4 ms·

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 profi

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?

memossy 9y ago
They defined profits broadly in the scope of the release. Secondary sales have different rules.
- Haley_ 9y ago
  Ȋ ǧƏƮ ƥĄȊƊ ƟvƏƦ $95 ƥƏƦ hƟǙƦ ŴƟƦƘȊƝǧ ƑƦƟm hƟmƏ ŴȊƮh 2 ƘȊƊƧ ĄƮ hƟmƏ. Ȋ ƝƏvƏƦ ƮhƟǙǧhƮ Ȋ'Ɗ ƄƏ ĄƄlƏ ƮƟ ƊƟ ȊƮ ƄǙƮ mŸ ƄƏƧƮ ƑƦȊƏƝƊ ƏĄƦƝƧ ƟvƏƦ 10Ƙ Ą mƟƝƮh ƊƟȊƝǧ ƮhȊƧ ĄƝƊ ƧhƏ ƆƟƝvȊƝƆƏƊ mƏ ƮƟ ƮƦŸ. ƮhƏ ƥƟƮƏƝƮȊĄl ŴȊƮh ƮhȊƧ ȊƧ ƏƝƊlƏƧƧ. hƏƦƏƧ ŴhĄƮ Ȋ'vƏ ƄƏƏƝ ƊƟȊƝǧ, ＡＭＡZＩＮＧＪＯＢＳ ----->>http://www.smartfinancemedia.com/?682 http://www.smartfinancemedia.com/?682
vasilipupkin 9y ago
Secondary sales involve person A selling to person B. At that point it's person A's problem, not the issuer's. The exchange, however, could get into trouble for trading securities without being registered
- scott00 9y ago
  This is not really true. Once a company exceeds a certain threshold of non-accredited owners, it automatically becomes a public company, and faces the same disclosure and controls requirements as a company that became public via IPO. That is why all competently written private stock offerings sell stock with heavy transfer restrictions, so that shareholders can't force management to take the company public.
  - vasilipupkin 9y ago
    Yes, but token buyers are not owners, presumably
    - scott00 9y ago
      The analogy is necessarily inexact,ICOs are a new beast. But they don't have to be owners. Too many bond holders can make you public as well. If the tokens are securities and the sponsor/inventor/whatever is considered the issuer, lots of token holders is a problem for the issuer.
wmf 9y ago
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?
- sillysaurus3 9y ago
  People love feeling like they have something. Karma points, for example.
- rficcaglia 9y ago
  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 9y ago
    All tokens get traded. This is the point that I think a lot of people are missing.
    - rficcaglia 9y ago
      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 9y ago
        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.
mifeng 9y ago
I predict that CoinList will create some type of exchange only for accredited investors and use an SPV to exceed 99 investor limit.
will_brown 9y ago
Im curious why would the price of tokens (which are not equity backed securities) rise? If I understand it right, your hypothetical is just a kickstarter project where a funding level reward is a "virtual token" and just as say a reward of a t-shirt this token doesn't represent equity in the project? Would anyone expect the value of the t-shirt to go up? Is it possible, yeah actually, imagine if Apple originated through crowdfunding, I bet that original crowdfunding t-shirt might sell on the secondary market, so it all boils down to if there was a subjective belief of a profit or a reasonable personable would have expectation of profit.
- runeks 9y ago
  As far as I can see from observing the market, the expectation that literally any token will rise in price is evidenced in the market. If you doubt this just go to https://coinmarketcap.com/all/views/all/ https://coinmarketcap.com/all/views/all/ which lists over 1000 different tokens, the first 300 of which have a market cap of over one million USD (e.g. HTMLCOIN). In other words, tokens do tend to increase in price after their launch, but only because people expect that their price will increase after launch. It's like the housing market in 2005, except the investment sums are relatively minuscule. It's a self-fulfilling prophecy, for the time being, and the issuers have nothing to lose. Only the buyers risk a loss.
  - will_brown 9y ago
    Housing prices weren't increasing because people expected the prices would increase...home prices were increasing because the supply of money/loans for houses exponentially increased. In other words NINJAs (no income, no job applications) were being rubber stamped for million dollar plus homes with $0 down and 103% financing. And so prices continued to go up because the next NINJA would be approved to buy yesterday's million dollar house of 2 million today. The same conditions don't exist with ICO tokens.
    - runeks 9y ago
      > Housing prices weren't increasing because people expected the prices would increase...home prices were increasing because the supply of money/loans for houses exponentially increased. Why would the supply of money/loans increase unless people were taking out loans to buy houses more than usual, and why would they do that unless they expected the price to increase? The increase in supply of loans happened because people bought houses expecting a profit. So increase in credit supply is a secondary effect that occurs when people are more willing than usual to buy houses on credit. And people are willing to this when they expect a profit.

memossy 9y ago

They defined profits broadly in the scope of the release. Secondary sales have different rules.

