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Statement on Cryptocurrencies and Initial Coin Offerings

811 points by corbinpage 9y ago

jashkenas 9y ago
A little emphasis, focusing on the aftermath from the SEC's July report on the DAO: > "Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. Many of these assertions appear to elevate form over substance. Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security."
- deleted 9y ago
  [deleted]
- brianpgordon 9y ago
  He even flat out says that most of the ICOs he's seen should be considered securities: > By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved. I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws. I think some of the other commenters are glossing over that statement and being rather over-optimistic about the SEC's stance toward tolerating ICOs.
  - dahdum 9y ago
    They've been pretty clear in the past about the Howey test and ICOs running foul of it, so that part of his letter wasn't all that new. They're already taking action and should be - just today I saw an ad promising 60x returns on an internal market. I didn't expect to see him acknowledging the positives of cryptocurrency and the ICO funding model overall.
- jackpeterfletch 9y ago
  I think people are viewing this as an attack on crypto, when its actually just common sense. People put too much faith the 'Contract' half of 'Ethereum/Smart Contract' Basically. Today ICOs are selling tokens as shares of equity in their company, or similar. Which you can then sell on. The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders. Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them. Otherwise how can the court help you, and who else is going to help you?
  - westurner 9y ago
    > I think people are viewing this as an attack on crypto, when its actually just common sense. > […] The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders. > Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them. This. IRS regards coins and tokens as capital gains taxable things regardless of whether they qualify as securities. SEC exists to protect investors from scams and unfair dealing. In order to protect investors, SEC regulates issuance of securities.
deleted 9y ago
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iMuzz 9y ago
> I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects. > We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. I don't know much about Jay Clayton (SEC Chairmain) but he seems to be taking a very pragmatic stance on tokens. From what I gather, he's saying that some of these tokens should be classified as securities, while others should not. And we as investors should be be diligent to probe the creators to see if these tokens are subject to regulation and are legal. This is amazing! The SEC haven't quite stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future.
- Alex3917 9y ago
  > he's saying that some of these tokens should be classified as securities If by 'some' you mean that some future tokens might be able to be offered for sale legally, then yes. But he also just declared basically 100% existing token operations to be criminal.
  - Frogolocalypse 9y ago
    Not 100%, but a lot, for sure. I definitely read it as most.
- wmf 9y ago
  he's saying that some of these tokens should be classified as securities, while others should not. Gotta love the unlimited supply of optimism in the cryptocurrency world. Every single existing token is either a security or a commodity, but people still think they can squeeze through the "utility token" loophole.
prakashrj 9y ago
But since there is no intermediary between your transactions in crypto, please be aware of fraud. You are completely responsible and accountable for all actions you take with your money. There will be nobody to blame in crypto :) This is what most governments are warning people against. It's more easy to scam people than before. Really.
josephagoss 9y ago
This is quite positive and in line with how ASIC (our SEC in Australia) are treating these types of assets. Both are quite opposite to the way China is handling ICO's and crypto currency in general.
- dmoy 9y ago
  China's also got laws against moving a lot of money out of the country, so not entirely unexpected.
mrb 9y ago
This is not a statement from the SEC, but from chairman Clayton. See footnote [1]: «This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product.»
- forgotmysn 9y ago
  ya it might be prudent to tweak the title
- ringaroundthetx 9y ago
  wait till you see how other commissioners vote alongside the chair
  - Frogolocalypse 9y ago
    Can't see any reason why they wouldn't. This seems all very straightforward. It looks like the advice is going out now to inform the market there are likely to be issues with many ICO's, and especially new ones.
- eternalban 9y ago
  Something about that bothers me. Even in this thread some are discussing this as "SEC says". In a way this is a 'pump' for cryptos and that [1] footnote could have been straight up front in the "Public Statement".
  - jessriedel 9y ago
    Part of what should bother us is that it signals that the law has become too vague to predict, so things are legal and illegal based on the inklings of the law enforcers. This means people are forced to read tea leaves in the enforcer's statements to determine what will be illegal in the future, rather than just reading an objective law on paper.
olivermarks 9y ago
Jay Clayton '1] This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product. ' Intriguing that this is a personal perspective....
- allenz 9y ago
