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The SEC Will Leave Good ICOs Alone

272 points by chollida1 8y ago

wtvanhest 8y ago
If anyone at bloomberg reads this comment, please stop the bar at the top from periodically coming down. It makes the article impossible to read for those that use the top of their smart phone as a place holder.
everdev 8y ago
This seems to be a trend in the US with crypto and marijuana as examples. If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market. I like that both are gaining acceptance, but to the early entrepreurs willing to sell a clear security without filing or the growers willing to sell a controlled substance underground, go the spoiles when the states and federal government bend to the will of the market. Unfortunately, it creates an unfair playing field for those willing to take a criminal risk and puts those that try to do things legally from day 1 at a disadvantage.
- stale2002 8y ago
  There is a better way to think about this. What the SEC cares about is whether uninformed investors are being ripped off. What matters way more than the letter of the law is whether people are being scammed. Ans I don't think this is a bad thing. The whole POINT of these laws in the first place is to protect people from being ripped off. And if you ARENT ripping people off, then the government probably won't go after you. Fairness isn't the purpose. The purpose is to protect people. And if you don't hurt anybody, well what was even the point of the law to begin with? No harm no foul is a perfectly reasonable philosophy.
  - marcoperaza 8y ago
    That’s not law. It’s exactly the kind of thing the rule of law is supposed to prevent. What constitutes “ripping people off” is an incredibly political and ever-shifting judgment. We vigorously debate and make laws, so that everyone knows what is allowed and what is not, regardless of what they think the law should be.
    - stale2002 8y ago
      > What constitutes “ripping people off” is an incredibly political and ever-shifting judgment. I think that for the example given, ICOs, the opposite is true. For "most" of these situations, whether something is a straight up scam or not is very obvious. And I am glad that the SEC has chosen to mostly go after the scams. Sure, grey areas will come up. But what does it matter if the grey areas are less than 1% of the market? There are certainly cases in the world where the nitty gritty details matter, and that there are huge grey areas. I just don't think the ICO market is one of these nuanced cases.
  - BaronVonSteuben 8y ago
    Fairness actually is the point sometimes. Obama talked about raising capital gains tax, even if it results in lower money for the government, simply for reasons of fairness [1][2]. [1] https://abcnews.go.com/Politics/DemocraticDebate/story?id=4670271&page=1&singlePage=true https://abcnews.go.com/Politics/DemocraticDebate/story?id=46... [2]https://www.washingtonpost.com/opinions/obamas-flawed-sense-of-fairness/2011/09/21/gIQAjRWtoK_story.html https://www.washingtonpost.com/opinions/obamas-flawed-sense-...
  - everdev 8y ago
    Then why not scrap the Howey Test (which was out forth as the definitive test to determine if an investment is a security) and just keep the existing fraud laws? Security law is in place for good reason, to protect investors.
    - npt4279 8y ago
      The Howey Test was created by the Supreme Court, not the SEC. Harder to scrap.
  - s73v3r_ 8y ago
    The problem is, those that are doing the action usually will disagree that they are harming people.
- marcoperaza 8y ago
  Part of the problem is that we’ve criminalized too many regulatory violations. Exclusively civil liability is more appropriate for the vast majority of regulatory violations. Provision for statutory and punitive damages if you want extra bite. If it is truly worthy of prison time, it will probably fall under existing general crimes: criminal fraud, reckless endangerment, theft, and so forth.
  - matthewbauer 8y ago
    Securities are civil though
    - marcoperaza 8y ago
      Many violations of securities laws carry the possibility of criminal sanction.
      - paulie_a 8y ago
        Not by the SEC which was the point
        marcoperaza 8y ago
        That’s misleading. All federal criminal prosecutions are done by the Department of Justice. But when it comes to prosecuting regulatory violations, it usually starts with a referral by the regulator (e.g. the SEC) who otherwise enforces that regulation. My point is about the regulatory regimes being enforced with criminal penalties, not some technicality over who does the prosecution. I’m not sure why you’re so focused on that.
        paulie_a 8y ago
        That absolutely is not misleading, the SEC flat out doesn't have the power to criminal prosecution and send someone to prison.
  - 8y ago
- Trundle 8y ago
  How is that an unfair playing field? People being rewarded for productive risk taking is one of the fairest things I can think of.
  - quickthrower2 8y ago
    Pablo Escobar was on to something then, ... well until he wasn't.
    - cheez 8y ago
      His crime was he got too big and bold. Fly under the radar and you'll survive.
    - nipponese 8y ago
      Even facetiously, that's a hard point to make. Cocaine has been illegal in the US for a very long time.
  - everdev 8y ago
    Well, I called the SEC and they said they can't think of a way how these ICOs are not violating the Howey Test. Basically that in time, they be prosecuted. So, those of us that decide that the potential for financial or criminal consequences is not with it miss out when it turns out all but the most egregious scams will get a pass.
    - nerdwaller 8y ago
      Through my work we’ve been in contact with the SEC as well, a few times, and they are pretty clear on not stating any real absolutes unfortunately. We do more of the service side of things for the institutional space, however - so perhaps our questions were a bit different.
    - Trundle 8y ago
      Sure, I understand where the risk is coming from. I don't understand where the unfairness is coming from.
- tCfD 8y ago
  'everything is legal if you scale it up' Wish I could recall the months old thread I found that in. I believe it was also blockchain-related
- JumpCrisscross 8y ago
  > If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market The track record of firms breaking laws to get ahead is grim. Where running ahead of the law has worked, it involved a trifecta of (a) popular support and (b) a municipal (not state or federal) law challenged with (c) civil (not criminal) penalties. The narrow opinion this article is based on is limited to Ethereum. It is the personal opinion of a single SEC commissioner (albeit, an influential one).
- toomanybeersies 8y ago
  Don't forget Uber and Airbnb ignoring taxi laws and hotel/zoning laws, then expecting that governments change the law to suit them.
  - xmly 8y ago
    This is a good point... But actually they call themselves ride sharing instead of commercial activities.
    - MrRubbish 8y ago
      tomato tomato
    - toomanybeersies 8y ago
      And yet the vast majority of Uber drivers I talk to derive their primary income from being an Uber driver. And likewise, the majority of listings on Airbnb are properties that aren't normally resided in by the owner. The whole "sharing economy" is a cheap veneer. It's commercial activities at heart.
- st26 8y ago
  Marijuana is more states rights vs federal though. Those MJ operations following state law are making a bet on federalism, rather than simply flagrantly ignoring law.
- gcb0 8y ago