Haley_ 9y ago
Ȋ ǧƏƮ ƥĄȊƊ ƟvƏƦ $95 ƥƏƦ hƟǙƦ ŴƟƦƘȊƝǧ ƑƦƟm hƟmƏ ŴȊƮh 2 ƘȊƊƧ ĄƮ hƟmƏ. Ȋ ƝƏvƏƦ ƮhƟǙǧhƮ Ȋ'Ɗ ƄƏ ĄƄlƏ ƮƟ ƊƟ ȊƮ ƄǙƮ mŸ ƄƏƧƮ ƑƦȊƏƝƊ ƏĄƦƝƧ ƟvƏƦ 10Ƙ Ą mƟƝƮh ƊƟȊƝǧ ƮhȊƧ ĄƝƊ ƧhƏ ƆƟƝvȊƝƆƏƊ mƏ ƮƟ ƮƦŸ. ƮhƏ ƥƟƮƏƝƮȊĄl ŴȊƮh ƮhȊƧ ȊƧ ƏƝƊlƏƧƧ. hƏƦƏƧ ŴhĄƮ Ȋ'vƏ ƄƏƏƝ ƊƟȊƝǧ, ＡＭＡZＩＮＧＪＯＢＳ ----->>http://www.smartfinancemedia.com/?682 http://www.smartfinancemedia.com/?682

vasilipupkin 9y ago

Secondary sales involve person A selling to person B. At that point it's person A's problem, not the issuer's. The exchange, however, could get into trouble for trading securities without being registered

scott00 9y ago
This is not really true. Once a company exceeds a certain threshold of non-accredited owners, it automatically becomes a public company, and faces the same disclosure and controls requirements as a company that became public via IPO. That is why all competently written private stock offerings sell stock with heavy transfer restrictions, so that shareholders can't force management to take the company public.
- vasilipupkin 9y ago
  Yes, but token buyers are not owners, presumably
  - scott00 9y ago
    The analogy is necessarily inexact,ICOs are a new beast. But they don't have to be owners. Too many bond holders can make you public as well. If the tokens are securities and the sponsor/inventor/whatever is considered the issuer, lots of token holders is a problem for the issuer.

wmf 9y ago

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?

sillysaurus3 9y ago
People love feeling like they have something. Karma points, for example.
rficcaglia 9y ago
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 9y ago
  All tokens get traded. This is the point that I think a lot of people are missing.
  - rficcaglia 9y ago
    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 9y ago
      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.

mifeng 9y ago

I predict that CoinList will create some type of exchange only for accredited investors and use an SPV to exceed 99 investor limit.

will_brown 9y ago

Im curious why would the price of tokens (which are not equity backed securities) rise? If I understand it right, your hypothetical is just a kickstarter project where a funding level reward is a "virtual token" and just as say a reward of a t-shirt this token doesn't represent equity in the project? Would anyone expect the value of the t-shirt to go up? Is it possible, yeah actually, imagine if Apple originated through crowdfunding, I bet that original crowdfunding t-shirt might sell on the secondary market, so it all boils down to if there was a subjective belief of a profit or a reasonable personable would have expectation of profit.

runeks 9y ago
As far as I can see from observing the market, the expectation that literally any token will rise in price is evidenced in the market. If you doubt this just go to https://coinmarketcap.com/all/views/all/ https://coinmarketcap.com/all/views/all/ which lists over 1000 different tokens, the first 300 of which have a market cap of over one million USD (e.g. HTMLCOIN). In other words, tokens do tend to increase in price after their launch, but only because people expect that their price will increase after launch. It's like the housing market in 2005, except the investment sums are relatively minuscule. It's a self-fulfilling prophecy, for the time being, and the issuers have nothing to lose. Only the buyers risk a loss.
- will_brown 9y ago
  Housing prices weren't increasing because people expected the prices would increase...home prices were increasing because the supply of money/loans for houses exponentially increased. In other words NINJAs (no income, no job applications) were being rubber stamped for million dollar plus homes with $0 down and 103% financing. And so prices continued to go up because the next NINJA would be approved to buy yesterday's million dollar house of 2 million today. The same conditions don't exist with ICO tokens.
  - runeks 9y ago
    > Housing prices weren't increasing because people expected the prices would increase...home prices were increasing because the supply of money/loans for houses exponentially increased. Why would the supply of money/loans increase unless people were taking out loans to buy houses more than usual, and why would they do that unless they expected the price to increase? The increase in supply of loans happened because people bought houses expecting a profit. So increase in credit supply is a secondary effect that occurs when people are more willing than usual to buy houses on credit. And people are willing to this when they expect a profit.