  It isn't yet practical for the SEC to regulate crypto formally because the industry is still in its early stages and evolving rapidly. The SEC needs to balance many interests, and it's not clear what the costs and benefits will be.
- wmf 9y ago
  Translation: I'm not allowed to officially say that all of this stuff is illegal, but... you should ask if it's legal.
seibelj 9y ago
An incredible display of pragmatism from our regulators. Given the commentary on HN it seems that most here want everyone involved in an ICO to be thrown in jail. ICO’s are an effective way to raise funds from a global pool of enthusiasts. The Ethereum blockchain itself was funded from an ICO, and it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC for a 22 year old kid like Vitalik. Very, very good news.
- RexetBlell 9y ago
  He was 19 around the time when Ethereum was raising money.
- wmf 9y ago
  Yes, ignoring absolutely all regulations does tend to be advantageous.
- forapurpose 9y ago
  > it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC for a 22 year old kid ... Why not? Isn't that the story of many wildly successful SV startups?
- brucephillips 9y ago
  > ICO's are an effective way to raise funds from a global pool of enthusiasts. Once they're regulated as the securities they are, what advantage do ICO's have?
- Kadin 9y ago
  > The Ethereum blockchain itself was funded from an ICO, and it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC I'm not sure this argument is as strong as you seem to think it is.
  - ryanSrich 9y ago
    Considering Ethereum's market cap is currently 1/2 of a trillion dollars, I'd say it's a pretty strong argument...
stale2002 9y ago
"In contrast, many token offerings appear to have gone beyond this construct and are more analogous to interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come." I am impressed with this SEC statement. The problem right now is with ICOs that sell tokens for something that doesn't already exist yet, as well as promise returns. Selling a token for something that doesn't exist yet is clearly a security. Whereas selling a token that already exists, and doesn't need any additional things to be built, is probably not a security. I am glad that the SEC seems to be getting things right.
- just_one_time_ 9y ago
  No ICO promises returns, you are an idiot.
wyldfire 9y ago
> Sample Questions for Investors Considering a Cryptocurrency or ICO Investment Opportunity What a great move by the SEC. I think Ethereum, as a vehicle for many/most ICOs, owes it to the community to embrace this list and create a standard disclosure form that encourages new ICOs to answer these. And if Ethereum offers an index of tokens somewhere (I'm not familiar w/Ethereum's details), it could indicate which ones answered some/all of the questions in the form. BTW industry/trade groups is how lots of businesses avoid regulation. Entertainment industry especially; e.g. ratings and content guidelines from MPAA/ESRB/Comic Code.
tptacek 9y ago
I encourage Main Street investors to be open to these opportunities This is ominous.
- adsfasdf2332 9y ago
  ...
- swyx 9y ago
  What else do your elf eyes see?
  - mLuby 9y ago
    They're taking the ICOs to Estonia!
just_one_time_ 9y ago
Its a lot of fun watching you idiots play catch up. I made my million and then some. I'm upset with you guys, I'm here everyday and have tried talking about Bitcoin all the time, just to get shot down. I hope you all die.
wpietri 9y ago
It's way down, but this strikes me as the key section: --- By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved. I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws. --- That seems a pretty clear warning: most ICOs will be treated as securities under US law. I'd be willing to bet that the SEC will be making an example of some people relatively soon.
- wpietri 9y ago
  Well that didn't take long: https://techcrunch.com/2017/12/12/sec-shuts-down-munchee-ico/ https://techcrunch.com/2017/12/12/sec-shuts-down-munchee-ico...
johnwheeler 9y ago
I wouldn’t read this with rose colored glasses. This is not pro or against crypto. He’s simply doing what the SEC does and warning speculators of the risks involved and saying that these will, despite what anyone has told you, be subject to federal securities laws.
dzonga 9y ago
After all this is written, you'll still find someone tryna peddle their little tokens out here!!
idibidiart 9y ago
I think the rate of technological change will force the SEC regulatory system to adopt an RFC process open to the public (bypassing Congress), similar to IETF, and I think Direct Democracy is an inevitable outcome of such disruption.
- rahulrrixe 9y ago
  That's a really strong statement. RFC structured this way because they needed people to contribute whereas SEC and Congress don't want people involvement.
  - idibidiart 9y ago
    The regulatory process is not scalable relative to the rate of technology driven disruption. It cannot scale. It can either fall behind or adapt to change, IMO.
fictionfuture 9y ago
Seems to me this is just a warning so that when both the SEC and US Treasury lay into cryptos next year they won’t feel so bad about everyone losing their BTC/ETH “fortunes” overnight.
- deleted 9y ago
  [deleted]
brucephillips 9y ago
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?
- stale2002 9y ago
  The difference is that books already exist. It is not about whether a token can rise or fall in value. It is about whether the token represents something that can be bought right NOW, or if it represents a future promise of some sort for something that doesn't exist yet. IE, funding book publishing in this example.
  - brucephillips 9y ago
    > It is not about whether a token can rise or fall in value. Yes, it is. According to the Howey Test.
- wmf 9y ago
