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SEC charges Impact Theory for unregistered offering of NFTs
- endianswap 3y agoHere's a link to the actual SEC press release, not the dissent over the action by two of the commissioners: https://www.sec.gov/news/press-release/2023-163 https://www.sec.gov/news/press-release/2023-163
- slapshot 3y ago@dang
- dang 3y agoOk, we've changed the URL to that from https://www.sec.gov/news/statement/peirce-uyeda-statement-nft-082823 https://www.sec.gov/news/statement/peirce-uyeda-statement-nf.... Thanks!
- yieldcrv 3y agoIts great to see commissioner Mark T Uyeda also dissenting, because for some time it was only Hester Pierce that would take these views on digital assets, and for her views to be elevated to head commissioner it requires a Republican President to make that nomination, as she is Republican. There are many people that are not Republican that would aim to get her appointed and do whatever it takes. Which means casting a vote for a Republican Presidential candidate no matter who that is, simply because the power is imbued within that person. Mark T Uyeda's existence as a Democrat makes this a lot simpler, for people that would find the above to be awkward, as Democrat leadership could also nominate him for head commissioner. Bipartisan dissent is great. It really isn't enough to just not like digital assets or the industry, to establish jurisdiction over them for enforcement. Oh no people lost money.... because they couldn't resale a consumer product? > We do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles along with vague promises to build the brand and thus increase the resale value of those tangible items. exactly, its either go after all of them until Congress rescinds the agency's charter completely with this outstanding application of Howey, or show the exact distinction that crypto asset creators can follow to act solely as a consumer product.
- lukev 3y agoI agree that the dissenters bring up a lot of good questions that need answering. However, if you believe their fundamental argument that NFTs aren't really securities... what regulatory body should prevent this kind of behavior? Or should rug-pulls effectively be legal, and buyer beware?
- bonestamp2 3y agoIf NFTs are not securities, then I believe it would fall on the FTC, like most other consumer protections.
- lukev 3y agoBut what law is being broken, if NFTs aren't securities?
- tedivm 3y agoThe article doesn't really match the title. The SEC press release is much more informative: https://www.sec.gov/news/press-release/2023-163 https://www.sec.gov/news/press-release/2023-163 What this article is linked to is a dissent from two of the commissioners.
- Dowwie 3y agothe title is literally the first sentence in the article
- dang 3y agoThanks. We've changed the URL from https://www.sec.gov/news/statement/peirce-uyeda-statement-nft-082823 https://www.sec.gov/news/statement/peirce-uyeda-statement-nf... to that now. See also https://news.ycombinator.com/item?id=37300225 https://news.ycombinator.com/item?id=37300225 and https://news.ycombinator.com/item?id=37300237 https://news.ycombinator.com/item?id=37300237.
- IOT_Apprentice 3y agoFinally addressing this other scammer portion of junk blockcoins et al. Long overdue.
- jermaustin1 3y agoThe concept of NFTs stored on a distributed ledger makes sense to me especially for the shitty games that sell skins. The idea they have some sort of value and can be considered a security, doesn't really. It is no different than the current in-game marketplaces that sell/resell skins from whatever game has skins this week. At what point does a thing you buy or sell become a security? Are baseball cards a security? Should my local baseball card shop be closed down as an unregistered securities broker? I don't own crypto or NFTs, so maybe I'm just not informed enough?
- bonestamp2 3y agoIt's a good question. I suppose it's possible that if your local baseball card store started marketing baseball cards as an investment, rather than a collectable, then they would land on the SEC's radar if they got big enough.
- cscheid 3y ago> At what point does a thing you buy or sell become a security? Are baseball cards a security? I don’t know about baseball cards, but the way Wizards of the Coast handles their policy around rare Magic: the Gathering cards makes me think their lawyers are definitely concerned about this kind of stuff.
- plorkyeran 3y agoWotC's steadfast refusal to publicly acknowledge the secondary resale market in any way gets comical at times, but they are a good example of how you should behave if you suspect you might have accidentally created a security.
- vkou 3y agoIs there any chance you, or someone else with knowledge of this could elaborate?
- bigger_cheese 3y ago
- playday 3y agoWhen you buy a restaurant lunch, you are expecting to increase your work income via the efforts of the cooks. And you clearly invested money since you pay for the lunch before you ate it. That’s all 3 prongs if the Howey test. Why isn’t the SEC enforcing securities laws against lunch fraud? Lunches must publish their financial statements so lunch buyers can make informed decisions! Personally I am angry that restaurants don’t publish the information I need to make an informed decision regarding my investment. What if they go bankrupt after I paid for my lunch and before they deliver it?
