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Sorry for the stupid questions, I really know very little about crypto. With that said, > Gensler firmly maintains that the vast majority of crypto assets are

Sorry for the stupid questions, I really know very little about crypto. With that said, > Gensler firmly maintains that the vast majority of crypto assets are securities, with the exception of Bitcoin Why? From an article on Reuters[1], > Bitcoin is not considered a security because its anonymous and open-source origins mean investor profits are not dependent on the efforts of developers or managers, said Carol Goforth, a law professor at the University of Arkansas. How is this different from, say, Ethereum? What about when changes to the Bitcoin network are done (either directly e.g. bug fixes or indirectly such as hard forking), does this not count as "efforts of developers or managers?" ^1: https://www.reuters.com/business/finance/what-makes-crypto-asset-security-us-2023-06-07/ https://www.reuters.com/business/finance/what-makes-crypto-a...

super256 3y ago
Ethereum ICO‘d and therefore doesn’t pass the Howey test.
- everfree 3y ago
  The Howey test is applied to the current status of an asset. It doesn't take an asset's origins into consideration. If you believe that Ethereum currently represents "an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others", then it is a security. If not, then not.
  - babyshake 3y ago
    Is there a statute of limitations or a similar concept? For example, hypothetically would it be possible 30 years after the Ethereum ICO for the SEC to declare that ETH has been a security the entire time? As of now, it's been almost 10 years since the Ethereum ICO.
    - yokem55 3y ago
      5 years unless there is evidence of active fraud.
      - iudqnolq 3y ago
        but that doesn't mean that if something exists for more than five years it can't be a fraud. It means they would have to find an action by Coinbase that was illegal and was done within the last five years. If it was illegal for coinbase to be a broker continually up until the present day then that would be within the statute of limitations
  - deleted 3y ago
    [deleted]
  - ceejayoz 3y ago
    If it was a security, but no longer is, the sale of an unregistered security back then was still a violation of the law that (barring statutes of limitations) could presumably still be prosecuted. The sale of ETH today would not be if it has transitioned into commodity status. The Howey test would be applied to the status of the asset at the time of the alleged violation of the law that is being prosecuted.
    - everfree 3y ago
      Right, but past violations of the law have nothing to do with how an asset should currently be regulated, which is what this thread is about.
      - ceejayoz 3y ago
        It has plenty to do with it. People are going "well they say BTC and ETH are OK, why not this random shitcoin?" The answer is "ETH wasn't OK when it was still like said random shitcoin".
dboreham 3y ago
[flagged]
potatototoo99 3y ago
In bitcoin software contributors can propose changes to the protocol and software, but they have no absolute power since they can just be rejected by the miners, who are not paid directly from bitcoin raising in price, but from fees from the operation of the network itself. So there is no organization or entity promising returns for owning bitcoin. In Ethereum, a centralized group of people put together a public sale of the token, promising great returns in exchange due to their visionary ideas. This is all perfectly fine, except they didn't register their sale as a security and companies touching Ethereum and other tokens continue to not follow security rules; which involve for instance disclosures about ownership and conflicts of interest. Ethereum is an extremelly centralized business with a few key figures with an interest in the appreciation of the asset, advertising it illegally to a US audience without following US laws.
- landoftheice 3y ago
  [dead]
- nnx 3y ago
  "In Ethereum, a centralized group of people put together a public sale of the token, promising great returns in exchange due to their visionary ideas. This is all perfectly fine, except they didn't register their sale as a security" If I write a book with visionary ideas that promises to change your life (great returns) and continue to work on revisions as I come up with new ideas - should I register it as a security before I can sell my book? The whole concept of securities laws makes little sense if you try to expand its reach beyond narrow traditional finance use cases... if even those cases make sense in the first place. Might be better off repealing all this complexity/bureaucracy and better enforce existing generic laws about theft/fraud...
  - refulgentis 3y ago
    You nailed it, securities law doesn't make sense if you don't apply it to finance. Not sure that really advances the rest of the claims.
    - 3y ago
everfree 3y ago
That's a good point. It sure would be helpful if Gary Gensler elaborated on his reasoning, rather than handing down his opinions with no explanation.
- wmf 3y ago
  I think he did explain it: Most coins have a centralized development team who are focused on increasing the coin's value. It's a classic investment no different than a startup.
  - everfree 3y ago
    Bitcoin has a centralized development team who is focused on increasing the coin's value. By writing more efficient clients, coordinating soft forks, and curating standards, the Bitcoin Core dev team is directly supporting the asset. So why did the SEC declare it not to be a security? We could speculate as much as we want, but at the end of the day these are the hard-hitting questions that the SEC has been avoiding, and their avoidance of these questions has been bad for everyone involved. Right now everyone is guessing why exactly the SEC considers most of the top 10 coins to be securities, except Bitcoin, with Ethereum apparently in limbo. Most importantly, it leaves companies guessing whether they'll have to wage a bankrupting 50-million-dollar lawsuit against the SEC to try to defend themselves if they launch a coin they believe not to be a security, but that the SEC later classifies as one through their opaque reasoning process. I mentioned it in a comment above, but the SEC needs to release something like a 10-step process for determining whether a certain crypto is a security. Something that's clear enough that a company's lawyers can apply it to their products to determine without a doubt whether they are in compliance with the law.
    - refulgentis 3y ago
      It's not centralized...
      - everfree 3y ago
        What do you call the group of developers who control write access and pull request approvals for the Bitcoin Core GitHub repository? You can't just apply to become one of these devs; they're grandfathered in from the early days. And they're the sole group who effectively have the final say on what features make it into the network protocol. To me, that sounds like a centralized team employing centralized decision making.
throwaway22032 3y ago
For those who saw Bitcoin and Ethereum from day 1 or close to it it makes more sense. Bitcoin started out as a toy with no value, even perhaps a proof of concept, which eventually gained value and began to be traded. Even years after its' creation people gave it away for free, there were faucets. The creator disappeared and the protocol intentionally has been designed in such a way that making changes is difficult and there's a lot of veto power by users. Ethereum has nothing like the same origin story. There was an expectation of value from the beginning, Vitalik is still around, and there are often huge centralized changes like PoS, the DAO rollback, etc.
- ETH_start 3y ago
  >Ethereum has nothing like the same origin story. Ethereum was the first token sale. There was no precedent established at the time of people profiting off of token sales. The token sale agreement explicitly said not to expect a profit. It was treated by participants as more of a kickstarter to crowdfund the launch of a new kind of decentralized computing platform. Going off tangent: if a token sale explicitly states that participants should not expect to profit, then the SEC should have no jurisdiction over it. Securities laws, as is, are already severe limitations on the right of adults to freely contract. To then shoehorn tokens - that represent no equity and make no representation of giving a claim to assets - into being subject to securities laws, is just egregious suppression of basic rights.
  - lclc 3y ago
    > Ethereum was the first token sale. That's not true. The first token sale (ICO) was Mastercoin, 1 year before Ethereum's ICO.
    - ETH_start 3y ago
      *first successful token sale
latchkey 3y ago
Matt Levine said it best: https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security https://www.bloomberg.com/opinion/articles/2023-06-07/when-i... "Some of them did securities offerings, but by the time the SEC noticed they were too entrenched and decentralized and it would have been a pain for the SEC to go after them. Ethereum, most notably, very very clearly did an ICO in 2014, raising about $18.3 million by selling ETH tokens. If they did that today, or in late 2017, the SEC would have some serious questions. But by the time the SEC got around to cracking down on ICOs in 2017, Ethereum was big and decentralized and the SEC would have had a hard time, practically and legally, challenging its 2014 ICO. And so everyone sort of grudgingly concedes that ETH is not a security."
paulddraper 3y ago
> How is this different from, say, Ethereum? The House Financial Services Chairman asked Gensler (Head of SEC) point blank half a dozen times whether Ethereum was a security. Half a dozen times, Gensler refused to answer. :/ https://youtu.be/VhA1dZXeao0 https://youtu.be/VhA1dZXeao0

