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The 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 ago
Are you implying that cryptocurrencies can't or don't?
EGreg 3y ago
That’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 ago
and crypto currencies are used as fuel for their networks
- FireBeyond 3y ago
  This 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.
  - EGreg 3y ago
    Ethereum is used to pay for transactions on its network. It is called “gas”. What level of detail do you want? People have a need to secure their transactions from double-spends and stealing etc. I personally think blockchains are a first-gen technology but the network requires ETH to pay for transactions. What is your point?
    - FireBeyond 3y ago
      "You can pay for transactions of a security with that same security, therefore it is not a security"? I don't think that's how it works.
      - EGreg 3y ago
        No, ETH is used to pay for transactions, the vast majority of which aren't "about Ethereum", but rather it is a general-purpose virtual machine that executes instructions in smart contracts, which can be for any general purpose, such as contests, or voting, or securing some assets, etc. So ETH has a lot of utility and is decentralized. That it's not a security has been a majority consensus of the SEC until Gary Gensler took over, and many commissioners including Hinman publicly said it: https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 But about whether it can never be considered a security? In theory I agree with you. Just because something has utility, doesn't mean it's not a security by the Howey test. Today the SEC says one thing (ETH is not a security). Tomorrow under different leadership they can turn around and say it is. Good luck convincing a court, though. And Howey is just on the federal level! As I have already said -- most Kickstarter campaigns are actually unregistered securities offerings, according to the Risk Capital test of California and a dozen other states: https://www.cuttingedgecapital.com/what-is-a-security-and-why-does-it-matter/ https://www.cuttingedgecapital.com/what-is-a-security-and-wh... Proceed at your Peril: https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1828&context=utklaw_facpubs https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1828&cont... Silver Hills case established the Risk Capital test: https://www.jdsupra.com/legalnews/silver-hills-doesn-t-mute-howey-23601/ https://www.jdsupra.com/legalnews/silver-hills-doesn-t-mute-... And in fact, nearly everything can be a security if you try hard enough: https://www.linkedin.com/pulse/everything-security-chris-harvey/?trk=pulse-article https://www.linkedin.com/pulse/everything-security-chris-har... So "how it works" is whatever the system happens to come up with in court cases and precedents. The definitions vary from jurisdiction to jurisdiction and are vague as it is. After all, capital invested into anything is "put at risk", even if by the Howey test it's not. While in Singapore, the definition of security is a lot more narrow. And FINMA in Switzerland seems to have a much more sane system specifically for tokens: https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/ https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleit... This is why blockchain and Web3 innovation is leaving the United States

codehalo 3y ago

Are you implying that cryptocurrencies can't or don't?

EGreg 3y ago

That’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 ago

and crypto currencies are used as fuel for their networks

FireBeyond 3y ago
This 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.
- EGreg 3y ago
  Ethereum is used to pay for transactions on its network. It is called “gas”. What level of detail do you want? People have a need to secure their transactions from double-spends and stealing etc. I personally think blockchains are a first-gen technology but the network requires ETH to pay for transactions. What is your point?
  - FireBeyond 3y ago
    "You can pay for transactions of a security with that same security, therefore it is not a security"? I don't think that's how it works.
    - EGreg 3y ago
      No, ETH is used to pay for transactions, the vast majority of which aren't "about Ethereum", but rather it is a general-purpose virtual machine that executes instructions in smart contracts, which can be for any general purpose, such as contests, or voting, or securing some assets, etc. So ETH has a lot of utility and is decentralized. That it's not a security has been a majority consensus of the SEC until Gary Gensler took over, and many commissioners including Hinman publicly said it: https://www.sec.gov/news/speech/speech-hinman-061418 https://www.sec.gov/news/speech/speech-hinman-061418 But about whether it can never be considered a security? In theory I agree with you. Just because something has utility, doesn't mean it's not a security by the Howey test. Today the SEC says one thing (ETH is not a security). Tomorrow under different leadership they can turn around and say it is. Good luck convincing a court, though. And Howey is just on the federal level! As I have already said -- most Kickstarter campaigns are actually unregistered securities offerings, according to the Risk Capital test of California and a dozen other states: https://www.cuttingedgecapital.com/what-is-a-security-and-why-does-it-matter/ https://www.cuttingedgecapital.com/what-is-a-security-and-wh... Proceed at your Peril: https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1828&context=utklaw_facpubs https://ir.law.utk.edu/cgi/viewcontent.cgi?article=1828&cont... Silver Hills case established the Risk Capital test: https://www.jdsupra.com/legalnews/silver-hills-doesn-t-mute-howey-23601/ https://www.jdsupra.com/legalnews/silver-hills-doesn-t-mute-... And in fact, nearly everything can be a security if you try hard enough: https://www.linkedin.com/pulse/everything-security-chris-harvey/?trk=pulse-article https://www.linkedin.com/pulse/everything-security-chris-har... So "how it works" is whatever the system happens to come up with in court cases and precedents. The definitions vary from jurisdiction to jurisdiction and are vague as it is. After all, capital invested into anything is "put at risk", even if by the Howey test it's not. While in Singapore, the definition of security is a lot more narrow. And FINMA in Switzerland seems to have a much more sane system specifically for tokens: https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/ https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleit... This is why blockchain and Web3 innovation is leaving the United States