate their own "DAO" as an
Investment Club LLC, specifically Investment Clubs _can be_ exempt from
securities laws [2] subject to the restrictions I outlined in my prior comment
such as a limit of "100 tokens" (i.e. 100 members to make future investments).

[1]
[https://news.ycombinator.com/item?id=11707497](https://news.ycombinator.com/item?id=11707497)

[2] [https://www.sec.gov/reportspubs/investor-
publications/invest...](https://www.sec.gov/reportspubs/investor-
publications/investorpubsinvclubhtm.html)

~~~
Jabanga
It's a decentralized and autonomous application. How could an autonomous
application on the blockchain be an LLC?

~~~
will_brown
I actually addressed this question a year and a half ago as well [1], where I
defined the DAO as blockchain based Investment Club Software. In otherwords
what you are calling the "autonomous application", that wouldn't be the LLC
but the Software that manages the Investment Club LLC. Note: the Wikipedia
article for "investment club software" that I originally linked to no longer
appears to exist.

[1]
[https://news.ycombinator.com/item?id=11711499](https://news.ycombinator.com/item?id=11711499)

~~~
Jabanga
So it's the shareholders who are responsible for forming an LLC? How can they
prevent non-members from becoming partners in the DAO, given the software is
autonomous and has no permission controls?

~~~
will_brown
First LLC's don't have "shareholders" the owners/equivalent of an LLC is a
Member.

The process would basically be as follows:

Say you form an Investment Club LLC, you create a smart contract/ICO with up
to 99 tokens, and purchasers of the ICO tokens become a "member" of the LLC.

Thereafter, the Investment Club LLC members could create a smart
contract/investment opportunity, but you would only be able to vote/invest if
you are a token holder...you say there are no permission controls but this was
exactly how the DAO was marketed to function, buy a Token for DAO and you
could participate/vote on future DAO investment opportunities.

~~~
Jabanga
So you're suggesting that instead of Slock.it developing the smart contract,
an LLC should have? How do the token buyers qualify as members of an LLC when
they're anonymous buyers with no legal affiliation to a LLC? Or are you saying
the LLC wouldn't be a traditional one with a legal identity and identification
of its members?

------
robbiet480
This _appears to_ only applies to ICOs that offer something that is like a
security, such as the DAO, not voucher based ICOs like Primalbase or Storj

EDIT: Added _appears to_ since IANAL

~~~
brucephillips
It does seem to be ambiguous. If you read the qualifications in section III:
[https://www.sec.gov/litigation/investreport/34-81207.pdf](https://www.sec.gov/litigation/investreport/34-81207.pdf),
they seem to apply to voucher tokens as well. Especially "A reasonable
expectation of profit".

~~~
josaka
This seems like an important distinction, i.e., between an ownership token and
a "voucher token," assuming the latter is a token that gives the holder the
right to some service. Curious how a groupon isn't a security if a voucher
token is.

~~~
brucephillips
A groupon doesn't appreciate when the company succeeds.

~~~
josaka
Maybe a better example would be a concert ticket, beanie babies, or baseball
cards.

------
memossy
As a hedge fund manager who just added a token to one of our projects (to help
create a resource to combat extremism naturally), I wrote up my thoughts here:

[https://medium.com/ananas-blog/sec-on-icos-securities-are-
se...](https://medium.com/ananas-blog/sec-on-icos-securities-are-securities-
but-928d9862389f)

A general rule of tokens is that if they promise a profit they are a scam and
if they promise a share of profits a security.

The closer they are to API keys the better in terms of non-securitability.

It is likely that the token usage will gradually bifurcate between those that
are "property" and scarce digital assets like Bitcoin (or rarepepes) and those
that are API keys.

For our charitable project we've tried to incorporate elements of both to
create an interesting token economy to build a useful resource.

Hopefully there will be more of these attempts, both registered as securities
and that fall outside of this classification.

------
dmitrygr
Good. This should help bring some sanity and accountability. they were both
quite needed

~~~
oneplane
Why? Nobody is forcing crypto currenency on anyone. I get that registered
companies might have some other deal with the govenment and with hacker
organisations, but a free and open (and non-country-bound) system should
really not be 'managed' by some random organisation in a random country.

~~~
dmitrygr
Same reason SEC exists. Because many people are easy to manipulate, and plenty
of malicious people out there will convince (not force) them to invest in
their ICO, etc.