  The value might increase if there's an artificially capped supply, but not otherwise. If demand increases they can just issue more tokens.
  - brucephillips 9y ago
    So a token in an exclusive book club would be a security?
- vasilipupkin 9y ago
  The difference is nobody would attempt to buy this participation to resell it later for a higher price
  - brucephillips 9y ago
    Why not?
Animats 9y ago
What the SEC seems to be doing is 1) warning ICO promoters that what they're doing may be illegal, and 2) going after the worst offenders first. The SEC has already acted against two ICO promoters, both of which were clearly running scams. There will probably be more actions.
justinjlynn 9y ago
Does anyone know if the SEC has any process to formally approach them and say "This is what we're planning on doing and the structure we're planning on using -- this where we're unclear; how would you treat this?" like the IRS has with Private Letter Rulings/Written Determinations?
- azernik 9y ago
  They do indeed - you can request a "no-action letter" confirming that an activity you have described to the SEC is okay. https://www.sec.gov/fast-answers/answersnoactionhtm.html https://www.sec.gov/fast-answers/answersnoactionhtm.html
Ologn 9y ago
Jeff Bezos once asked Warren Buffett why people did not follow Buffett's model of investing, since it had made Buffett the third richest person in the US. Buffett replied, "no one wants to get rich slowly".
drawkbox 9y ago
As I have stated previously, these market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other. I think for a long time this is how crypto is viewed, it is risky but people are willing to take the risk currently. More reputable US sources like Coinbase are making this possible rather than historical risky bets like mtgox, btc-e etc. In the statement they do mention whether an ICO is domestic/foreign in their research as something you should look out for in terms of the "security" of your purchase, but also whether or not the SEC can even do anything about it. Regulation will be coming along and they have a blueprint for how that might happen, i.e. securities vs tokens/coins/currency. Before the regulation the risk is higher but probably also the reward. At this point cryptocurrencies and ICOs are an unstoppable train, either the SEC will be able to regulate currencies + securities or some new group will be formed to handle oversight in the US at least.
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Smith_seth 9y ago
I GOT MY PROGRAMMED BLANK ATM CARD TO WITHDRAW A MAXIMUM OF $5000 DAILY. I AM SO EXCITED BECAUSE I ORDERED AND PAID FOR DELIVERY, DIDN'T GET SCAMMED, AND I NOW OWN MY HOME, MY BUSINESS HAS GROWN BIGGER. GEORG BEDNORZ (georgbednorzhackers@gmail.com) IS THE NAME OF THIS USA HACKER THAT GAVE ME THE CARD AND ALSO HE IS OFFERING ALL KINDS OF LOAN WITH ONLY 2% INTEREST RATE.
crispytx 9y ago
LMAO, the SEC is going to shut down Coinbase and Bitcoin is going to zero. Suckers!
teknologist 9y ago
Much better than China's response to ICO's. This is how it should be done.
gchokov 9y ago
Sounds like - do what you want at your own risk and due diligence. I can't help but think that large financial institutions and governments are also behind the crypto madness in order to make money on the retail's back. Otherwise, this would have been stopped by now.
- kodablah 9y ago
  I think they are behind it and haven't brought the hammer down because they don't want to encourage "going dark" (or even darker than they already are). Surely they're finding their enforcement arm much more limited than in traditional markets. Not embracing new markets will only make that worse.
LeicaLatte 9y ago
Very encouraging response. Kinda shocked to be honest.
xHopen 9y ago
Buy the dip
projmayhem 9y ago
It's obvious the SEC intends to enforce securities regulations on crypto markets. The big exchanges already and typically employ experts in regulatory compliance specifically related to AML and KYC laws on a federal and state-by-state level. The reason being access to Americans is by and large more important than access to any other set of customers. And "everyone" knows ICO's exist only to side-step securities laws and make a quick buck. There are very few legitimate offerings. Expect the SEC enforcement arm to come down like the hammer of god. What I find funny is this idea crypto won't be the next level of monitoring and control of the money supply. You crypto proponents are going to be very unhappy when you see what Uncle Sam has in store. Fiat currency has much better built-in anonymity then this block chain nonsense. And see how that is controlled, regulated, and tracked through treaties, laws, and digital mechanisms?
ataturk 9y ago
Why do we let this crap happen? ICOs and cryptocoins are a bubble that is now big enough to be an existential threat to the overall markets and when they blow, they are going to take down all kind of other things with them. I went through this with the dot-com bubble, the housing bubble, now the freaking crypto "nothingness is something to invest in" bubble. Some people really saw Millenials coming from a mile away.
api 9y ago
Side note but: I asked here if anyone's actually using an ICO project: https://news.ycombinator.com/item?id=15901992 https://news.ycombinator.com/item?id=15901992 Didn't get much traction. :(
readhn 9y ago
...and this is how the collapse begins
neuromancer2701 9y ago
What about using the ICO tokens as a sort of gift certificate for your product at a later date? Isn't that what Brave did with the BAT ICO?
lurr 9y ago
> encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. so what, are we going to stop seeing "US IP detected, unable to participate" in ICOs?