  you mean like uber disrespecting taxi laws or paypal blatantly breaking international banking and money laundering laws? this seems to be the trend for a few years already.
- dannyw 8y ago
  Ridesharing and Airbnb is another example.
- Waterluvian 8y ago
  More important than any of that, which you don't mention at all are the people who get caught in the middle and lose out. The victims of the move fast, break stuff attitude. I care about protecting them far more than preventing an unfair playing field for the unfortunate startups that didn't break the law fast enough.
  - friedman23 8y ago
    Who are the victims?
    - drngdds 8y ago
      Anyone who gets scammed by an ICO?
      - icoico 8y ago
        Do you mean to imply that there are ICOs that aren't scams?
  - angel_j 8y ago
    You are not protecting anybody, Holden Caulfield, and nobody asked for your protection in the first place.
- deleted 8y ago
  [deleted]
- justonepost 8y ago
  I think the idea is to respect the spirit of our laws and you won't get punished. Taking a risk here is fine, but make choices which are moral/ethical and aren't abusing your customers and are generally a positive for the economy. Do that, and if the laws turn in your favor, you'll probably do ok. Government, good government, isn't trying to crush the entrepreneurial spirit. They also recognize that startups deserve a different legal arena than more established companies.
paulie_a 8y ago
Hopefully the SEC actually finds a good one to leave alone. but I am guessing that will be a challenge for them. The entire landscape of ico could be decimated and nothing of value would be lost.
- pwaai 8y ago
  your comment will shortly be downvoted people involved in ICO and the idiots that bought into it. I'm sorry but HN has changed dramatically since this crypto craze. It's invited a lot of charlatans, and weird vote manipulations to drive the narrative. Not just with crypto but that alt right trash Damore who committed career suicide had strange number of new accounts in the comments and it was like seeing reddit.
  - paulie_a 8y ago
    I know it will but I don't honestly care about downvotes. It is hilarious that people are so dedicated to these obvious scams though. Literally every ico is a scam aimed at idiots. Honestly if I met someone that outright said they sell cocaine I would have more respect for them than anyone involved in an ICO
    - pwaai 8y ago
      I think it's one of those sunk cost fallacy. Because you put your reputation and social credit as collateral for a large expected return, you have no choice but to keep living the lie. Like that aussie dude who keeps telling people he is satoshi. He told the lie for so long that he refuses the remotest possibility that he is amongst the very small minority of people he surrounded himself with that reinforces his reality. The facts don't matter to religious fanatics. They are simply pawns of sociopathic tendencies.
    - s73v3r_ 8y ago
      "Literally every ico is a scam aimed at idiots." Well, if you were planning a scam, would you aim it at smart people? Seems similar to the reason why so many of those scam emails have terrible grammar: they want to weed out anyone smart enough to recognize the scam.
pwaai 8y ago
Good luck because you won't find an ico that is not a security aimed at swindling teachers, baristas and other innocent people. The % of 'Good ICO' is very very small, if non existant. It turns out nobody wants to do an ICO unless they get money. Fuck you. If you've been involved in an ICO or blockchain charlatanism, you are well deserving of scrutiny. In a few years after the crypto craze is over, everybody will be busy sending out DMCA notices to Google to hide their involvement in the 99% of ICO that will never deliver, get 'hacked', or just take off with the money. Fuck ICOs
pwaai 8y ago
Why are there so many ex-convicts in this ICO/crypto space? Like literally, a huge chunk of these so called ICO investors and founders have very shady pasts. Why isn't anybody calling people out on this? Why do we have criminals being entrusted with people's livelihood?
- slimsag 8y ago
  These types of people are very much attracted to get rich quick schemes, obviously. Given that cryptocurrency currently and historically has existed almost solely as a "you can get rich quick with this" scheme, I don't find it surprising at all.
- whatshisface 8y ago
  >Why are there so many ex-convicts in this ICO/crypto space? >Why do we have criminals being entrusted with people's livelihood? The second sentence answers the first: we do not want to trust criminals with people's livelihoods, so we leave lots of brainpower lying around outside of "normal society" because we don't want to let an embezzler write accounting software. Is it any wonder, then, that we would see an abnormal number of criminals end up working in a field where there was money but nobody to keep them out? You and I can choose between academia, industry and weird self-owned schemes, but there is a certain group of smart people that have only one option...
  - swampthinker 8y ago
    That's an incredibly interesting way of looking at it. At first blush I was thinking more of a "Wild West attracts Wild West criminals", but it definitely is more nuanced than that.
  - notahacker 8y ago
    I suspect there are reasons why people with convictions for deception and fraud are particularly likely to be attracted to ICOs other than the reluctance of accounting software firms to hire them...
- girvo 8y ago
pmorici 8y ago
I think the headline might be glossing over some important details. There is a subset of ICO's that consulted lawyers and structured their deals in such a way that they don't run afoul of SEC regulations. If you ever see people talking about a "utility token" that is a why they are calling it that. It doesn't give the owner any stake in the company or right to a share of the company's profits. It's more a kin to a virtual currency in a video game the likes of which preceded crypto currencies. What people really want or where I think the promise of Ethereum in particular really lies is to tokenize traditional assets in the form of ERC-20 tokens in the case of stocks or ERC-721 tokens in the case of unique property. The SEC will need to be involved in the former to make it legal. Both Coinbase and TZero possibly others are working on that now.
- JumpCrisscross 8y ago
  > if you ever see people talking about a "utility token" that is a why they are calling it that The SEC has consistently seen utility tokens as securities. The workaround, so far unproven in court, is the SAFT (simple agreement for future tokens).
  - AnthonyMouse 8y ago
    > The SEC has consistently seen utility tokens as securities. The workaround, so far unproven in court, is the SAFT (simple agreement for future tokens). The issue with all of this is that people are trying to fit a new technology into a series of boxes when it doesn't fit into any of them. The problem cryptocurrencies aim to solve looks like this. I have a hardcopy of a book that I've finished reading and I'm prepared to sell it so I can use the money to buy a copy of another book. I am not keen on the efficiency of the barter system, so what I need is currency that allows me to sell the book I have and then buy the book I want. But currency isn't a security. The rules for securities are much more strict, because you have to worry about people defrauding investors and engaging in stock price manipulations etc. In the normal everyday currency transaction where I exchange my book for a $20 bill and then go somewhere else and exchange my $20 bill for a book, there is never any paperwork for me to fill out. I don't have to give anyone my name or anything else to allow them to compile a database of which books I read or which social clubs I patronize or what kind of contraceptives I use. The rules for digital credit transactions are also strict, because they were designed for credit transactions, where you have to worry about someone buying something on credit and then not paying, or taking out credit in someone else's name. What's really needed is a digital version of cash. But there is no law designed for digital cash, so people keep trying to squeeze things that aim to serve that purpose into one box or another when the rules were clearly designed for something else. What we need is for the law to more explicitly allow the internet to work like the real world.
