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The Howey test is a test for investment contracts, not securities in general. Securities are much broader and can even include things expected to yield a loss

by ac29 4y ago

The Howey test is a test for investment contracts, not securities in general. Securities are much broader and can even include things expected to yield a loss (such as negative yield-to-maturity bonds).

yokem55 4y ago
True, but there has to be some kind of limiting definition of 'non-investment security', because otherwise any business offering a 'money back guarantee' when they sell a physical product is selling an unregistered security. Hence it should be a very tall order for the SEC to attempt to label non-investment things as securities.
LatteLazy 4y ago
I am not sure that's accurate. I believe a security is MORE tightly defined than an investment contract: it had to be fungible etc. But I may be wrong and I think most of crypto already fulfils this which is why people default to Howey. I'd be happy to be corrected. Either way, we are sort of stuck on the same core problem: What is a security? The Howey test was made up by SCOTUS. It isn't set in stone. If someone can made a convincing case it's wrong, congress or the courts can change it. The problem is, it is actually hard to come up with a definition that is general, simple and applies to stable coins but not to 1000s of thinks like bricks or cars or concert tickets. That's how we ended up with Howey in the first place. So we either have to admit stable coins aren't securities. Or we have to widen the definition a lot and suddenly the sec also have to regulate all sorts of markets they've never actually touched before. Of course if you know such a definition, I am all ears. I actually think cryptos state as psuedo regulated is the worst of all worlds: good actors and would be investors or users are put off by the chance of politically motivated regulator actions and rampant fraud. But that's a much wider position than "stable coins aren't securities because they don't offer a reasonable expectation of profit"...

by ac29 4y ago

yokem55 4y ago

True, but there has to be some kind of limiting definition of 'non-investment security', because otherwise any business offering a 'money back guarantee' when they sell a physical product is selling an unregistered security. Hence it should be a very tall order for the SEC to attempt to label non-investment things as securities.

LatteLazy 4y ago

I am not sure that's accurate. I believe a security is MORE tightly defined than an investment contract: it had to be fungible etc. But I may be wrong and I think most of crypto already fulfils this which is why people default to Howey. I'd be happy to be corrected. Either way, we are sort of stuck on the same core problem: What is a security? The Howey test was made up by SCOTUS. It isn't set in stone. If someone can made a convincing case it's wrong, congress or the courts can change it. The problem is, it is actually hard to come up with a definition that is general, simple and applies to stable coins but not to 1000s of thinks like bricks or cars or concert tickets. That's how we ended up with Howey in the first place. So we either have to admit stable coins aren't securities. Or we have to widen the definition a lot and suddenly the sec also have to regulate all sorts of markets they've never actually touched before. Of course if you know such a definition, I am all ears. I actually think cryptos state as psuedo regulated is the worst of all worlds: good actors and would be investors or users are put off by the chance of politically motivated regulator actions and rampant fraud. But that's a much wider position than "stable coins aren't securities because they don't offer a reasonable expectation of profit"...