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This seems obvious and not remotely over reaching. The SEC press release[0] makes a clear distinction between decentralized staking and centralized promising t

This seems obvious and not remotely over reaching. The SEC press release[0] makes a clear distinction between decentralized staking and centralized promising to stake on behalf of a customer. Promising to use funds in a specific way to generate a specific return sounds like the most obvious security. Nobody should be surprised. [0] https://www.sec.gov/news/press-release/2023-25 https://www.sec.gov/news/press-release/2023-25

beaned 4y ago
Is it a "promise" if it's a guaranteed algorithmic result?
- altairprime 4y ago
  Yes. “Lend us your money and we’ll invest in a guaranteed return from an algorithm” has been said many times, long before cryptocoins.
- saurik 4y ago
  It is still a promise if you can't be sure they actually did the staking correctly or even at all.
  - beaned 4y ago
    That seems like a traditional contract between provider and consumer more than a security. If I own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent. ChatGPT (for what it's worth): When people talk about "securities," they usually mean financial instruments such as stocks, bonds, and derivatives, rather than specific types of payments made to shareholders. In this broader sense, dividends are not considered securities themselves, but they are closely related to the securities that represent ownership in a company.
    - JumpCrisscross 4y ago
      > own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent When you buy a dividend-bearing stock on Charles Schwab, you're given access to shareholder documents describing what you are owed under what conditions. There is no analog for crypto. The investor's interface is with Kraken, not with the chain. This isn't an insurmountable problem! But every staking product I've seen mimics a high-yield savings account more than the FX-linked security that it is.
      - beaned 4y ago
        I don't understand how they're different. Charles Schwab is a middleman to the company (say Exxon). Kraken is a middleman to the Blockchain. That seems like a clear analog, and not only that, but the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents, which represent legal contracts, but are still susceptible to human error.
        JumpCrisscross 4y ago
        > Charles Schwab is a middleman to the company (say Exxon) Charles Schwab is a middleman to the market. Exxon separately puts out disclosures. Charles Schwab and Exxon never need interact for this to work. > Kraken is a middleman to the Blockchain Agreed. Which is why it should be regulated like Charles Schwab. The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must. > the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true.
        beaned 4y ago
        > The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must. Like what? I'm not sure I understand. They're both approved to hold things for consumers, which is already a promise to redeem upon request. Staking feels like the same thing. Is the confusion because ETH itself has not yet been explicitly ruled to be a security? > This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true Would be an interesting debate but maybe let's not go down that rabbit hole :D
  - zoklet-enjoyer 4y ago
    Look on chain. Kraken is one of the largest ATOM validators.
- JumpCrisscross 4y ago
  > a "promise" if it's a guaranteed algorithmic result? Staking isn't banned. Intermediaries offering staking-based-products is being questioned. There is no algorithmic guarantee Kraken is doing anything.
  - beaned 4y ago
    That still doesn't make it a security.
    - JumpCrisscross 4y ago
      > doesn't make it a security The alternative is a bank account. That's not a conversation anyone in crypto wants to have. Longer: yes, it does. You're investing money with the expectation of profit. For on-chain staking, the common enterprise and effort of others tests are ambiguous. But here, you're not staking on chain. You're giving money to Kraken to stake for you. Security. (Again, it looks more like a savings account, but nobody wants that.)
      - beaned 4y ago
        It seems to me that by this description, whether or not it's a security is basically how it's marketed? You could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw. Also these returns are denominated in the staked currency, there is no - and had never been - a promise of returns in USD. I don't actually know: does that make a difference, technically speaking? It would seem that it should.
        JumpCrisscross 4y ago
        > whether or not it's a security of basically marketing? Not basically, but substantially. > could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw Custodianship is a big word in finance [1]. There are crypto custodians, and I'm guessing they let coins be staked. But that isn't something you can easily scale to retail. > there is no - and had never been - a promise of returns in USD Not relevant. You can issue stock that pays dividends in piñatas. If it's sold to Americans, the SEC has jurisdiction. [1] https://www.investopedia.com/terms/c/custodian.asp https://www.investopedia.com/terms/c/custodian.asp
- timcavel 4y ago
  [dead]
- MacsHeadroom 4y ago
  >Is it a "promise" if it's a guaranteed algorithmic result? No, and that's what decentralized staking is. That's fine and the SEC is explicitly not taking issue with it. Centralized 'promising to engage in decentralized staking on a customer's behalf' is not guaranteed or algorithmic-- which is why it necessarily causes said customers to "take on risks associated with those [centralized] platforms," to quote the SEC, and thus becomes a security.
g42gregory 4y ago
> Promising to use funds in a specific way to generate a specific return If you also promise to return the money after the specified period, this sounds like a definition of a fixed income bond, no?
- JumpCrisscross 4y ago
  > this sounds like a definition of a fixed income bond Bonds are securitised loans, which are not securities per se. It's a somewhat arbitrary boundary that rests on the degree to which a secondary market exists. But just because something is loan-like doesn't make it a security.
  - legutierr 4y ago
    When is a bond not a security?
    - JumpCrisscross 4y ago
      > When is a bond not a security Bonds are securities. Loans aren’t always. (Government debt in the form of Treasuries are securities. Government debt in the form of accounts payable are not.)
- deleted 4y ago
  [deleted]
deleted 4y ago
[deleted]

beaned 4y ago

Is it a "promise" if it's a guaranteed algorithmic result?