logicallee 8y ago
Do you think I should consider an ICO for a company which has been unable to close its seed round (except under ridiculously bad terms)? I have an extremely strong association between the words ICO and "scam", but I also recently found out that seed rounds are basically non-existent [1] If the SEC tacitly allows for "good-faith" ICO's, I would consider it. I don't want to shutter the work of my cofounders and contributors just because the seed-stage startup ecosystem is this broken. However, I have gone down extremely long rabbit holes and I am very wary. I would like to raise approximately 300k for a play that is built for an acquisition for a major player (within a small number of years). We got one term sheet for effectively 51% of the company for $17k or so. (That was from a real VC.) There were no other serious offers. Another (more promising?) alternative would be to bootstrap doing something unrelated. For example we have some expertise on our team in machine learning and perhaps could use it in an unrelated market where the size of the opportunity is pretty small (and it's pretty competitive). Is ICO worth exploring at this stage? (Bearing in mind that we are built for acquisition.) We are a "real" startup and don't have anything to do with cryptocurrencies or tokens. I also personally think the SEC does fantastic work that makes the whole startup ecosystem, and indeed investment at all, possible. There is a reason the United States investment climate is one of the best in the world, if not the best, and I think the SEC and general legal framework is one of these. So I am strongly biased against unregulated ICO's and would be very happy to submit to any oversight that would increase transparency and investor protections. [1] https://news.ycombinator.com/item?id=17284796 https://news.ycombinator.com/item?id=17284796
- JumpCrisscross 8y ago
  > I also recently found out that seed rounds are basically non-existent $8.5 billion were invested across close to 14,000 seed and angel-stage rounds in 2017 [1]. On both deal frequency and gross volume, seed and angel financing grew from 2016. [1] https://news.crunchbase.com/news/q4-2017-global-report-vc-sets-annual-records-back-strong-late-stage-results/ https://news.crunchbase.com/news/q4-2017-global-report-vc-se...
  - logicallee 8y ago
    > close to 14,000 seed and angel-stage rounds in 2017 worldwide. :) That's "basically non-existent". Maybe you can flip it around like this: the number of people worth at least $30 million worldwide is 226,450. https://en.wikipedia.org/wiki/Ultra_high-net-worth_individual https://en.wikipedia.org/wiki/Ultra_high-net-worth_individua...
throwaway66666 8y ago
We are now somewhen in the 90s, somewhere in the US. Welcome. People are getting scammed when buying things online. The elderly are sending money to Nigerian princes. There are rapists and murderers on chatrooms preying for victims. Kids addicted to online games drop out of school. There is deviant pornography turning young men and girls into perverts or enticing them to post nudity online. I strongly believe we must protect the public, and we must put severe regulations on the internet. Noone should be able to just set up a website or online business. It is far too dangerous. Aspiring e-entrepreneurs must be required to file a goverment-reviewed application, and be represented by an attorney throughout the whole process, as well as undergo background checks and pay various fees to state and federal agencies. If all goes well, within 1-2 years (depending on backlog) they can have permission to put up a website. Every year they must renew their website license, and according to what kind of content they wish to host they will need different licenses (eg different if you want to serve video, different if you want to have chat) /s Makes sense right? The internet seemed like a weird crazy unregulated space back then. Except that.... that would have killed all of the amazing innovation that happened in the past 25 years in the US. My point is. We must protect the public, of course. But it is never as simple as pulling out the torches and pitchforks screaming "BAN BITCOIN. BAN THE DARKWEB. STOP ICOs". We cannot risk stifling innovation. Because if we do - innovation will still happen just... somewhere else in the world. And no government wants that. - EDIT: FYI - in case you think I am exaggerating, the scenario I described above is similar to today's internet situation in mainland China. You need an ICP license (granted by the government and renewed yearly) in order to be able to have a publicly accessible domain name. If you want to serve back visual content (images/video) and user-to-user communication (chat or public text posts) you need to undergo extra delays and checks to prove that you are trustworthy and can censor content. Certain websites from outside of China (eg google, fb) are just banned.
- JumpCrisscross 8y ago
  > it is never as simple as pulling out the torches and pitchforks screaming "BAN BITCOIN. BAN THE DARKWEB. STOP ICOs" Straw man [1]. Nobody serious suggests banning any of these. [1] https://en.wikipedia.org/wiki/Straw_man https://en.wikipedia.org/wiki/Straw_man
fake-name 8y ago
Let me know as soon as they find this elusive "good ICO". I hear they're generally found in the same habitat as unicorns.
- omarchowdhury 8y ago
  Plenty of unicorns out there.
thisisit 8y ago
I think couple of things need to be repeated from earlier threads. This discussion happened during a Yahoo conference. So, its more like a person's opinion. Unless we get a press release from SEC it is a difficult statement to make whether SEC is all good with ICOs. Secondly, the question of Ethereum being a security is a tricky one. It is a security by definition given in the same speech. So, it started out as a security but then it is not a security any more? That is confusing. A good read on this: https://prestonbyrne.com/2018/06/14/ether-is-not-a-security/ https://prestonbyrne.com/2018/06/14/ether-is-not-a-security/
- davidwparker 8y ago
  Here's the official statement from the SEC. "based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions." https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418
  - thisisit 8y ago
    Please read in full before quoting an article. The very first footnote is: > The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff.
    - charlesdm 8y ago
      But isn't this person the person in charge within the SEC for setting the policy? It seems unlikely his opinion will be different from the official stance.
      - nerdponx 8y ago
        Even if one person is in charge, policy is not set in isolation. Their opinion will weigh on the decision but it will not be the decision.
dgreensp 8y ago
So basically, if you want to raise money by selling gift cards for a product that doesn’t exist to speculators who will trade them, make sure you describe it in terms of some inscrutable crypto protocol network thing that doesn’t map neatly to stock or gift cards.