811 points by corbinpage 9y ago

A little emphasis, focusing on the aftermath from the SEC's July report on the DAO: > "Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. Many of these assertions appear to elevate form over substance. Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security."

deleted 9y ago
[deleted]
brianpgordon 9y ago
He even flat out says that most of the ICOs he's seen should be considered securities: > By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved. I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws. I think some of the other commenters are glossing over that statement and being rather over-optimistic about the SEC's stance toward tolerating ICOs.
- dahdum 9y ago
  They've been pretty clear in the past about the Howey test and ICOs running foul of it, so that part of his letter wasn't all that new. They're already taking action and should be - just today I saw an ad promising 60x returns on an internal market. I didn't expect to see him acknowledging the positives of cryptocurrency and the ICO funding model overall.
jackpeterfletch 9y ago
I think people are viewing this as an attack on crypto, when its actually just common sense. People put too much faith the 'Contract' half of 'Ethereum/Smart Contract' Basically. Today ICOs are selling tokens as shares of equity in their company, or similar. Which you can then sell on. The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders. Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them. Otherwise how can the court help you, and who else is going to help you?
- westurner 9y ago
  > I think people are viewing this as an attack on crypto, when its actually just common sense. > […] The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders. > Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them. This. IRS regards coins and tokens as capital gains taxable things regardless of whether they qualify as securities. SEC exists to protect investors from scams and unfair dealing. In order to protect investors, SEC regulates issuance of securities.

deleted 9y ago

[deleted]

iMuzz 9y ago

> I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects. > We at the SEC are committed to promoting capital formation. The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing. I am confident that developments in fintech will help facilitate capital formation and provide promising investment opportunities for institutional and Main Street investors alike. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. I don't know much about Jay Clayton (SEC Chairmain) but he seems to be taking a very pragmatic stance on tokens. From what I gather, he's saying that some of these tokens should be classified as securities, while others should not. And we as investors should be be diligent to probe the creators to see if these tokens are subject to regulation and are legal. This is amazing! The SEC haven't quite stepped in yet. But I fully expect them to. And this gives some great insight into what we can expect in the future.

