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I've always been kind of confused as to how the SEC has jurisdiction on this. The Telegram tokens don't appear to be a stake in the company and rather seem to b

I've always been kind of confused as to how the SEC has jurisdiction on this. The Telegram tokens don't appear to be a stake in the company and rather seem to be similar to a PayPal account balance. Companies can effectively issue money via coupons or redeemable certificates. In the case of coupons there is some law about requiring them to have a marked cash value. EDIT: Though it will prompt more downvotes -- explain them when downvoting, thanks.

DiogenesKynikos 7y ago
From the SEC's filing: > Grams are securities because the Initial Purchasers and subsequent investors expect to profit from Telegram’s work: the development of a TON “ecosystem,” integration with Messenger, and implementation of the new TON Blockchain. Grams are not a currency because, among other things, there are not any products or services that can be purchased with Grams. Rather, there is an expectation on the part of investors that they will profit if Telegram builds out the functionalities it has promised. It continues: > The definition of a “security” includes a wide range of investment vehicles, including “investment contracts.” Investment contracts are instruments through which an individual invests money in a common enterprise and reasonably expects profits or returns derived from the entrepreneurial or managerial efforts of others. In a variety of circumstances, courts have found that novel or unique investment vehicles constitute investment contracts, including interests in orange groves, animal breeding programs, railroads, airplanes, mobile phones, and enterprises existing only on the Internet. As the U.S. Supreme Court has noted, Congress defined “security” broadly to embody a “flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.”
- snagglegaggle 7y ago
  Your first quote is interesting, as that definition fits quite well collectible items. As the brand grows the value of the collectible also grows, and the collectible is purchased to make profit (or can be purchased to make profit; maybe I do the reverse and by GRAM just for the fuzzy feeling it gives me). Yet we do not see such actions taken against companies that produce collectibles. This is probably because when adding the second, you see there is a major theme of profit redistribution. In all of those cases profit is collected centrally and then redistributed. With a collectible or a token such as gram it is not -- the item may become more valuable, partially due to activities of the creator, but it is not a profit sharing scheme. So... do Telegram's tokens grant you some definite share of their future profits? You're giving them money, but there is no legal recourse to claim a return from what I can see.
  - milankragujevic 7y ago
    Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. They are at least physical items.
    - snagglegaggle 7y ago
      A large number of people "invest" in collectibles only to resell them for a higher price. See: beany babies, trading card games, figurines, dolls. Just like those items tokens can be owned though their representation isn't much to look at. I'm not sure that is a useful distinction, unless you can explain further? E.g. why doesn't it apply to intellectual property? I keep getting downvoted -- I'm not arguing that Telegram has a workable business plan, just that this isn't really something the SEC can regulate.
      - milankragujevic 7y ago
        You can put collectibles on a shelf to impress likeminded friends. Or to feel happy. You can only trade securities and other similar assets. Also, generally if everyone bought figures to resell... I dont know how that can work... There is always an "unlucky fool" who buys from "scalpers" and keeps the item.
    - derefr 7y ago
      How about virtual collectibles in MMOs?