- erikpukinskis 8y ago
  I don’t disagree with your characterization of many ICOs. But... is there anything wrong with that? It’s a junk investment, but aren’t junk investments just as valid as strong investments? If my gift card for an unreleased product trades for pennies on the dollar... isn’t that still a valid investment?
  - dgreensp 8y ago
    Anything can be an investment. There are laws about gift cards and equity. Cryptocurrency systems are so technically complex and overloaded with ideals, uses, and philosophies that they can be simultaneously nothing like and everything like these things, IMO. It’s not about what’s right and wrong, it’s just amusing to me that if you want to exploit this particular opinion, as a loophole, the way you’d do it is to make your cryptocurrency sufficiently abstruse. Edit: To be really clear, I’m talking about the opinion that basically says, if your coin functions as equity then it’s equity; if it functions as a gift card, it’s a gift card; but if it functions as a protocol, it’s a protocol, even if it has speculators bidding it up and benefits going to coin-holders — basically a lot of the properties of equities and gift cards that cause them to be regulated.
c3534l 8y ago
This is how the internet and the tech industry in general have worked. Legislators and regulators are reluctant to clamp down on an emerging industry before it's clear how it's going to work. At one point the legality of Napster was legitimately up for debate. As time went on, however, those regulations have come. I think this is actually the right approach. Be conservative in regulating a new industry and wait until it's mature and understood, while allowing it to grow and work out as many kinks in the free market before the government steps in.
- sonnyblarney 8y ago
  "This is how the internet and the tech industry in general have worked." Well I don't think that IBM, Sun, Nvidia, Oracle, Apple, Google, Microsoft, Sandisk, Cisco, Ebay, Craigslist, Wikipedia, Facebook, Snapchat, Wechat, Instagram, Pinterest, fall into that category. AirBnB, Uber, some weed companies ... DraftKings, Kik, Telegram ... I suppose fall into that. But 'hotel permits' and 'cab permits' are in another league altogether from 'selling drugs / gambling' or 'unregulated securities', so I think ABnB and Uber really are in a middle category. Selling 'classically licentious stuff' like porn, drugs, gambling - and also selling financial scams - these things are as old as time ... and there's good reason we regulate it, even if we don't always agree on the thin red line (i.e. should weed or prostitution be illegal?). That doesn't leave to many real companies skirting regular law and waiting for regulation to catch up. ICO's I think are a special case. The one's the SEC has said are 'cool' are basically the token-only one's and I think they are all de-facto scams, to the extent I highly doubt any of those tokens will be viable. The SEC is missing one thing - and that is the speculative nature of the coins and that they are not bought up front as 'currencies to do stuff'. No - they are bought with the hope of massive increase in valuation of the currency, thereby making them more like securities than currencies. Or rather, they are 'financial options on some future currency'. In which case, I think they need to be regulated, at least lightly, or at least in some basic way, i.e. requiring minimum amounts of transparency, at very least the executives have to register with the CEO and can go to jail if they just run off with the money willy nilly, which it seems they can do today ...
  - c3534l 8y ago
sonnyblarney 8y ago
"But if there is a company, and it raises money by issuing a token to the public, it has the same securities-law obligations it would if it raised money by issuing stock or bonds." And there's the rub. Sometimes, it's hard to tell.
sriram_sun 8y ago
Laughable! What's a "Good" ICO? FTA: "Loosely speaking, then, ICOs that seek to fund the construction of decentralized open protocols should still work under the SEC’s rules." Also "ICOs that are just fundraising schemes for companies will be treated like securities.." I'm looking at this distinction with both eyebrows raised. I'm highly skeptical that an ICO will be treated differently under different use cases. This would only lead to confusion. Further down, in the article, the author brings up a third category - Ripple. What's to prevent a fourth and a fifth category? The law when it comes down is going to be uniformly applicable to ALL ICOs not just "Good" and "Bad" ones.
matt_the_bass 8y ago
Check out the rest of the writing by this author. Matt Levine is great. He has an impressive background which gives him great (and usually cynical) opinions about various financial topics.
kruhft 8y ago
What's a 'good ICO'? I did 2 and didn't get shit for it.
- kruhft 8y ago
  Here's one of my 'test tokens' (KITN): https://etherscan.io/token/0xd9db1e7eff06dc16347ee2e3f203655417528bed https://etherscan.io/token/0xd9db1e7eff06dc16347ee2e3f203655...
- kruhft 8y ago
  Here's an 'offical one' that worked (airdropped): https://etherscan.io/token/0x6a95771d66731e1f59681b9f71f45dc2d248790c https://etherscan.io/token/0x6a95771d66731e1f59681b9f71f45dc...
- kruhft 8y ago
  Plus a 'flipped litecoin' "Kruhft Coin Classic" (email me for macOS binaries and source, no seed nodes right now). kruhft@icloud.com
pontifier 8y ago
I had a bad experience with a coin, and I'm hoping the SEC gets involved with investigating it. They claim it was not an ICO, but I never got the coins I expected. They were doing quite well, and are in the top 20 on coinmarketcap. I feel cheated, and have received a lot of flak since becoming more vocal about the issue... there were even some half-joking death threats and websites created to discredit me. They claim there was a deadline I missed. I maintain there was insufficient notice of the deadline, and that they just wanted to keep the coins themselves. Also, I'm not sure it's legal for them to keep something like that once it's paid for... It's a big question, worth a lot of money, and I'm glad the SEC is finally getting involved in this area.
davidgerard 8y ago
I did a panel on ICOs last Thursday. Me as crypto skeptic, two crypto guys as well. Video here: https://davidgerard.co.uk/blockchain/2018/06/14/topline-comms-how-to-launch-a-successful-ico-with-me-on-the-panel/ https://davidgerard.co.uk/blockchain/2018/06/14/topline-comm... (no transcript, sorry) We all concurred: assume your ICO is a security, talk to your regulators. And, ah, don't do fraud - "fake it till you make it" needs to not become "make material misstatements when making an offering". Doing your best to do things properly will definitely make regulators much more helpful. Remember that financial regulators actually want you to do well in business, and make a great big pile of money! The SEC's mission statement is: "protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." They'll be delighted to help with that third part as long as you're not messing with the first two parts. Note also that the regulators are all going "what on earth", and they all talk to each other. FINMA in Switzerland has some surprisingly clear guidance on ICO tokens. Basically: it's a security unless it's pure utility, and if your "utility" token is exchange-tradeable it probably becomes a security. We expected this would be a good rule to work to. Let me stress again: talk to your regulators first. One of the guys on the panel (Davide Vicini from Maveric SA) spends way too much of his time helping ICOs who launched and then tried to square things with the regulators.