super256 3y ago

Ethereum ICO‘d and therefore doesn’t pass the Howey test.

everfree 3y ago
The Howey test is applied to the current status of an asset. It doesn't take an asset's origins into consideration. If you believe that Ethereum currently represents "an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others", then it is a security. If not, then not.
- babyshake 3y ago
  Is there a statute of limitations or a similar concept? For example, hypothetically would it be possible 30 years after the Ethereum ICO for the SEC to declare that ETH has been a security the entire time? As of now, it's been almost 10 years since the Ethereum ICO.
  - yokem55 3y ago
    5 years unless there is evidence of active fraud.
    - iudqnolq 3y ago
      but that doesn't mean that if something exists for more than five years it can't be a fraud. It means they would have to find an action by Coinbase that was illegal and was done within the last five years. If it was illegal for coinbase to be a broker continually up until the present day then that would be within the statute of limitations
- deleted 3y ago
  [deleted]
- ceejayoz 3y ago
  If it was a security, but no longer is, the sale of an unregistered security back then was still a violation of the law that (barring statutes of limitations) could presumably still be prosecuted. The sale of ETH today would not be if it has transitioned into commodity status. The Howey test would be applied to the status of the asset at the time of the alleged violation of the law that is being prosecuted.
  - everfree 3y ago
    Right, but past violations of the law have nothing to do with how an asset should currently be regulated, which is what this thread is about.
    - ceejayoz 3y ago
      It has plenty to do with it. People are going "well they say BTC and ETH are OK, why not this random shitcoin?" The answer is "ETH wasn't OK when it was still like said random shitcoin".

dboreham 3y ago

[flagged]

potatototoo99 3y ago

In bitcoin software contributors can propose changes to the protocol and software, but they have no absolute power since they can just be rejected by the miners, who are not paid directly from bitcoin raising in price, but from fees from the operation of the network itself. So there is no organization or entity promising returns for owning bitcoin. In Ethereum, a centralized group of people put together a public sale of the token, promising great returns in exchange due to their visionary ideas. This is all perfectly fine, except they didn't register their sale as a security and companies touching Ethereum and other tokens continue to not follow security rules; which involve for instance disclosures about ownership and conflicts of interest. Ethereum is an extremelly centralized business with a few key figures with an interest in the appreciation of the asset, advertising it illegally to a US audience without following US laws.

