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Yet Bitcoin and Ethereum are not considered securities by the SEC. So clearly the same sort of asset is considered a security sometimes but not other times, ess

Yet Bitcoin and Ethereum are not considered securities by the SEC. So clearly the same sort of asset is considered a security sometimes but not other times, essentially whenever the SEC decides.

stingraycharles 7y ago
> Yet Bitcoin and Ethereum are not considered securities by the SEC. Why is that ?
- seibelj 7y ago
  Bitcoin and Ethereum do not pass the Howey Test because they are "sufficiently decentralized", primarily because no single enterprise is responsible for developing it. But there is no framework on how exactly one becomes sufficiently decentralized, and because Ethereum had an ICO and is not a security, we know there is a way to do an ICO without needing to be registered. Unfortunately the current regulatory framework is opaque. The SEC "knows them when they sees them" so to speak but cannot explain clearly how to avoid becoming a security. My hope is that this lawsuit will result in clear guidance on how to become a Bitcoin or Ethereum, which will significantly help boost the industry.
  - nostrademons 7y ago
    ETH was specifically called out by one of the SEC guidance letters as something that was a security at the time of its issuance but is no longer a security because material facts pertinent to the Howey Test have changed (notably, they delivered on the product, ETH now has significant use-value apart from speculative purposes, and development & decision-making are decentralized). That something could move from "security" to "not a security" in 3 years while preserving the ownership interests of stakeholders should probably tell you that crypto is something new, though, and that existing legal frameworks don't properly capture how it behaves.
  - gowld 7y ago
    Eth was a security was it stopped being a security before SEC took action, so there's nothing for SEC to do.now.
- toomuchtodo 7y ago
  "The CFTC has designated bitcoin as a commodity. Fraud and manipulation involving bitcoin traded in interstate commerce are appropriately within the purview of the CFTC, as is the regulation of commodity futures tied directly to bitcoin. That said, products linked to the value of underlying digital assets, including bitcoin and other cryptocurrencies, may be structured as securities products subject to registration under the Securities Act of 1933 or the Investment Company Act of 1940." https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11#_ftnref2 https://www.sec.gov/news/public-statement/statement-clayton-...
tadfisher 7y ago
Because Bitcoin and Ethereum are not stand-ins for shares in a particular entity.
- jki275 7y ago
  Eth and BTc are quite different and Eth is absolutely a security. Eth meets the Howey test. BTc arguably does not due to its manner of distribution and initiation.
  - DennisP 7y ago
    According to the SEC chairman, ETH may have been a security at first but it's not anymore. https://coincenter.org/link/sec-chairman-clayton-just-confirmed-commission-staff-analysis-that-ethereum-and-cryptos-like-it-are-not-securities https://coincenter.org/link/sec-chairman-clayton-just-confir...
    - jki275 7y ago
      Yes, the SEC has handwaved it out of being a security. That doesn’t change facts, they simply aren’t going to do anything about it.
  - loceng 7y ago
    Do we know for sure how it was distributed and initiated BT though? We don't even know who "Satoshi Nakamoto" is.
  - fastball 7y ago
    What entity are you investing in when you purchase ETH?
    - jki275 7y ago
      Vitalik Buterin and the other whales who started it.
      - 7y ago
jonnydubowsky 7y ago
The SEC doesn't decide whether a token is a security or not. It either is or it isn't, and the determination they make is based on work thst any company can and should do themselves before issuing any tokens in any form. There are clear methods that can be followed to know whether or not you are going to get a scary letter later. Going through these measures to understand if what you are issuing is a security is not unusually difficult. It does take time, and often requires seeking good legal advice. The strategy many of the worst ico's used, of trying to write their way around the very real considerations of securities laws, was poorly thought out and now they are paying the price. There are many instances of projects that went about this the right way, I.e Filecoin, Ocean Protocol, Cardstack.

Yet Bitcoin and Ethereum are not considered securities by the SEC. So clearly the same sort of asset is considered a security sometimes but not other times, essentially whenever the SEC decides.

stingraycharles 7y ago

> Yet Bitcoin and Ethereum are not considered securities by the SEC. Why is that ?

seibelj 7y ago
Bitcoin and Ethereum do not pass the Howey Test because they are "sufficiently decentralized", primarily because no single enterprise is responsible for developing it. But there is no framework on how exactly one becomes sufficiently decentralized, and because Ethereum had an ICO and is not a security, we know there is a way to do an ICO without needing to be registered. Unfortunately the current regulatory framework is opaque. The SEC "knows them when they sees them" so to speak but cannot explain clearly how to avoid becoming a security. My hope is that this lawsuit will result in clear guidance on how to become a Bitcoin or Ethereum, which will significantly help boost the industry.
- nostrademons 7y ago
  ETH was specifically called out by one of the SEC guidance letters as something that was a security at the time of its issuance but is no longer a security because material facts pertinent to the Howey Test have changed (notably, they delivered on the product, ETH now has significant use-value apart from speculative purposes, and development & decision-making are decentralized). That something could move from "security" to "not a security" in 3 years while preserving the ownership interests of stakeholders should probably tell you that crypto is something new, though, and that existing legal frameworks don't properly capture how it behaves.
- gowld 7y ago
  Eth was a security was it stopped being a security before SEC took action, so there's nothing for SEC to do.now.
toomuchtodo 7y ago
"The CFTC has designated bitcoin as a commodity. Fraud and manipulation involving bitcoin traded in interstate commerce are appropriately within the purview of the CFTC, as is the regulation of commodity futures tied directly to bitcoin. That said, products linked to the value of underlying digital assets, including bitcoin and other cryptocurrencies, may be structured as securities products subject to registration under the Securities Act of 1933 or the Investment Company Act of 1940." https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11#_ftnref2 https://www.sec.gov/news/public-statement/statement-clayton-...

tadfisher 7y ago

Because Bitcoin and Ethereum are not stand-ins for shares in a particular entity.

jki275 7y ago
Eth and BTc are quite different and Eth is absolutely a security. Eth meets the Howey test. BTc arguably does not due to its manner of distribution and initiation.
- DennisP 7y ago
  According to the SEC chairman, ETH may have been a security at first but it's not anymore. https://coincenter.org/link/sec-chairman-clayton-just-confirmed-commission-staff-analysis-that-ethereum-and-cryptos-like-it-are-not-securities https://coincenter.org/link/sec-chairman-clayton-just-confir...
  - jki275 7y ago
    Yes, the SEC has handwaved it out of being a security. That doesn’t change facts, they simply aren’t going to do anything about it.
- loceng 7y ago
  Do we know for sure how it was distributed and initiated BT though? We don't even know who "Satoshi Nakamoto" is.
- fastball 7y ago
  What entity are you investing in when you purchase ETH?
  - jki275 7y ago
    Vitalik Buterin and the other whales who started it.
    - 7y ago

jonnydubowsky 7y ago

The SEC doesn't decide whether a token is a security or not. It either is or it isn't, and the determination they make is based on work thst any company can and should do themselves before issuing any tokens in any form. There are clear methods that can be followed to know whether or not you are going to get a scary letter later. Going through these measures to understand if what you are issuing is a security is not unusually difficult. It does take time, and often requires seeking good legal advice. The strategy many of the worst ico's used, of trying to write their way around the very real considerations of securities laws, was poorly thought out and now they are paying the price. There are many instances of projects that went about this the right way, I.e Filecoin, Ocean Protocol, Cardstack.