272 points by chollida1 8y ago

If anyone at bloomberg reads this comment, please stop the bar at the top from periodically coming down. It makes the article impossible to read for those that use the top of their smart phone as a place holder.

everdev 8y ago

This seems to be a trend in the US with crypto and marijuana as examples. If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market. I like that both are gaining acceptance, but to the early entrepreurs willing to sell a clear security without filing or the growers willing to sell a controlled substance underground, go the spoiles when the states and federal government bend to the will of the market. Unfortunately, it creates an unfair playing field for those willing to take a criminal risk and puts those that try to do things legally from day 1 at a disadvantage.

stale2002 8y ago
There is a better way to think about this. What the SEC cares about is whether uninformed investors are being ripped off. What matters way more than the letter of the law is whether people are being scammed. Ans I don't think this is a bad thing. The whole POINT of these laws in the first place is to protect people from being ripped off. And if you ARENT ripping people off, then the government probably won't go after you. Fairness isn't the purpose. The purpose is to protect people. And if you don't hurt anybody, well what was even the point of the law to begin with? No harm no foul is a perfectly reasonable philosophy.
- marcoperaza 8y ago
  That’s not law. It’s exactly the kind of thing the rule of law is supposed to prevent. What constitutes “ripping people off” is an incredibly political and ever-shifting judgment. We vigorously debate and make laws, so that everyone knows what is allowed and what is not, regardless of what they think the law should be.
  - stale2002 8y ago
    > What constitutes “ripping people off” is an incredibly political and ever-shifting judgment. I think that for the example given, ICOs, the opposite is true. For "most" of these situations, whether something is a straight up scam or not is very obvious. And I am glad that the SEC has chosen to mostly go after the scams. Sure, grey areas will come up. But what does it matter if the grey areas are less than 1% of the market? There are certainly cases in the world where the nitty gritty details matter, and that there are huge grey areas. I just don't think the ICO market is one of these nuanced cases.
- BaronVonSteuben 8y ago
  Fairness actually is the point sometimes. Obama talked about raising capital gains tax, even if it results in lower money for the government, simply for reasons of fairness [1][2]. [1] https://abcnews.go.com/Politics/DemocraticDebate/story?id=4670271&page=1&singlePage=true https://abcnews.go.com/Politics/DemocraticDebate/story?id=46... [2]https://www.washingtonpost.com/opinions/obamas-flawed-sense-of-fairness/2011/09/21/gIQAjRWtoK_story.html https://www.washingtonpost.com/opinions/obamas-flawed-sense-...
- everdev 8y ago
  Then why not scrap the Howey Test (which was out forth as the definitive test to determine if an investment is a security) and just keep the existing fraud laws? Security law is in place for good reason, to protect investors.
  - npt4279 8y ago
    The Howey Test was created by the Supreme Court, not the SEC. Harder to scrap.
- s73v3r_ 8y ago
  The problem is, those that are doing the action usually will disagree that they are harming people.
marcoperaza 8y ago
Part of the problem is that we’ve criminalized too many regulatory violations. Exclusively civil liability is more appropriate for the vast majority of regulatory violations. Provision for statutory and punitive damages if you want extra bite. If it is truly worthy of prison time, it will probably fall under existing general crimes: criminal fraud, reckless endangerment, theft, and so forth.
- matthewbauer 8y ago
  Securities are civil though
  - marcoperaza 8y ago
    Many violations of securities laws carry the possibility of criminal sanction.
    - paulie_a 8y ago
      Not by the SEC which was the point
      - marcoperaza 8y ago
        That’s misleading. All federal criminal prosecutions are done by the Department of Justice. But when it comes to prosecuting regulatory violations, it usually starts with a referral by the regulator (e.g. the SEC) who otherwise enforces that regulation. My point is about the regulatory regimes being enforced with criminal penalties, not some technicality over who does the prosecution. I’m not sure why you’re so focused on that.
        paulie_a 8y ago
        That absolutely is not misleading, the SEC flat out doesn't have the power to criminal prosecution and send someone to prison.
- 8y ago
Trundle 8y ago
How is that an unfair playing field? People being rewarded for productive risk taking is one of the fairest things I can think of.
- quickthrower2 8y ago
  Pablo Escobar was on to something then, ... well until he wasn't.
  - cheez 8y ago
    His crime was he got too big and bold. Fly under the radar and you'll survive.
  - nipponese 8y ago
    Even facetiously, that's a hard point to make. Cocaine has been illegal in the US for a very long time.
- everdev 8y ago
  Well, I called the SEC and they said they can't think of a way how these ICOs are not violating the Howey Test. Basically that in time, they be prosecuted. So, those of us that decide that the potential for financial or criminal consequences is not with it miss out when it turns out all but the most egregious scams will get a pass.
  - nerdwaller 8y ago
    Through my work we’ve been in contact with the SEC as well, a few times, and they are pretty clear on not stating any real absolutes unfortunately. We do more of the service side of things for the institutional space, however - so perhaps our questions were a bit different.
  - Trundle 8y ago
    Sure, I understand where the risk is coming from. I don't understand where the unfairness is coming from.
tCfD 8y ago
'everything is legal if you scale it up' Wish I could recall the months old thread I found that in. I believe it was also blockchain-related
JumpCrisscross 8y ago
> If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market The track record of firms breaking laws to get ahead is grim. Where running ahead of the law has worked, it involved a trifecta of (a) popular support and (b) a municipal (not state or federal) law challenged with (c) civil (not criminal) penalties. The narrow opinion this article is based on is limited to Ethereum. It is the personal opinion of a single SEC commissioner (albeit, an influential one).
toomanybeersies 8y ago
Don't forget Uber and Airbnb ignoring taxi laws and hotel/zoning laws, then expecting that governments change the law to suit them.
- xmly 8y ago
  This is a good point... But actually they call themselves ride sharing instead of commercial activities.
  - MrRubbish 8y ago
    tomato tomato
  - toomanybeersies 8y ago
    And yet the vast majority of Uber drivers I talk to derive their primary income from being an Uber driver. And likewise, the majority of listings on Airbnb are properties that aren't normally resided in by the owner. The whole "sharing economy" is a cheap veneer. It's commercial activities at heart.
st26 8y ago
Marijuana is more states rights vs federal though. Those MJ operations following state law are making a bet on federalism, rather than simply flagrantly ignoring law.
gcb0 8y ago
you mean like uber disrespecting taxi laws or paypal blatantly breaking international banking and money laundering laws? this seems to be the trend for a few years already.
dannyw 8y ago
Ridesharing and Airbnb is another example.
Waterluvian 8y ago
More important than any of that, which you don't mention at all are the people who get caught in the middle and lose out. The victims of the move fast, break stuff attitude. I care about protecting them far more than preventing an unfair playing field for the unfortunate startups that didn't break the law fast enough.
- friedman23 8y ago
  Who are the victims?
  - drngdds 8y ago
    Anyone who gets scammed by an ICO?
    - icoico 8y ago
      Do you mean to imply that there are ICOs that aren't scams?
- angel_j 8y ago
  You are not protecting anybody, Holden Caulfield, and nobody asked for your protection in the first place.
deleted 8y ago
[deleted]
justonepost 8y ago
I think the idea is to respect the spirit of our laws and you won't get punished. Taking a risk here is fine, but make choices which are moral/ethical and aren't abusing your customers and are generally a positive for the economy. Do that, and if the laws turn in your favor, you'll probably do ok. Government, good government, isn't trying to crush the entrepreneurial spirit. They also recognize that startups deserve a different legal arena than more established companies.