Alex3917 9y ago
> he's saying that some of these tokens should be classified as securities If by 'some' you mean that some future tokens might be able to be offered for sale legally, then yes. But he also just declared basically 100% existing token operations to be criminal.
- Frogolocalypse 9y ago
  Not 100%, but a lot, for sure. I definitely read it as most.
wmf 9y ago
he's saying that some of these tokens should be classified as securities, while others should not. Gotta love the unlimited supply of optimism in the cryptocurrency world. Every single existing token is either a security or a commodity, but people still think they can squeeze through the "utility token" loophole.

prakashrj 9y ago

But since there is no intermediary between your transactions in crypto, please be aware of fraud. You are completely responsible and accountable for all actions you take with your money. There will be nobody to blame in crypto :) This is what most governments are warning people against. It's more easy to scam people than before. Really.

josephagoss 9y ago

This is quite positive and in line with how ASIC (our SEC in Australia) are treating these types of assets. Both are quite opposite to the way China is handling ICO's and crypto currency in general.

dmoy 9y ago
China's also got laws against moving a lot of money out of the country, so not entirely unexpected.

mrb 9y ago

This is not a statement from the SEC, but from chairman Clayton. See footnote [1]: «This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product.»

forgotmysn 9y ago
ya it might be prudent to tweak the title
ringaroundthetx 9y ago
wait till you see how other commissioners vote alongside the chair
- Frogolocalypse 9y ago
  Can't see any reason why they wouldn't. This seems all very straightforward. It looks like the advice is going out now to inform the market there are likely to be issues with many ICO's, and especially new ones.
eternalban 9y ago
Something about that bothers me. Even in this thread some are discussing this as "SEC says". In a way this is a 'pump' for cryptos and that [1] footnote could have been straight up front in the "Public Statement".
- jessriedel 9y ago
  Part of what should bother us is that it signals that the law has become too vague to predict, so things are legal and illegal based on the inklings of the law enforcers. This means people are forced to read tea leaves in the enforcer's statements to determine what will be illegal in the future, rather than just reading an objective law on paper.

olivermarks 9y ago

Jay Clayton '1] This statement is my own and does not reflect the views of any other Commissioner or the Commission. This statement is not, and should not be taken as, a definitive discussion of applicable law, all the relevant risks with respect to these products, or a statement of my position on any particular product. ' Intriguing that this is a personal perspective....

allenz 9y ago
It isn't yet practical for the SEC to regulate crypto formally because the industry is still in its early stages and evolving rapidly. The SEC needs to balance many interests, and it's not clear what the costs and benefits will be.
wmf 9y ago
Translation: I'm not allowed to officially say that all of this stuff is illegal, but... you should ask if it's legal.

seibelj 9y ago

An incredible display of pragmatism from our regulators. Given the commentary on HN it seems that most here want everyone involved in an ICO to be thrown in jail. ICO’s are an effective way to raise funds from a global pool of enthusiasts. The Ethereum blockchain itself was funded from an ICO, and it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC for a 22 year old kid like Vitalik. Very, very good news.

RexetBlell 9y ago
He was 19 around the time when Ethereum was raising money.
wmf 9y ago
Yes, ignoring absolutely all regulations does tend to be advantageous.
forapurpose 9y ago
> it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC for a 22 year old kid ... Why not? Isn't that the story of many wildly successful SV startups?
brucephillips 9y ago
> ICO's are an effective way to raise funds from a global pool of enthusiasts. Once they're regulated as the securities they are, what advantage do ICO's have?
Kadin 9y ago
> The Ethereum blockchain itself was funded from an ICO, and it’s doubtful that as much money would have been raised at such advantageous terms from traditional VC I'm not sure this argument is as strong as you seem to think it is.
- ryanSrich 9y ago
  Considering Ethereum's market cap is currently 1/2 of a trillion dollars, I'd say it's a pretty strong argument...

stale2002 9y ago

"In contrast, many token offerings appear to have gone beyond this construct and are more analogous to interests in a yet-to-be-built publishing house with the authors, books and distribution networks all to come." I am impressed with this SEC statement. The problem right now is with ICOs that sell tokens for something that doesn't already exist yet, as well as promise returns. Selling a token for something that doesn't exist yet is clearly a security. Whereas selling a token that already exists, and doesn't need any additional things to be built, is probably not a security. I am glad that the SEC seems to be getting things right.

