6 ms·

Did you tell the person you're selling it to that they'll be able to make 10x what they paid on it in a year as part of your pitch?

adamsmith143 5y ago
Nope but if I did it still wouldn't make the point. I've bought Gold from dealers who will tell you it's going to the moon straight to your face, doesn't make it an investment contract. Ferrari dealer might tell you this model is going to be a classic worth 10x in 20 years, doesn't make it an investment contract. Real estate agent will tell you to your face that this home will appreciate 20% in 5 years, doesn't make it an investment contract. If all you had to do was say this thing will be more valuable in the future then half the commerce in the US would count as an investment contract.
- stormbrew 5y ago
  The gold is already dug up. The ferrari is already built (even if it's not, like it's got custom features or w/e, they're going to build it whether you give them money or not because that's what they do). Real estate is a heavily regulated market precisely because it's an investment. None of these are like either the web3 nonsense or your hypothetical with my caveat added on. If you're offering to build something with someone else's money and you sell it to them as something that will grow in value over time, that is exactly selling someone an investment. And the fact that it sometimes happens without triggering regulatory oversight doesn't mean it's not in that category, it just means sometimes people casually break the law (which is true anyways).
  - adamsmith143 5y ago
    >The gold is already dug up. The ferrari is already built (even if it's not, like it's got custom features or w/e, they're going to build it whether you give them money or not because that's what they do). Real estate is a heavily regulated market precisely because it's an investment. The gold might not even be in bar form yet, just a pile of gold ore dust. Ferarri is definitely not just building cars willy nilly. Real estate is 100% not considered a security. Yes it is regulated but so is the Banana industry, doesn't mean they are investments. >And the fact that it sometimes happens without triggering regulatory oversight doesn't mean it's not in that category Happy to be proven wrong if you provide the relevant SEC guidance but I highly doubt investments are categorized in the way you suggest. To be clear I despise NFTs and think most of the crypto space is fraudulent but I think you've created a strawman here.
    - stormbrew 5y ago
      Well, you've moved the goalposts a couple of times so I'm not sure where I'm even getting the straw from. I'm not sure what to tell you if you think all of these are the same category of transaction: - selling someone "virtual land" that doesn't exist yet, and won't until and unless they obtain sufficient investment to build it (my understanding of the original thing), - someone commissioning you to build a dresser for them (what you initially said -- this is not a security, I agree, hence...), - you selling someone a promise of a dresser that will increase in value if they pay you to build it (my proposed change to your scenario to align it more closely to the original thing -- this is indeed, deliberately, a strawman intended to align your argument with the thing we're actually talking about), - buying gold that already exists, whatever form it's in, assuming the person you're buying it from already has it and doesn't have to mine it (the strawman to again align this with the original thing would be that they have to mine it -- I'm pretty sure this would be considered an investment into a mining operation), - buying an expensive car that is, bar some minor customizations, like every other car of the same model in existence and that the company has already invested in building, - real estate (just completely different from all of these, but my point was just that it's not a standard purchase and has its own structure around it. That said, there are real estate-related securities so...) Anyways, Animats seems more familiar with the specific legalities of this so I'll leave that to them. I never claimed to have a perfect understanding of US securities law, I just found your counter-example disingenuous.
      - adamsmith143 5y ago
        I don't think it's disingenuous at all, paying for something that is not built yet that may increase in value does not = a security.
        deleted 5y ago
        [deleted]
- Animats 5y ago
  I have to explain this again? Howey test, per the SEC: [1] 1. Investment of Money (anything of value) 2. Common Enterprise 3. Reasonable Expectation of Profits Derived from Efforts of Others If all are true, it's a security for US regulatory purposes. If offered to US persons, you have to go through the ordinary IPO process, with a prospectus issued under penalty of perjury and SEC registration. Nonfungible tokens were an attempt to get around this. If each one is different, and valued separately, there's no "common enterprise". This works for Bored Ape Yacht Club. Land in a virtual world, not so much. Fractional ownership of NFTs, definitely common enterprise. Nonfungible implies illiquid - there's no market price. Each item sells on its own, like Beanie Babies on eBay. You put your item up for sale and wait. Maybe a buyer comes along. Maybe not. NFT buyers have discovered this the hard way. Most resale attempts on OpenSea are stalled at minimum bid/asking price not reached. The minters of the tokens do great, since minting is cheap. Buyers (the suckers), not so much. People like you helping people like us help ourselves - Processed World [1] https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an...

