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other very popular industries could be selling securities, if you actually apply the test. Tell me the flaw in the following, and if there is no flaw, why did t
by EGreg 3y ago
other very popular industries could be selling securities, if you actually apply the test. Tell me the flaw in the following, and if there is no flaw, why did the SEC never go after them to make an example:
All shows like Yu Gi Oh, Pokemon, etc. have been running, technically speaking, unregistered securities offerings throughout the world and United States, yet the SEC does nothing. They are textbook cases of the Howey Test:
1) People (kids, in fact!) buy Yu Gi Oh trading cards
2) There is an investment of money (either they nag their parents, or they actually spend a non-trivial proportion of their own life savings)
3) With an expectation of profit. Witness how many of them don't actually use the cards, but keep them in mint condition (and as we have seen SEC successfully argue in the recent case SEC vs LBRY, if even a few people buy with expectation of profit, then ALL those sales are securities).
4) From the efforts of others -- namely the producers of the show, and their promotion of Yu Gi Oh trading cards. Trading! Perhaps even selling!
5) There is definitely a common enterprise, that isn't even decentralized. The Yu Gi Oh show is produced in Japan and shown in the USA, and drives the sales of the cards. Cancel the show, and the cards fall in price.
Yu Gi Oh Abridged series even lampooned this, to great comedic effect.
Oh those foreign-owned Japanese companies, preying on our kids selling them investment contracts! Do they really think the kids are sophisticated investors who think things through when they keep their mint-condition cards! Who will buy the top and be holding the bag after the show is canceled?
So being a textbook definition of Howey, why did the SEC never go after Pokemon, Yu Gi Oh and any of the other "merchandising" companies? How about Marvel with their mint-condition comics? Isn't that a "common enterprise" since some people buy comics for their investment value?
- marcinzm 3y ago>why did the SEC never go after them to make an example: Because they don't have a market cap over a trillion dollars.
- lettergram 3y agoGoing after trading cards would point out how crazy the SEC actually is
- djbusby 3y agoThe cards can also be used for playing and the comics for reading. They escape the Howey Test because they can and are used for non-securities things.
- codehalo 3y agoAre you implying that cryptocurrencies can't or don't?
- EGreg 3y agoThat’s the same argument that makers of utility tokens made. As long as the items are useful, they’re not securities. Any securities lawyer worth their salt will tell you that mere possible utility does not make something not a security. The distinction of “utility token” vs “security token” is not an official dichotomy. Something could be a utility token AND STILL be sold in securities sales. For example, concert tickets are useful to attend a concert. But if you buy thousands of them, and scalp them, you aren’t doing it to attend a thousand concerts. You’re doing it to resell and make a profit. You have a common enterprise with the people putting on the concert. Similarly if you buy too many utility tokens for you to conceivably use in the next few years, that could be a securities transaction by the Howey Test. Look no further than LBRY case recently decided in SEC’s favor. I read it and spoke to the founder recently (randomly met him in a car shop LOL). And I am not even talking about the Risk Capital test, used in California and a dosen other Western states, by which most Kickstarter campaigns are technically unregistered securities sales!
- pwb25 3y agoand crypto currencies are used as fuel for their networks
- FireBeyond 3y agoThis is a non-statement. What does that even mean? That's like saying "The USD is used as fuel for the US economy." Even talking about more crypto-concepts as gas fees doesn't negate this. It's not some "other purpose" and courts won't buy such disingenuous spins.
- jcranmer 3y ago> 5) There is definitely a common enterprise, that isn't even decentralized. The Yu Gi Oh show is produced in Japan and shown in the USA, and drives the sales of the cards. Cancel the show, and the cards fall in price. That is not a common enterprise. Where is the role of the "investor" (purchaser of the cards) in this enterprise?
- EGreg 3y agoTo make the claim that it’s not a common enterprise, you’d have to actually define the term “common enterprise”. Can you link to an authoritative or reliable definition? Or case law? Really anything? That would tive us a basis for discussion. Merely claiming “it’s not a common enterprise” cause it’s your feeling, is a weak defense if SEC were to bring a case.
- hef19898 3y agoWhy stop at defining "common enterprise"? We should also define "define", "common", "enter" and "prise". After all we need a common basis, folks!
- EGreg 3y agoTerms in law need to have a commonly accepted definition in order for anyone to decide court cases. Sometimes case law has an effect to chnage the definition. What is your point? That definitions are irrelevant, and anyone can claim any combination of words ?
- hef19898 3y agoThat, and I am not a lawyer, apparently it is pretty clear what a "common enterprise" is in the context we discuss here. Challenging that definition just because you don't like it might win internet arguments. Wether or not it works in court this time, believe it or not that defence was already tried, will be seen. I guess it won't end too well for crypto so.