~~~
Jabanga
Then we should limit who people can vote for, since voters are so easy to
manipulate into voting against their own interests. The basic principles of
liberal democracy assume that a person has an absolute right to make decisions
for their own life. These kinds of restrictions are unconscionable
restrictions on the right of free people to their personal autonomy.

~~~
cheetos
There is simply a massive difference between the theory of democracy and its
actual implementation. Your personal autonomy is restricted by the government,
massively, period, generally for everyone's own good. They decide what and how
much medicine you can put in your body. Whether you can gamble, and where, and
on what, and how much. What drugs you can take. What speed you can drive.
Whether you must go to school or not based on your age. Which food you can buy
at the supermarket. What you are allowed to see on television. Where and when
you may protest. What behavior is allowed in public and what is not. What
speech is considered 'free' and what isn't. What machines you may operate and
under what circumstances. Which financial transactions you may or may not
participate in and the terms of those transactions. The type of home you build
and it's specifications. Which countries you may or may not enter and under
which circumstances. Whether you are allowed to work or not. It's just the way
things are.

~~~
Jabanga
>Your personal autonomy is restricted by the government, massively, period,
generally for everyone's own good. They decide what and how much medicine you
can put in your body. Whether you can gamble, and where, and on what, and how
much. What drugs you can take. What speed you can drive. Whether you must go
to school or not based on your age. Which food you can buy at the supermarket.

These restrictions violate people's basic rights and are to the material
detriment of society at large. The more of a regulatory burden is placed on an
industry, the more dysfunctional, bureaucratic and nepotistic it is.

~~~
jpetso
Basic rights are defined by various charters, constitutions, international
agreements, and that's about it. If you find that one of those restrictions
contradicts the ones applicable to your country and legal system, you have a
good shot at changing it. (Point in case: gay marriage, and other Supreme
Court rulings.)

As for all other rights, those are determined by the government that is
democratically voted in. If most people, via their elected representatives,
decide that you shouldn't be allowed to speed, or smoke crack, and it's not
constitutionally guaranteed, then it's not a basic right and it's not your
right at all. Maybe moral right, but that depends on highly subjective morals
and might therefore still get you into legal trouble.

Best course of action is probably to find a country with a legal framework
that matches your morals. If there's no such country, perhaps the time for
these ideas hasn't come and you want to lobby for them to be recognized as
basic rights, since right now they're obviously not.

~~~
Jabanga
>Maybe moral right, but that depends on highly subjective morals and might
therefore still get you into legal trouble.

We're intelligent human beings. We should be able to arrive at some kind of
consensus on what our moral rights our, through rational discourse. That's
what I'm trying to do right now. My argument starts with what "the law" means:

[https://www.theatlantic.com/politics/archive/2016/06/enforci...](https://www.theatlantic.com/politics/archive/2016/06/enforcing-
the-law-is-inherently-violent/488828/)

~~~
jpetso
> We should be able to arrive at some kind of consensus on what our moral
> rights our, through rational discourse.

In the commonly used sense of the term, the scope of morals by far exceeds
what you'll get even reasonable people to agree upon. "Rational discourse"
means that you need enough of an uncontroversial set of base facts that either
party is willing to work with. I don't think we have enough of those to derive
a single valid system of morals without injecting other, subjective, more
controversial opinions in the process.

Say, you have a basic statement such as "All people should be equal",
something that most can agree with. By itself, this isn't actionable, and
won't determine how to handle a situation unambiguously. You could come up
with a libertarian doctrine that all people should be given the same treatment
regardless of their background or current situation, or you could come up with
a socialist doctrine that disadvantaged people should get extra support to
balance out unequal origins and misfortune. Or anything in between. None of
these can be rationally discarded, because there's not enough source data to
come to any conclusion to begin with. If you attempt to expand the set of
source data, you will find many who disagree with you. That's why it's
subjective.

That said, trying to distill what basic facts we do have, so that they can be
worked with in a constructive fashion, is a commendable goal. Good luck!

------
hellbanner
In another thread commenters speculated that ICO hacks were coming from inside
jobs.. does this new SEC report change how the government would handle that?
Is fraud of securities different from fraud over imaginary coins now?

~~~
vkou
Fraud is fraud, regardless of whether or not you're stealing securities,
magical internet money, or baseball cards.

~~~
ceejayoz
Certain types of fraud are still likely to garner more attention, particularly
when there's a dedicated law enforcement organization tasked with it.

~~~
hellbanner
Aaand front page of HN, the very next day:

[https://news.ycombinator.com/item?id=14861925](https://news.ycombinator.com/item?id=14861925)

------
williamle8300
You can't change the thirst for freedom inborne in every man via laws. This
will only make cryptocurrency slip more easily through their fingers and
galvanize efforts to avoid oversight.

------
kevinr
I dunno what y'all's problem is, the last ruling like this (from the IRS)
meant I got to write $200 in Bitcoin losses off on my taxes.