      - milankragujevic 7y ago
        If purchased to resell, then yes it should be and already is mostly made illegal/breach of TOS. People can buy things to enjoy, not just to resell.
    - flyGuyOnTheSly 7y ago
      >Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. Neither is crypto. I use it to buy real things all the time. Usually at a significant price discount, to boot!
tanilama 7y ago
> I've always been kind of confused as to how the SEC has jurisdiction on this Because they ask for real money for merely handle you a digital certificate that, the main purpose of which is to wait it to shoot higher to sell for a profit? Edit: Thanks for the downvote to validate this claim ;)
wahern 7y ago
You can Google the legal arguments, but suffice it to say that the legislation creating the SEC is old and vague, and anyone, including the SEC, who says that their characterization of tokens is absolutely correct is misleading you. Also, the SEC is notorious for their intransigence even after multiple courts and even the Supreme Court have repeatedly rejected their legal interpretations. One example is their definition of insider trader--their definition of insider trading is far more expansive than courts will accept. When you take insider trading courses at a corporation, you're typically being taught the SEC definition, not the legal definition accepted by Federal courts. Normally companies are risk adverse and aren't keen to piss off the SEC, so they play along. Nobody wants the SEC snooping around as there are invariably minor infractions to be found, especially at a large company. But sometimes, as with Telegram, companies will push back heavily when they want to aggressively pursue some profit opportunity. This doesn't mean these companies are willfully ignoring the law or aggressively pushing the envelope, as is often the case in other areas of regulatory law, e.g. Uber. Rather they're just not willing to placate the SEC. Their legal counsel might otherwise sincerely believe that the company's actions are well within the bounds of the actual law.
- qwerty456127 7y ago
  All SEC does is creating jobs for lawyers, fake sense of safety for amateur investors and a vulnerability in every business so it can be exploited once that becomes a profitable idea. Did you know everything is securities fraud?[1] [1] https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...]
  - wahern 7y ago
    In the SEC's defense, they're tiny and woefully underfunded. That's why they always come out swinging hard, and are so intransigent. They want interpretations that make it easy for them to penalize and convict. Big companies have enough legal resources, as well as enough pull in Washington, to wipe the floor with the SEC unless the law is crystal clear in the SEC's favor. The SEC is hardly the only regulatory agency that wants easier convictions, or is fearful of lobbyist pushback, but it's a perpetual issue with the SEC, and the situation is peculiarly and qualitatively unique. If the SEC gives a small investor an inch, the big financial houses will extend that into a parsec. And those companies are constantly watching for those opportunities. So, yeah, the SEC isn't shy about picking a fight with the little guys because they only pick fights they think they can win, preferably outside court; the consequences of losing a fight are huge. This strategy isn't unique to the SEC, but it's uniquely consequential to their authority and effectiveness in general. It's an unfair situation all around, but at the end of the day responsibility falls on Congress. In any event, my point was that if the situation seems confusing, it almost certainly is a confusing situation without any obvious answers.
eljee 7y ago
The issuing company needs to have already built the infrastructure that the token commoditizes, otherwise its a speculative investment, even if the token is just a voucher or grants access to a service.