just_one_time_ 9y ago
No ICO promises returns, you are an idiot.

wyldfire 9y ago

> Sample Questions for Investors Considering a Cryptocurrency or ICO Investment Opportunity What a great move by the SEC. I think Ethereum, as a vehicle for many/most ICOs, owes it to the community to embrace this list and create a standard disclosure form that encourages new ICOs to answer these. And if Ethereum offers an index of tokens somewhere (I'm not familiar w/Ethereum's details), it could indicate which ones answered some/all of the questions in the form. BTW industry/trade groups is how lots of businesses avoid regulation. Entertainment industry especially; e.g. ratings and content guidelines from MPAA/ESRB/Comic Code.

tptacek 9y ago

I encourage Main Street investors to be open to these opportunities This is ominous.

adsfasdf2332 9y ago
...
swyx 9y ago
What else do your elf eyes see?
- mLuby 9y ago
  They're taking the ICOs to Estonia!

just_one_time_ 9y ago

Its a lot of fun watching you idiots play catch up. I made my million and then some. I'm upset with you guys, I'm here everyday and have tried talking about Bitcoin all the time, just to get shot down. I hope you all die.

wpietri 9y ago

It's way down, but this strikes me as the key section: --- By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved. I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws. --- That seems a pretty clear warning: most ICOs will be treated as securities under US law. I'd be willing to bet that the SEC will be making an example of some people relatively soon.

wpietri 9y ago
Well that didn't take long: https://techcrunch.com/2017/12/12/sec-shuts-down-munchee-ico/ https://techcrunch.com/2017/12/12/sec-shuts-down-munchee-ico...

johnwheeler 9y ago

I wouldn’t read this with rose colored glasses. This is not pro or against crypto. He’s simply doing what the SEC does and warning speculators of the risks involved and saying that these will, despite what anyone has told you, be subject to federal securities laws.

dzonga 9y ago

After all this is written, you'll still find someone tryna peddle their little tokens out here!!

idibidiart 9y ago

I think the rate of technological change will force the SEC regulatory system to adopt an RFC process open to the public (bypassing Congress), similar to IETF, and I think Direct Democracy is an inevitable outcome of such disruption.

rahulrrixe 9y ago
That's a really strong statement. RFC structured this way because they needed people to contribute whereas SEC and Congress don't want people involvement.
- idibidiart 9y ago
  The regulatory process is not scalable relative to the rate of technology driven disruption. It cannot scale. It can either fall behind or adapt to change, IMO.

fictionfuture 9y ago

Seems to me this is just a warning so that when both the SEC and US Treasury lay into cryptos next year they won’t feel so bad about everyone losing their BTC/ETH “fortunes” overnight.

deleted 9y ago
[deleted]

brucephillips 9y ago

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?

stale2002 9y ago
The difference is that books already exist. It is not about whether a token can rise or fall in value. It is about whether the token represents something that can be bought right NOW, or if it represents a future promise of some sort for something that doesn't exist yet. IE, funding book publishing in this example.
- brucephillips 9y ago
  > It is not about whether a token can rise or fall in value. Yes, it is. According to the Howey Test.
wmf 9y ago
The value might increase if there's an artificially capped supply, but not otherwise. If demand increases they can just issue more tokens.
- brucephillips 9y ago
  So a token in an exclusive book club would be a security?
vasilipupkin 9y ago
The difference is nobody would attempt to buy this participation to resell it later for a higher price
- brucephillips 9y ago
  Why not?