------
prgmatic
What does this mean if you've bought or sold cryptocurrency within 2017?

~~~
_delirium
The only people directly affected are people who have offered an "initial coin
offering" (ICO) of pre-mined coins from a new cryptocurrency, in the U.S.,
without registering the offering with the SEC. This ruling is looking at ICOs
specifically, not just anyone who has bought or sold cryptocurrency.

------
iMuzz
> The SEC's Report of Investigation found that tokens offered and sold by a
> "virtual" organization known as "The DAO" were securities and therefore
> subject to the federal securities laws. The Report confirms that issuers of
> distributed ledger or blockchain technology-based securities must register
> offers and sales of such securities unless a valid exemption applies.

> The agency has decided not to bring charges in this instance, or make
> findings of violations in the Report

So they aren't going to bring charged to the creators of The Dao. What about
the other dApp's based in the US that have already ICO'd (BAT, Augur etc.)?
Also, if a company successfully files/gets approved by the SEC, does that mean
that NASDAQ can now list tokens?

AFAIK the SEC only cares about securities sold in the U.S. I'd imagine this
incentivizes a lot of Token issuers to leave the U.S?

~~~
Cshelton
The SEC cares about U.S. citizens. If you marketed and/or sold to a U.S.
investor, you are now under the SEC's jurisdiction.

There are countries you can go to of course, but not many left. Grand
Caymans... Switzerland is no longer a safe haven from U.S. jurisdiction
either.

~~~
JumpCrisscross
> _The SEC cares about U.S. citizens_

Residents. Noncitizen American residents are protected by the SEC. Though even
that is a leaky boundary [1].

[1] [http://clsbluesky.law.columbia.edu/2017/04/11/proskauer-
rose...](http://clsbluesky.law.columbia.edu/2017/04/11/proskauer-rose-
discusses-the-secs-extraterritorial-reach/)

 _Disclaimer: I am not a lawyer and this is not legal advice. Do not take
legal advice from my Internet comments._

------
kusmi
I don't understand exactly what this implies. If DAO is a C Corp, will it pay
taxes on USD equivalent value of their coin holdings (150$ million going by
the report?), or only on what they ultimately convert to USD? What if they use
the coins to make purchases directly? If I own a C Corp, can I hide earnings
in USD from being taxed by exchanging them for coins I make using some open
source block chain?

------
zallarak
I'm uncertain of how much value the SEC provides. Problems they fail to solve:

* High brokerage fees

* Poor-outcome annuities

* Penny stock trading

* Risky options trading

Tokens are fraught with fraud, but the impetus for research is upon the
individual. I fear that regulating this will stifle innovation with little
benefit to end-consumers in terms of safety, because people will still get
swindled out of their money by other legalized means.

------
bluesign
So to be security,

\- must have investment, \- profit expectation, \- this profit must come from
efforts of others (management) \- limited or none voting right

So what is preventing digital currencies classified at securities?

------
throwaway86328
Isn't it also illegal to buy unlicensed securities? Couldn't the SEC also
prosecute individuals who simply bought into these as unaccredited investors?

(I am not a lawyer)

------
kensai
Look at the beating the market gets right now (as of 13 minutes after the news
were posted).

[https://coinmarketcap.com](https://coinmarketcap.com)

~~~
Cshelton
To be fair, the market was down around that much today already. The SEC
article has had little to no effect as of yet.

I also don't see it having much effect at all as all of those tokens are
traded in secondary markets.

~~~
jandrese
Or everybody who mattered already knew what was going to happen from their
insider sources and were trading in advance of the announcement.

~~~
Cshelton
I would consider holders of most tokens to be "dumb money"... they did not
have an inside source to the SEC release...

------
rdlecler1
Anyone care to speculate on what this will do to ether/bitcoin values? Does
this concentrate interest in the existing players?

~~~
Fej
Value is going to dip. They are speculative. Investments.

The big supporters of cryptocurrencies were under the delusion that they were
exempt from financial regulations. Today the SEC reminded them that securities
law applies to everyone.

This makes it significantly harder to invest. Investors getting out will cause
a drop in the coins' value.

------
JohnJamesRambo
This is wonderful news. The ICO world was a disgusting mess of ignorance and
pyramid schemes.

------
m1k32h07
Why isn't etherium's price crashing right now?
[https://ethereumprice.org/](https://ethereumprice.org/)

~~~
matthewbauer
The sad thing is markets aren't rational at the end of the day.

------
discombobulate
Removed. I'm not from the US.

~~~
vasilipupkin
I am not sure how that exempts anyone from anything. If you, as a Swiss
company, issue tokens that are securities according to country X and sell them
to citizens of country X without going through a securities offering, you are
violating that country's securities laws and the fact that you are based in
Switzerland I don't think is relevant

------
bitmapbrother
I was watching a YouTube video of a popular Ethereum blogger and he mentioned
that one of his acquaintances was charged with tax evasion for not reporting
his cryptocurrency income. This person thought he could just pay what he owed
and be done with it. Unfortunately, it doesn't work like that. Once they catch
you for tax evasion you'll pay whatever you owe in addition to facing tax
evasion charges.