paulie_a 8y ago

Hopefully the SEC actually finds a good one to leave alone. but I am guessing that will be a challenge for them. The entire landscape of ico could be decimated and nothing of value would be lost.

pwaai 8y ago
your comment will shortly be downvoted people involved in ICO and the idiots that bought into it. I'm sorry but HN has changed dramatically since this crypto craze. It's invited a lot of charlatans, and weird vote manipulations to drive the narrative. Not just with crypto but that alt right trash Damore who committed career suicide had strange number of new accounts in the comments and it was like seeing reddit.
- paulie_a 8y ago
  I know it will but I don't honestly care about downvotes. It is hilarious that people are so dedicated to these obvious scams though. Literally every ico is a scam aimed at idiots. Honestly if I met someone that outright said they sell cocaine I would have more respect for them than anyone involved in an ICO
  - pwaai 8y ago
    I think it's one of those sunk cost fallacy. Because you put your reputation and social credit as collateral for a large expected return, you have no choice but to keep living the lie. Like that aussie dude who keeps telling people he is satoshi. He told the lie for so long that he refuses the remotest possibility that he is amongst the very small minority of people he surrounded himself with that reinforces his reality. The facts don't matter to religious fanatics. They are simply pawns of sociopathic tendencies.
  - s73v3r_ 8y ago
    "Literally every ico is a scam aimed at idiots." Well, if you were planning a scam, would you aim it at smart people? Seems similar to the reason why so many of those scam emails have terrible grammar: they want to weed out anyone smart enough to recognize the scam.

pwaai 8y ago

Good luck because you won't find an ico that is not a security aimed at swindling teachers, baristas and other innocent people. The % of 'Good ICO' is very very small, if non existant. It turns out nobody wants to do an ICO unless they get money. Fuck you. If you've been involved in an ICO or blockchain charlatanism, you are well deserving of scrutiny. In a few years after the crypto craze is over, everybody will be busy sending out DMCA notices to Google to hide their involvement in the 99% of ICO that will never deliver, get 'hacked', or just take off with the money. Fuck ICOs

pwaai 8y ago

Why are there so many ex-convicts in this ICO/crypto space? Like literally, a huge chunk of these so called ICO investors and founders have very shady pasts. Why isn't anybody calling people out on this? Why do we have criminals being entrusted with people's livelihood?

slimsag 8y ago
These types of people are very much attracted to get rich quick schemes, obviously. Given that cryptocurrency currently and historically has existed almost solely as a "you can get rich quick with this" scheme, I don't find it surprising at all.
whatshisface 8y ago
>Why are there so many ex-convicts in this ICO/crypto space? >Why do we have criminals being entrusted with people's livelihood? The second sentence answers the first: we do not want to trust criminals with people's livelihoods, so we leave lots of brainpower lying around outside of "normal society" because we don't want to let an embezzler write accounting software. Is it any wonder, then, that we would see an abnormal number of criminals end up working in a field where there was money but nobody to keep them out? You and I can choose between academia, industry and weird self-owned schemes, but there is a certain group of smart people that have only one option...
- swampthinker 8y ago
  That's an incredibly interesting way of looking at it. At first blush I was thinking more of a "Wild West attracts Wild West criminals", but it definitely is more nuanced than that.
- notahacker 8y ago
  I suspect there are reasons why people with convictions for deception and fraud are particularly likely to be attracted to ICOs other than the reluctance of accounting software firms to hire them...
girvo 8y ago

pmorici 8y ago

I think the headline might be glossing over some important details. There is a subset of ICO's that consulted lawyers and structured their deals in such a way that they don't run afoul of SEC regulations. If you ever see people talking about a "utility token" that is a why they are calling it that. It doesn't give the owner any stake in the company or right to a share of the company's profits. It's more a kin to a virtual currency in a video game the likes of which preceded crypto currencies. What people really want or where I think the promise of Ethereum in particular really lies is to tokenize traditional assets in the form of ERC-20 tokens in the case of stocks or ERC-721 tokens in the case of unique property. The SEC will need to be involved in the former to make it legal. Both Coinbase and TZero possibly others are working on that now.

JumpCrisscross 8y ago
> if you ever see people talking about a "utility token" that is a why they are calling it that The SEC has consistently seen utility tokens as securities. The workaround, so far unproven in court, is the SAFT (simple agreement for future tokens).
- AnthonyMouse 8y ago
  > The SEC has consistently seen utility tokens as securities. The workaround, so far unproven in court, is the SAFT (simple agreement for future tokens). The issue with all of this is that people are trying to fit a new technology into a series of boxes when it doesn't fit into any of them. The problem cryptocurrencies aim to solve looks like this. I have a hardcopy of a book that I've finished reading and I'm prepared to sell it so I can use the money to buy a copy of another book. I am not keen on the efficiency of the barter system, so what I need is currency that allows me to sell the book I have and then buy the book I want. But currency isn't a security. The rules for securities are much more strict, because you have to worry about people defrauding investors and engaging in stock price manipulations etc. In the normal everyday currency transaction where I exchange my book for a $20 bill and then go somewhere else and exchange my $20 bill for a book, there is never any paperwork for me to fill out. I don't have to give anyone my name or anything else to allow them to compile a database of which books I read or which social clubs I patronize or what kind of contraceptives I use. The rules for digital credit transactions are also strict, because they were designed for credit transactions, where you have to worry about someone buying something on credit and then not paying, or taking out credit in someone else's name. What's really needed is a digital version of cash. But there is no law designed for digital cash, so people keep trying to squeeze things that aim to serve that purpose into one box or another when the rules were clearly designed for something else. What we need is for the law to more explicitly allow the internet to work like the real world.

