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> 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-...

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-...