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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

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.
  - cortesoft 8y ago
    Right, but the article is talking about ICOs, not cryptocoins in general.
    - AnthonyMouse 8y ago
      But once there is an ICO then whatever it is it continues to be, right? It obviously impacts the initial value of a coin if it can't practically be used as currency because future trades have to be treated as a regulated securities instrument.
  - lmm 8y ago
    If someone issued a physical banknote for their book-trading club idea and a bunch of those changed hands at speculative prices while the book-trading club didn't even exist, you bet the SEC would regulate it as a security. This has nothing to do with internet versus real world.
  - s73v3r_ 8y ago
    "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." No, I think it's more that it does fit into those boxes, but those with interests in the technology desperately want to think it doesn't. "What we need is for the law to more explicitly allow the internet to work like the real world." Why?
- pmorici 8y ago
  No, they haven't. I think you misunderstand what they have said. As recently April 26th a SEC official in testimony before Congress [0][1] explicitly said a utility token was possible. They have warned that something having utility doesn't mean it isn't also a security. The SAFT is an interesting beast but it is generally only offered to accredited investors where as utility tokens are usually offered in an everyone can participate style ICO. [0] https://www.youtube.com/watch?v=rNdly_FXlKs https://www.youtube.com/watch?v=rNdly_FXlKs [1] https://www.forbes.com/sites/astanley/2018/04/28/sec-official-offers-new-hope-for-utility-tokens-in-congressional-testimony/ https://www.forbes.com/sites/astanley/2018/04/28/sec-officia...
unclebucknasty 8y ago
>It doesn't give the owner any stake in the company or right to a share of the company's profits. This underscores the absurdity of the SEC's position on investing in the first place, including the requirement for "accredited investor status", etc. You can spend as much as you want on a thing which may patently have zero-value, as long as you call it an asset (or something else). No one will stop you. But, the minute it's suggested that the thing represents the possibility of profit-sharing or ownership in something of potential value, then it is verboten or otherwise heavily regulated. Likewise, no one stops you from blowing your entire paycheck on a slot machine or lottery tickets. And, this, with a simple disclaimer of odds. Seems investment opportunities can be similarly disclaimed so that people can make their own decisions. This would not preclude SEC prosecutions for outright fraud, etc. when people are found to be nakedly defrauding the investing public.
- CPLX 8y ago
  > no one stops you from blowing your entire paycheck on a slot machine or lottery tickets Yes they do. Those things are illegal in most places, and where they are legal they're heavily regulated or run by the state.
  - unclebucknasty 8y ago
    Incorrect. Most U.S. states have a lottery and the few that don't generally don't because they have local casinos to "protect". Also, any regulations in place have nothing to do with restricting how much customers can spend.
  - unclebucknasty 8y ago
    I see you edited your comment to add "or run by the state" after my reply. For future reference, it's OK to just say "My bad. I didn't know that. Thanks for the info."
ojr 8y ago
there's already an app that could be used as a huge example of where utility tokens can work, imagine HQ Trivia giving their own HQ Token ICO instead of rewarding users us dollars, better margins, easier questions, more winners
- s73v3r_ 8y ago
  But, a large part of why people play, or at least started playing, was the possibility of being paid, in a currency they could actually use for stuff. What on earth would I be able to use HQ-coin on, other than to make the game easier for other people?
  - ojr 8y ago
    you can exchange the HQCoin to dollars, there are already cryptocurrency debit cards, HQ Trivia can mint HQCoins cheaper than they can get dollars

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.
- cortesoft 8y ago
  Right, but the article is talking about ICOs, not cryptocoins in general.
  - AnthonyMouse 8y ago
    But once there is an ICO then whatever it is it continues to be, right? It obviously impacts the initial value of a coin if it can't practically be used as currency because future trades have to be treated as a regulated securities instrument.
- lmm 8y ago
  If someone issued a physical banknote for their book-trading club idea and a bunch of those changed hands at speculative prices while the book-trading club didn't even exist, you bet the SEC would regulate it as a security. This has nothing to do with internet versus real world.
- s73v3r_ 8y ago
  "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." No, I think it's more that it does fit into those boxes, but those with interests in the technology desperately want to think it doesn't. "What we need is for the law to more explicitly allow the internet to work like the real world." Why?
pmorici 8y ago
No, they haven't. I think you misunderstand what they have said. As recently April 26th a SEC official in testimony before Congress [0][1] explicitly said a utility token was possible. They have warned that something having utility doesn't mean it isn't also a security. The SAFT is an interesting beast but it is generally only offered to accredited investors where as utility tokens are usually offered in an everyone can participate style ICO. [0] https://www.youtube.com/watch?v=rNdly_FXlKs https://www.youtube.com/watch?v=rNdly_FXlKs [1] https://www.forbes.com/sites/astanley/2018/04/28/sec-official-offers-new-hope-for-utility-tokens-in-congressional-testimony/ https://www.forbes.com/sites/astanley/2018/04/28/sec-officia...

unclebucknasty 8y ago

>It doesn't give the owner any stake in the company or right to a share of the company's profits. This underscores the absurdity of the SEC's position on investing in the first place, including the requirement for "accredited investor status", etc. You can spend as much as you want on a thing which may patently have zero-value, as long as you call it an asset (or something else). No one will stop you. But, the minute it's suggested that the thing represents the possibility of profit-sharing or ownership in something of potential value, then it is verboten or otherwise heavily regulated. Likewise, no one stops you from blowing your entire paycheck on a slot machine or lottery tickets. And, this, with a simple disclaimer of odds. Seems investment opportunities can be similarly disclaimed so that people can make their own decisions. This would not preclude SEC prosecutions for outright fraud, etc. when people are found to be nakedly defrauding the investing public.

CPLX 8y ago
> no one stops you from blowing your entire paycheck on a slot machine or lottery tickets Yes they do. Those things are illegal in most places, and where they are legal they're heavily regulated or run by the state.
- unclebucknasty 8y ago
  Incorrect. Most U.S. states have a lottery and the few that don't generally don't because they have local casinos to "protect". Also, any regulations in place have nothing to do with restricting how much customers can spend.
- unclebucknasty 8y ago
  I see you edited your comment to add "or run by the state" after my reply. For future reference, it's OK to just say "My bad. I didn't know that. Thanks for the info."

ojr 8y ago

there's already an app that could be used as a huge example of where utility tokens can work, imagine HQ Trivia giving their own HQ Token ICO instead of rewarding users us dollars, better margins, easier questions, more winners

s73v3r_ 8y ago
But, a large part of why people play, or at least started playing, was the possibility of being paid, in a currency they could actually use for stuff. What on earth would I be able to use HQ-coin on, other than to make the game easier for other people?
- ojr 8y ago
  you can exchange the HQCoin to dollars, there are already cryptocurrency debit cards, HQ Trivia can mint HQCoins cheaper than they can get dollars