logicallee 8y ago

Do you think I should consider an ICO for a company which has been unable to close its seed round (except under ridiculously bad terms)? I have an extremely strong association between the words ICO and "scam", but I also recently found out that seed rounds are basically non-existent [1] If the SEC tacitly allows for "good-faith" ICO's, I would consider it. I don't want to shutter the work of my cofounders and contributors just because the seed-stage startup ecosystem is this broken. However, I have gone down extremely long rabbit holes and I am very wary. I would like to raise approximately 300k for a play that is built for an acquisition for a major player (within a small number of years). We got one term sheet for effectively 51% of the company for $17k or so. (That was from a real VC.) There were no other serious offers. Another (more promising?) alternative would be to bootstrap doing something unrelated. For example we have some expertise on our team in machine learning and perhaps could use it in an unrelated market where the size of the opportunity is pretty small (and it's pretty competitive). Is ICO worth exploring at this stage? (Bearing in mind that we are built for acquisition.) We are a "real" startup and don't have anything to do with cryptocurrencies or tokens. I also personally think the SEC does fantastic work that makes the whole startup ecosystem, and indeed investment at all, possible. There is a reason the United States investment climate is one of the best in the world, if not the best, and I think the SEC and general legal framework is one of these. So I am strongly biased against unregulated ICO's and would be very happy to submit to any oversight that would increase transparency and investor protections. [1] https://news.ycombinator.com/item?id=17284796 https://news.ycombinator.com/item?id=17284796

JumpCrisscross 8y ago
> I also recently found out that seed rounds are basically non-existent $8.5 billion were invested across close to 14,000 seed and angel-stage rounds in 2017 [1]. On both deal frequency and gross volume, seed and angel financing grew from 2016. [1] https://news.crunchbase.com/news/q4-2017-global-report-vc-sets-annual-records-back-strong-late-stage-results/ https://news.crunchbase.com/news/q4-2017-global-report-vc-se...
- logicallee 8y ago
  > close to 14,000 seed and angel-stage rounds in 2017 worldwide. :) That's "basically non-existent". Maybe you can flip it around like this: the number of people worth at least $30 million worldwide is 226,450. https://en.wikipedia.org/wiki/Ultra_high-net-worth_individual https://en.wikipedia.org/wiki/Ultra_high-net-worth_individua...

throwaway66666 8y ago

We are now somewhen in the 90s, somewhere in the US. Welcome. People are getting scammed when buying things online. The elderly are sending money to Nigerian princes. There are rapists and murderers on chatrooms preying for victims. Kids addicted to online games drop out of school. There is deviant pornography turning young men and girls into perverts or enticing them to post nudity online. I strongly believe we must protect the public, and we must put severe regulations on the internet. Noone should be able to just set up a website or online business. It is far too dangerous. Aspiring e-entrepreneurs must be required to file a goverment-reviewed application, and be represented by an attorney throughout the whole process, as well as undergo background checks and pay various fees to state and federal agencies. If all goes well, within 1-2 years (depending on backlog) they can have permission to put up a website. Every year they must renew their website license, and according to what kind of content they wish to host they will need different licenses (eg different if you want to serve video, different if you want to have chat) /s Makes sense right? The internet seemed like a weird crazy unregulated space back then. Except that.... that would have killed all of the amazing innovation that happened in the past 25 years in the US. My point is. We must protect the public, of course. But it is never as simple as pulling out the torches and pitchforks screaming "BAN BITCOIN. BAN THE DARKWEB. STOP ICOs". We cannot risk stifling innovation. Because if we do - innovation will still happen just... somewhere else in the world. And no government wants that. - EDIT: FYI - in case you think I am exaggerating, the scenario I described above is similar to today's internet situation in mainland China. You need an ICP license (granted by the government and renewed yearly) in order to be able to have a publicly accessible domain name. If you want to serve back visual content (images/video) and user-to-user communication (chat or public text posts) you need to undergo extra delays and checks to prove that you are trustworthy and can censor content. Certain websites from outside of China (eg google, fb) are just banned.

JumpCrisscross 8y ago
> it is never as simple as pulling out the torches and pitchforks screaming "BAN BITCOIN. BAN THE DARKWEB. STOP ICOs" Straw man [1]. Nobody serious suggests banning any of these. [1] https://en.wikipedia.org/wiki/Straw_man https://en.wikipedia.org/wiki/Straw_man

fake-name 8y ago

Let me know as soon as they find this elusive "good ICO". I hear they're generally found in the same habitat as unicorns.

omarchowdhury 8y ago
Plenty of unicorns out there.

thisisit 8y ago

I think couple of things need to be repeated from earlier threads. This discussion happened during a Yahoo conference. So, its more like a person's opinion. Unless we get a press release from SEC it is a difficult statement to make whether SEC is all good with ICOs. Secondly, the question of Ethereum being a security is a tricky one. It is a security by definition given in the same speech. So, it started out as a security but then it is not a security any more? That is confusing. A good read on this: https://prestonbyrne.com/2018/06/14/ether-is-not-a-security/ https://prestonbyrne.com/2018/06/14/ether-is-not-a-security/

davidwparker 8y ago
Here's the official statement from the SEC. "based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions." https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418
- thisisit 8y ago
  Please read in full before quoting an article. The very first footnote is: > The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff.
  - charlesdm 8y ago
    But isn't this person the person in charge within the SEC for setting the policy? It seems unlikely his opinion will be different from the official stance.
    - nerdponx 8y ago
      Even if one person is in charge, policy is not set in isolation. Their opinion will weigh on the decision but it will not be the decision.

dgreensp 8y ago

So basically, if you want to raise money by selling gift cards for a product that doesn’t exist to speculators who will trade them, make sure you describe it in terms of some inscrutable crypto protocol network thing that doesn’t map neatly to stock or gift cards.