landoftheice 3y ago
[dead]
nnx 3y ago
"In Ethereum, a centralized group of people put together a public sale of the token, promising great returns in exchange due to their visionary ideas. This is all perfectly fine, except they didn't register their sale as a security" If I write a book with visionary ideas that promises to change your life (great returns) and continue to work on revisions as I come up with new ideas - should I register it as a security before I can sell my book? The whole concept of securities laws makes little sense if you try to expand its reach beyond narrow traditional finance use cases... if even those cases make sense in the first place. Might be better off repealing all this complexity/bureaucracy and better enforce existing generic laws about theft/fraud...
- refulgentis 3y ago
  You nailed it, securities law doesn't make sense if you don't apply it to finance. Not sure that really advances the rest of the claims.
  - 3y ago

everfree 3y ago

That's a good point. It sure would be helpful if Gary Gensler elaborated on his reasoning, rather than handing down his opinions with no explanation.

wmf 3y ago
I think he did explain it: Most coins have a centralized development team who are focused on increasing the coin's value. It's a classic investment no different than a startup.
- everfree 3y ago
  Bitcoin has a centralized development team who is focused on increasing the coin's value. By writing more efficient clients, coordinating soft forks, and curating standards, the Bitcoin Core dev team is directly supporting the asset. So why did the SEC declare it not to be a security? We could speculate as much as we want, but at the end of the day these are the hard-hitting questions that the SEC has been avoiding, and their avoidance of these questions has been bad for everyone involved. Right now everyone is guessing why exactly the SEC considers most of the top 10 coins to be securities, except Bitcoin, with Ethereum apparently in limbo. Most importantly, it leaves companies guessing whether they'll have to wage a bankrupting 50-million-dollar lawsuit against the SEC to try to defend themselves if they launch a coin they believe not to be a security, but that the SEC later classifies as one through their opaque reasoning process. I mentioned it in a comment above, but the SEC needs to release something like a 10-step process for determining whether a certain crypto is a security. Something that's clear enough that a company's lawyers can apply it to their products to determine without a doubt whether they are in compliance with the law.
  - refulgentis 3y ago
    It's not centralized...
    - everfree 3y ago
      What do you call the group of developers who control write access and pull request approvals for the Bitcoin Core GitHub repository? You can't just apply to become one of these devs; they're grandfathered in from the early days. And they're the sole group who effectively have the final say on what features make it into the network protocol. To me, that sounds like a centralized team employing centralized decision making.

throwaway22032 3y ago

For those who saw Bitcoin and Ethereum from day 1 or close to it it makes more sense. Bitcoin started out as a toy with no value, even perhaps a proof of concept, which eventually gained value and began to be traded. Even years after its' creation people gave it away for free, there were faucets. The creator disappeared and the protocol intentionally has been designed in such a way that making changes is difficult and there's a lot of veto power by users. Ethereum has nothing like the same origin story. There was an expectation of value from the beginning, Vitalik is still around, and there are often huge centralized changes like PoS, the DAO rollback, etc.

ETH_start 3y ago
>Ethereum has nothing like the same origin story. Ethereum was the first token sale. There was no precedent established at the time of people profiting off of token sales. The token sale agreement explicitly said not to expect a profit. It was treated by participants as more of a kickstarter to crowdfund the launch of a new kind of decentralized computing platform. Going off tangent: if a token sale explicitly states that participants should not expect to profit, then the SEC should have no jurisdiction over it. Securities laws, as is, are already severe limitations on the right of adults to freely contract. To then shoehorn tokens - that represent no equity and make no representation of giving a claim to assets - into being subject to securities laws, is just egregious suppression of basic rights.
- lclc 3y ago
  > Ethereum was the first token sale. That's not true. The first token sale (ICO) was Mastercoin, 1 year before Ethereum's ICO.
  - ETH_start 3y ago
    *first successful token sale

latchkey 3y ago

Matt Levine said it best: https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security https://www.bloomberg.com/opinion/articles/2023-06-07/when-i... "Some of them did securities offerings, but by the time the SEC noticed they were too entrenched and decentralized and it would have been a pain for the SEC to go after them. Ethereum, most notably, very very clearly did an ICO in 2014, raising about $18.3 million by selling ETH tokens. If they did that today, or in late 2017, the SEC would have some serious questions. But by the time the SEC got around to cracking down on ICOs in 2017, Ethereum was big and decentralized and the SEC would have had a hard time, practically and legally, challenging its 2014 ICO. And so everyone sort of grudgingly concedes that ETH is not a security."

paulddraper 3y ago

> How is this different from, say, Ethereum? The House Financial Services Chairman asked Gensler (Head of SEC) point blank half a dozen times whether Ethereum was a security. Half a dozen times, Gensler refused to answer. :/ https://youtu.be/VhA1dZXeao0 https://youtu.be/VhA1dZXeao0