altairprime 4y ago
Yes. “Lend us your money and we’ll invest in a guaranteed return from an algorithm” has been said many times, long before cryptocoins.
saurik 4y ago
It is still a promise if you can't be sure they actually did the staking correctly or even at all.
- beaned 4y ago
  That seems like a traditional contract between provider and consumer more than a security. If I own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent. ChatGPT (for what it's worth): When people talk about "securities," they usually mean financial instruments such as stocks, bonds, and derivatives, rather than specific types of payments made to shareholders. In this broader sense, dividends are not considered securities themselves, but they are closely related to the securities that represent ownership in a company.
  - JumpCrisscross 4y ago
    > own a dividend-bearing stock on Charles Schwab and they don't pay me the dividend, it's not because Charles Schwab offered a security, they're just being fraudulent When you buy a dividend-bearing stock on Charles Schwab, you're given access to shareholder documents describing what you are owed under what conditions. There is no analog for crypto. The investor's interface is with Kraken, not with the chain. This isn't an insurmountable problem! But every staking product I've seen mimics a high-yield savings account more than the FX-linked security that it is.
    - beaned 4y ago
      I don't understand how they're different. Charles Schwab is a middleman to the company (say Exxon). Kraken is a middleman to the Blockchain. That seems like a clear analog, and not only that, but the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents, which represent legal contracts, but are still susceptible to human error.
      - JumpCrisscross 4y ago
        > Charles Schwab is a middleman to the company (say Exxon) Charles Schwab is a middleman to the market. Exxon separately puts out disclosures. Charles Schwab and Exxon never need interact for this to work. > Kraken is a middleman to the Blockchain Agreed. Which is why it should be regulated like Charles Schwab. The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must. > the code, the law of the Blockchain, is certainly more publicly available and less prone to change or failure than shareholder documents This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true.
        beaned 4y ago
        > The SEC isn't going that far. It's just saying if you want to take peoples' money and pay a return on it, you need to do the things others who do the same must. Like what? I'm not sure I understand. They're both approved to hold things for consumers, which is already a promise to redeem upon request. Staking feels like the same thing. Is the confusion because ETH itself has not yet been explicitly ruled to be a security? > This is a valid hypothesis. To the extent it's been tested, the opposite has been (inconclusively) true Would be an interesting debate but maybe let's not go down that rabbit hole :D
- zoklet-enjoyer 4y ago
  Look on chain. Kraken is one of the largest ATOM validators.
JumpCrisscross 4y ago
> a "promise" if it's a guaranteed algorithmic result? Staking isn't banned. Intermediaries offering staking-based-products is being questioned. There is no algorithmic guarantee Kraken is doing anything.
- beaned 4y ago
  That still doesn't make it a security.
  - JumpCrisscross 4y ago
    > doesn't make it a security The alternative is a bank account. That's not a conversation anyone in crypto wants to have. Longer: yes, it does. You're investing money with the expectation of profit. For on-chain staking, the common enterprise and effort of others tests are ambiguous. But here, you're not staking on chain. You're giving money to Kraken to stake for you. Security. (Again, it looks more like a savings account, but nobody wants that.)
    - beaned 4y ago
      It seems to me that by this description, whether or not it's a security is basically how it's marketed? You could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw. Also these returns are denominated in the staked currency, there is no - and had never been - a promise of returns in USD. I don't actually know: does that make a difference, technically speaking? It would seem that it should.
      - JumpCrisscross 4y ago
        > whether or not it's a security of basically marketing? Not basically, but substantially. > could also explain such a product as simply a custodianship that is able to hold your eth in a staked state for you, with no promise of return at all, only a claim to whatever the staked eth amounts to in its own domination at the time you'd like to withdraw Custodianship is a big word in finance [1]. There are crypto custodians, and I'm guessing they let coins be staked. But that isn't something you can easily scale to retail. > there is no - and had never been - a promise of returns in USD Not relevant. You can issue stock that pays dividends in piñatas. If it's sold to Americans, the SEC has jurisdiction. [1] https://www.investopedia.com/terms/c/custodian.asp https://www.investopedia.com/terms/c/custodian.asp
timcavel 4y ago
[dead]
MacsHeadroom 4y ago
>Is it a "promise" if it's a guaranteed algorithmic result? No, and that's what decentralized staking is. That's fine and the SEC is explicitly not taking issue with it. Centralized 'promising to engage in decentralized staking on a customer's behalf' is not guaranteed or algorithmic-- which is why it necessarily causes said customers to "take on risks associated with those [centralized] platforms," to quote the SEC, and thus becomes a security.

g42gregory 4y ago

> Promising to use funds in a specific way to generate a specific return If you also promise to return the money after the specified period, this sounds like a definition of a fixed income bond, no?

JumpCrisscross 4y ago
> this sounds like a definition of a fixed income bond Bonds are securitised loans, which are not securities per se. It's a somewhat arbitrary boundary that rests on the degree to which a secondary market exists. But just because something is loan-like doesn't make it a security.
- legutierr 4y ago
  When is a bond not a security?
  - JumpCrisscross 4y ago
    > When is a bond not a security Bonds are securities. Loans aren’t always. (Government debt in the form of Treasuries are securities. Government debt in the form of accounts payable are not.)
deleted 4y ago
[deleted]

deleted 4y ago

[deleted]