DiogenesKynikos 7y ago

From the SEC's filing: > Grams are securities because the Initial Purchasers and subsequent investors expect to profit from Telegram’s work: the development of a TON “ecosystem,” integration with Messenger, and implementation of the new TON Blockchain. Grams are not a currency because, among other things, there are not any products or services that can be purchased with Grams. Rather, there is an expectation on the part of investors that they will profit if Telegram builds out the functionalities it has promised. It continues: > The definition of a “security” includes a wide range of investment vehicles, including “investment contracts.” Investment contracts are instruments through which an individual invests money in a common enterprise and reasonably expects profits or returns derived from the entrepreneurial or managerial efforts of others. In a variety of circumstances, courts have found that novel or unique investment vehicles constitute investment contracts, including interests in orange groves, animal breeding programs, railroads, airplanes, mobile phones, and enterprises existing only on the Internet. As the U.S. Supreme Court has noted, Congress defined “security” broadly to embody a “flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.”

snagglegaggle 7y ago
Your first quote is interesting, as that definition fits quite well collectible items. As the brand grows the value of the collectible also grows, and the collectible is purchased to make profit (or can be purchased to make profit; maybe I do the reverse and by GRAM just for the fuzzy feeling it gives me). Yet we do not see such actions taken against companies that produce collectibles. This is probably because when adding the second, you see there is a major theme of profit redistribution. In all of those cases profit is collected centrally and then redistributed. With a collectible or a token such as gram it is not -- the item may become more valuable, partially due to activities of the creator, but it is not a profit sharing scheme. So... do Telegram's tokens grant you some definite share of their future profits? You're giving them money, but there is no legal recourse to claim a return from what I can see.
- milankragujevic 7y ago
  Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. They are at least physical items.
  - snagglegaggle 7y ago
    A large number of people "invest" in collectibles only to resell them for a higher price. See: beany babies, trading card games, figurines, dolls. Just like those items tokens can be owned though their representation isn't much to look at. I'm not sure that is a useful distinction, unless you can explain further? E.g. why doesn't it apply to intellectual property? I keep getting downvoted -- I'm not arguing that Telegram has a workable business plan, just that this isn't really something the SEC can regulate.
    - milankragujevic 7y ago
      You can put collectibles on a shelf to impress likeminded friends. Or to feel happy. You can only trade securities and other similar assets. Also, generally if everyone bought figures to resell... I dont know how that can work... There is always an "unlucky fool" who buys from "scalpers" and keeps the item.
  - derefr 7y ago
    How about virtual collectibles in MMOs?
    - milankragujevic 7y ago
      If purchased to resell, then yes it should be and already is mostly made illegal/breach of TOS. People can buy things to enjoy, not just to resell.
  - flyGuyOnTheSly 7y ago
    >Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. Neither is crypto. I use it to buy real things all the time. Usually at a significant price discount, to boot!

tanilama 7y ago

> I've always been kind of confused as to how the SEC has jurisdiction on this Because they ask for real money for merely handle you a digital certificate that, the main purpose of which is to wait it to shoot higher to sell for a profit? Edit: Thanks for the downvote to validate this claim ;)

wahern 7y ago

You can Google the legal arguments, but suffice it to say that the legislation creating the SEC is old and vague, and anyone, including the SEC, who says that their characterization of tokens is absolutely correct is misleading you. Also, the SEC is notorious for their intransigence even after multiple courts and even the Supreme Court have repeatedly rejected their legal interpretations. One example is their definition of insider trader--their definition of insider trading is far more expansive than courts will accept. When you take insider trading courses at a corporation, you're typically being taught the SEC definition, not the legal definition accepted by Federal courts. Normally companies are risk adverse and aren't keen to piss off the SEC, so they play along. Nobody wants the SEC snooping around as there are invariably minor infractions to be found, especially at a large company. But sometimes, as with Telegram, companies will push back heavily when they want to aggressively pursue some profit opportunity. This doesn't mean these companies are willfully ignoring the law or aggressively pushing the envelope, as is often the case in other areas of regulatory law, e.g. Uber. Rather they're just not willing to placate the SEC. Their legal counsel might otherwise sincerely believe that the company's actions are well within the bounds of the actual law.

qwerty456127 7y ago
All SEC does is creating jobs for lawyers, fake sense of safety for amateur investors and a vulnerability in every business so it can be exploited once that becomes a profitable idea. Did you know everything is securities fraud?[1] [1] https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...]
- wahern 7y ago
  In the SEC's defense, they're tiny and woefully underfunded. That's why they always come out swinging hard, and are so intransigent. They want interpretations that make it easy for them to penalize and convict. Big companies have enough legal resources, as well as enough pull in Washington, to wipe the floor with the SEC unless the law is crystal clear in the SEC's favor. The SEC is hardly the only regulatory agency that wants easier convictions, or is fearful of lobbyist pushback, but it's a perpetual issue with the SEC, and the situation is peculiarly and qualitatively unique. If the SEC gives a small investor an inch, the big financial houses will extend that into a parsec. And those companies are constantly watching for those opportunities. So, yeah, the SEC isn't shy about picking a fight with the little guys because they only pick fights they think they can win, preferably outside court; the consequences of losing a fight are huge. This strategy isn't unique to the SEC, but it's uniquely consequential to their authority and effectiveness in general. It's an unfair situation all around, but at the end of the day responsibility falls on Congress. In any event, my point was that if the situation seems confusing, it almost certainly is a confusing situation without any obvious answers.

eljee 7y ago

The issuing company needs to have already built the infrastructure that the token commoditizes, otherwise its a speculative investment, even if the token is just a voucher or grants access to a service.