erikpukinskis 8y ago
I don’t disagree with your characterization of many ICOs. But... is there anything wrong with that? It’s a junk investment, but aren’t junk investments just as valid as strong investments? If my gift card for an unreleased product trades for pennies on the dollar... isn’t that still a valid investment?
- dgreensp 8y ago
  Anything can be an investment. There are laws about gift cards and equity. Cryptocurrency systems are so technically complex and overloaded with ideals, uses, and philosophies that they can be simultaneously nothing like and everything like these things, IMO. It’s not about what’s right and wrong, it’s just amusing to me that if you want to exploit this particular opinion, as a loophole, the way you’d do it is to make your cryptocurrency sufficiently abstruse. Edit: To be really clear, I’m talking about the opinion that basically says, if your coin functions as equity then it’s equity; if it functions as a gift card, it’s a gift card; but if it functions as a protocol, it’s a protocol, even if it has speculators bidding it up and benefits going to coin-holders — basically a lot of the properties of equities and gift cards that cause them to be regulated.

c3534l 8y ago

This is how the internet and the tech industry in general have worked. Legislators and regulators are reluctant to clamp down on an emerging industry before it's clear how it's going to work. At one point the legality of Napster was legitimately up for debate. As time went on, however, those regulations have come. I think this is actually the right approach. Be conservative in regulating a new industry and wait until it's mature and understood, while allowing it to grow and work out as many kinks in the free market before the government steps in.

sonnyblarney 8y ago
"This is how the internet and the tech industry in general have worked." Well I don't think that IBM, Sun, Nvidia, Oracle, Apple, Google, Microsoft, Sandisk, Cisco, Ebay, Craigslist, Wikipedia, Facebook, Snapchat, Wechat, Instagram, Pinterest, fall into that category. AirBnB, Uber, some weed companies ... DraftKings, Kik, Telegram ... I suppose fall into that. But 'hotel permits' and 'cab permits' are in another league altogether from 'selling drugs / gambling' or 'unregulated securities', so I think ABnB and Uber really are in a middle category. Selling 'classically licentious stuff' like porn, drugs, gambling - and also selling financial scams - these things are as old as time ... and there's good reason we regulate it, even if we don't always agree on the thin red line (i.e. should weed or prostitution be illegal?). That doesn't leave to many real companies skirting regular law and waiting for regulation to catch up. ICO's I think are a special case. The one's the SEC has said are 'cool' are basically the token-only one's and I think they are all de-facto scams, to the extent I highly doubt any of those tokens will be viable. The SEC is missing one thing - and that is the speculative nature of the coins and that they are not bought up front as 'currencies to do stuff'. No - they are bought with the hope of massive increase in valuation of the currency, thereby making them more like securities than currencies. Or rather, they are 'financial options on some future currency'. In which case, I think they need to be regulated, at least lightly, or at least in some basic way, i.e. requiring minimum amounts of transparency, at very least the executives have to register with the CEO and can go to jail if they just run off with the money willy nilly, which it seems they can do today ...
- c3534l 8y ago

sonnyblarney 8y ago

"But if there is a company, and it raises money by issuing a token to the public, it has the same securities-law obligations it would if it raised money by issuing stock or bonds." And there's the rub. Sometimes, it's hard to tell.

sriram_sun 8y ago

Laughable! What's a "Good" ICO? FTA: "Loosely speaking, then, ICOs that seek to fund the construction of decentralized open protocols should still work under the SEC’s rules." Also "ICOs that are just fundraising schemes for companies will be treated like securities.." I'm looking at this distinction with both eyebrows raised. I'm highly skeptical that an ICO will be treated differently under different use cases. This would only lead to confusion. Further down, in the article, the author brings up a third category - Ripple. What's to prevent a fourth and a fifth category? The law when it comes down is going to be uniformly applicable to ALL ICOs not just "Good" and "Bad" ones.

matt_the_bass 8y ago

Check out the rest of the writing by this author. Matt Levine is great. He has an impressive background which gives him great (and usually cynical) opinions about various financial topics.

kruhft 8y ago

What's a 'good ICO'? I did 2 and didn't get shit for it.

kruhft 8y ago
Here's one of my 'test tokens' (KITN): https://etherscan.io/token/0xd9db1e7eff06dc16347ee2e3f203655417528bed https://etherscan.io/token/0xd9db1e7eff06dc16347ee2e3f203655...
kruhft 8y ago
Here's an 'offical one' that worked (airdropped): https://etherscan.io/token/0x6a95771d66731e1f59681b9f71f45dc2d248790c https://etherscan.io/token/0x6a95771d66731e1f59681b9f71f45dc...
kruhft 8y ago
Plus a 'flipped litecoin' "Kruhft Coin Classic" (email me for macOS binaries and source, no seed nodes right now). kruhft@icloud.com

pontifier 8y ago

I had a bad experience with a coin, and I'm hoping the SEC gets involved with investigating it. They claim it was not an ICO, but I never got the coins I expected. They were doing quite well, and are in the top 20 on coinmarketcap. I feel cheated, and have received a lot of flak since becoming more vocal about the issue... there were even some half-joking death threats and websites created to discredit me. They claim there was a deadline I missed. I maintain there was insufficient notice of the deadline, and that they just wanted to keep the coins themselves. Also, I'm not sure it's legal for them to keep something like that once it's paid for... It's a big question, worth a lot of money, and I'm glad the SEC is finally getting involved in this area.

davidgerard 8y ago

I did a panel on ICOs last Thursday. Me as crypto skeptic, two crypto guys as well. Video here: https://davidgerard.co.uk/blockchain/2018/06/14/topline-comms-how-to-launch-a-successful-ico-with-me-on-the-panel/ https://davidgerard.co.uk/blockchain/2018/06/14/topline-comm... (no transcript, sorry) We all concurred: assume your ICO is a security, talk to your regulators. And, ah, don't do fraud - "fake it till you make it" needs to not become "make material misstatements when making an offering". Doing your best to do things properly will definitely make regulators much more helpful. Remember that financial regulators actually want you to do well in business, and make a great big pile of money! The SEC's mission statement is: "protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." They'll be delighted to help with that third part as long as you're not messing with the first two parts. Note also that the regulators are all going "what on earth", and they all talk to each other. FINMA in Switzerland has some surprisingly clear guidance on ICO tokens. Basically: it's a security unless it's pure utility, and if your "utility" token is exchange-tradeable it probably becomes a security. We expected this would be a good rule to work to. Let me stress again: talk to your regulators first. One of the guys on the panel (Davide Vicini from Maveric SA) spends way too much of his time helping ICOs who launched and then tried to square things with the regulators.