Animats 9y ago

What the SEC seems to be doing is 1) warning ICO promoters that what they're doing may be illegal, and 2) going after the worst offenders first. The SEC has already acted against two ICO promoters, both of which were clearly running scams. There will probably be more actions.

justinjlynn 9y ago

Does anyone know if the SEC has any process to formally approach them and say "This is what we're planning on doing and the structure we're planning on using -- this where we're unclear; how would you treat this?" like the IRS has with Private Letter Rulings/Written Determinations?

azernik 9y ago
They do indeed - you can request a "no-action letter" confirming that an activity you have described to the SEC is okay. https://www.sec.gov/fast-answers/answersnoactionhtm.html https://www.sec.gov/fast-answers/answersnoactionhtm.html

Ologn 9y ago

Jeff Bezos once asked Warren Buffett why people did not follow Buffett's model of investing, since it had made Buffett the third richest person in the US. Buffett replied, "no one wants to get rich slowly".

drawkbox 9y ago

As I have stated previously, these market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other. I think for a long time this is how crypto is viewed, it is risky but people are willing to take the risk currently. More reputable US sources like Coinbase are making this possible rather than historical risky bets like mtgox, btc-e etc. In the statement they do mention whether an ICO is domestic/foreign in their research as something you should look out for in terms of the "security" of your purchase, but also whether or not the SEC can even do anything about it. Regulation will be coming along and they have a blueprint for how that might happen, i.e. securities vs tokens/coins/currency. Before the regulation the risk is higher but probably also the reward. At this point cryptocurrencies and ICOs are an unstoppable train, either the SEC will be able to regulate currencies + securities or some new group will be formed to handle oversight in the US at least.

deleted 9y ago

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Smith_seth 9y ago

I GOT MY PROGRAMMED BLANK ATM CARD TO WITHDRAW A MAXIMUM OF $5000 DAILY. I AM SO EXCITED BECAUSE I ORDERED AND PAID FOR DELIVERY, DIDN'T GET SCAMMED, AND I NOW OWN MY HOME, MY BUSINESS HAS GROWN BIGGER. GEORG BEDNORZ (georgbednorzhackers@gmail.com) IS THE NAME OF THIS USA HACKER THAT GAVE ME THE CARD AND ALSO HE IS OFFERING ALL KINDS OF LOAN WITH ONLY 2% INTEREST RATE.

crispytx 9y ago

LMAO, the SEC is going to shut down Coinbase and Bitcoin is going to zero. Suckers!

teknologist 9y ago

Much better than China's response to ICO's. This is how it should be done.

gchokov 9y ago

Sounds like - do what you want at your own risk and due diligence. I can't help but think that large financial institutions and governments are also behind the crypto madness in order to make money on the retail's back. Otherwise, this would have been stopped by now.

kodablah 9y ago
I think they are behind it and haven't brought the hammer down because they don't want to encourage "going dark" (or even darker than they already are). Surely they're finding their enforcement arm much more limited than in traditional markets. Not embracing new markets will only make that worse.

LeicaLatte 9y ago

Very encouraging response. Kinda shocked to be honest.

xHopen 9y ago

Buy the dip

projmayhem 9y ago

It's obvious the SEC intends to enforce securities regulations on crypto markets. The big exchanges already and typically employ experts in regulatory compliance specifically related to AML and KYC laws on a federal and state-by-state level. The reason being access to Americans is by and large more important than access to any other set of customers. And "everyone" knows ICO's exist only to side-step securities laws and make a quick buck. There are very few legitimate offerings. Expect the SEC enforcement arm to come down like the hammer of god. What I find funny is this idea crypto won't be the next level of monitoring and control of the money supply. You crypto proponents are going to be very unhappy when you see what Uncle Sam has in store. Fiat currency has much better built-in anonymity then this block chain nonsense. And see how that is controlled, regulated, and tracked through treaties, laws, and digital mechanisms?

ataturk 9y ago

Why do we let this crap happen? ICOs and cryptocoins are a bubble that is now big enough to be an existential threat to the overall markets and when they blow, they are going to take down all kind of other things with them. I went through this with the dot-com bubble, the housing bubble, now the freaking crypto "nothingness is something to invest in" bubble. Some people really saw Millenials coming from a mile away.

api 9y ago

Side note but: I asked here if anyone's actually using an ICO project: https://news.ycombinator.com/item?id=15901992 https://news.ycombinator.com/item?id=15901992 Didn't get much traction. :(

readhn 9y ago

...and this is how the collapse begins

neuromancer2701 9y ago

What about using the ICO tokens as a sort of gift certificate for your product at a later date? Isn't that what Brave did with the BAT ICO?

lurr 9y ago

> encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so. so what, are we going to stop seeing "US IP detected, unable to participate" in ICOs?