adamsmith143 5y ago

Nope but if I did it still wouldn't make the point. I've bought Gold from dealers who will tell you it's going to the moon straight to your face, doesn't make it an investment contract. Ferrari dealer might tell you this model is going to be a classic worth 10x in 20 years, doesn't make it an investment contract. Real estate agent will tell you to your face that this home will appreciate 20% in 5 years, doesn't make it an investment contract. If all you had to do was say this thing will be more valuable in the future then half the commerce in the US would count as an investment contract.

stormbrew 5y ago
The gold is already dug up. The ferrari is already built (even if it's not, like it's got custom features or w/e, they're going to build it whether you give them money or not because that's what they do). Real estate is a heavily regulated market precisely because it's an investment. None of these are like either the web3 nonsense or your hypothetical with my caveat added on. If you're offering to build something with someone else's money and you sell it to them as something that will grow in value over time, that is exactly selling someone an investment. And the fact that it sometimes happens without triggering regulatory oversight doesn't mean it's not in that category, it just means sometimes people casually break the law (which is true anyways).
- adamsmith143 5y ago
  >The gold is already dug up. The ferrari is already built (even if it's not, like it's got custom features or w/e, they're going to build it whether you give them money or not because that's what they do). Real estate is a heavily regulated market precisely because it's an investment. The gold might not even be in bar form yet, just a pile of gold ore dust. Ferarri is definitely not just building cars willy nilly. Real estate is 100% not considered a security. Yes it is regulated but so is the Banana industry, doesn't mean they are investments. >And the fact that it sometimes happens without triggering regulatory oversight doesn't mean it's not in that category Happy to be proven wrong if you provide the relevant SEC guidance but I highly doubt investments are categorized in the way you suggest. To be clear I despise NFTs and think most of the crypto space is fraudulent but I think you've created a strawman here.
  - stormbrew 5y ago
    Well, you've moved the goalposts a couple of times so I'm not sure where I'm even getting the straw from. I'm not sure what to tell you if you think all of these are the same category of transaction: - selling someone "virtual land" that doesn't exist yet, and won't until and unless they obtain sufficient investment to build it (my understanding of the original thing), - someone commissioning you to build a dresser for them (what you initially said -- this is not a security, I agree, hence...), - you selling someone a promise of a dresser that will increase in value if they pay you to build it (my proposed change to your scenario to align it more closely to the original thing -- this is indeed, deliberately, a strawman intended to align your argument with the thing we're actually talking about), - buying gold that already exists, whatever form it's in, assuming the person you're buying it from already has it and doesn't have to mine it (the strawman to again align this with the original thing would be that they have to mine it -- I'm pretty sure this would be considered an investment into a mining operation), - buying an expensive car that is, bar some minor customizations, like every other car of the same model in existence and that the company has already invested in building, - real estate (just completely different from all of these, but my point was just that it's not a standard purchase and has its own structure around it. That said, there are real estate-related securities so...) Anyways, Animats seems more familiar with the specific legalities of this so I'll leave that to them. I never claimed to have a perfect understanding of US securities law, I just found your counter-example disingenuous.
    - adamsmith143 5y ago
      I don't think it's disingenuous at all, paying for something that is not built yet that may increase in value does not = a security.
      - deleted 5y ago
        [deleted]
Animats 5y ago
I have to explain this again? Howey test, per the SEC: [1] 1. Investment of Money (anything of value) 2. Common Enterprise 3. Reasonable Expectation of Profits Derived from Efforts of Others If all are true, it's a security for US regulatory purposes. If offered to US persons, you have to go through the ordinary IPO process, with a prospectus issued under penalty of perjury and SEC registration. Nonfungible tokens were an attempt to get around this. If each one is different, and valued separately, there's no "common enterprise". This works for Bored Ape Yacht Club. Land in a virtual world, not so much. Fractional ownership of NFTs, definitely common enterprise. Nonfungible implies illiquid - there's no market price. Each item sells on its own, like Beanie Babies on eBay. You put your item up for sale and wait. Maybe a buyer comes along. Maybe not. NFT buyers have discovered this the hard way. Most resale attempts on OpenSea are stalled at minimum bid/asking price not reached. The minters of the tokens do great, since minting is cheap. Buyers (the suckers), not so much. People like you helping people like us help ourselves - Processed World [1] https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://www.sec.gov/corpfin/framework-investment-contract-an...