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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
by 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 agoThere 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 agoThat’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 agoFairness 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 agoThen 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 agoThe Howey Test was created by the Supreme Court, not the SEC. Harder to scrap.
- s73v3r_ 8y agoThe problem is, those that are doing the action usually will disagree that they are harming people.
- marcoperaza 8y agoPart 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 agoSecurities are civil though
- marcoperaza 8y agoMany violations of securities laws carry the possibility of criminal sanction.
- paulie_a 8y agoNot by the SEC which was the point
- marcoperaza 8y agoThat’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 agoThat 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 agoHow 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 agoPablo Escobar was on to something then, ... well until he wasn't.
- everdev 8y agoWell, 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 agoThrough 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 agoSure, 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 agoDon't forget Uber and Airbnb ignoring taxi laws and hotel/zoning laws, then expecting that governments change the law to suit them.
- xmly 8y agoThis is a good point... But actually they call themselves ride sharing instead of commercial activities.
- MrRubbish 8y agotomato tomato
- toomanybeersies 8y agoAnd 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 agoMarijuana 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 agoyou 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 agoRidesharing and Airbnb is another example.
- Waterluvian 8y agoMore 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 agoWho are the victims?
- angel_j 8y agoYou are not protecting anybody, Holden Caulfield, and nobody asked for your protection in the first place.
- deleted 8y ago[deleted]
- justonepost 8y agoI 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.