- jkingsman 3y agoIf crypto was actually like lunch -- returns were generated in minutes, there were tens of millions of successful examples that don't fail, and the insanely rare ones that fail in that mode risk double or low triple digit dollars -- then maybe the SEC wouldn't care as much.
- bigbillheck 3y agoWhen lunches fail it's more often the CDC (or the local equivalent) that gets involved.
- jkingsman 3y agoHAH right XD
- woah 3y agoIt may seem like lunches are doing well for a little while, but 12 hours later, they all go to shit
- bigbillheck 3y ago> you are expecting to increase your work income via the efforts of the cooks. Are you suggesting that retirees, the unemployed, students, and children never buy lunch? > since you pay for the lunch before you ate it. When was the last time you went to a restaurant that wasn't fast food?
- m00dy 3y agowhat Impact Theory is this ? the youtube channel ?
- deleted 3y ago[deleted]
- carabiner 3y agoNFT was just all fake volume... Sell an NFT to yourself for $1m, boom, you now own a $1m asset. Then list it for $100k for the next sucker.
- capableweb 3y agoHow do you sell yourself a NFT to yourself if you don't already have $1,000,000? Something is clearly missing from your line of thinking here.
- mmastrac 3y agoBitcoin loans? You just need it long enough to make a wash trade.
- wpietri 3y agoThere seem to be a lot of people out there with paper cryptocurrency gains who are happy to use them for absolutely anything that will make more money.
- andy81 3y agoThe normal method is to generate a collection of a 10k NFTs and sell back and forth between your own accounts for $100 each. The hope is that some sucker will buy them for $10, thinking that it's a bargain.
- AnthonyMouse 3y ago> How do you sell yourself a NFT to yourself if you don't already have $1,000,000? Installment plan.
- IanCal 3y agoMany people with a million dollars would like to have a million dollars and another hundred thousand dollars.
- vagab0nd 3y agoYou use a flashloan.
- Animats 3y agoNFTs were supposed to be an end-run around the Howey Test. ICOs were clearly securities offerings, and the SEC shut down most of those. NFTs were specifically designed to evade that test, by claiming they were really "digital artworks". This one, though, was clearly marketed as Make Money Fast. The Securities Act of 1934 has a "duck test" definition of security - if it is marketed, bought, sold, and held as a money-making thing, it's a security. The contract terms don't matter. This is because creative financial scams long predate 1934.
- wpietri 3y agoI really appreciate the way the Howey Test matches the regulatory purpose, its operationalist approach to the question. That it's stood up to nearly a century of scammer "innovation" is admirable. It does have the drawback of requiring some interpretation, some thought. But I think that's necessary. Rather than requiring regulators to keep creating ever-broader definitions of "security", patching every scammer hole, it throws the burden back on those wanting to innovate. They're supposed to stop and say, "Well what are we really up to here?" And I think that's where the burden should be. My only real grumble is that the SEC gave the cryptowhatever world too much rope. I wish they had been faster off the mark, so there was less nonsense. But even there I can't complain too much. Generally I want regulators to be cautious squashing new things.
- dcow 3y agoNot trying to kill the vibe of your comment, I just want to point out that the burden of proof historically has fallen on the accuser, the regulator, the plaintiff, (point is: not the defendant,) to prove that some behavior is illegal and problematic. So I’m not sure I agree that it’s good to foster a regulatory regime where everyone trying to innovate is questioning whether the political winds will change in the future and some new hotshot regulator is going to make their career by being tough on whatever they’re currently doing when last year nobody cared. Post facto regulation doesn't really do any good as you’ve realized in your comment—the damage is already done. So at least I think we need to protect innovators by holding regulators to a statute of limitation on enforcing policy (like no bringing cases against activity that predates some signaling by the regulator that the interpretation is changing), and ideally require regulators to publish guidelines before they’re allowed to take legal action. Or maybe regulators should have to inform an innovator that they’re no longer in compliance with an updated perspective and provide them actionable steps that if taken would make them compliant, etc. prior to taking legal action. I’m not saying there’s no room for interpretation practically, but this deal where the SEC sits silent on whether “crypto assets” are securities or not and the only way we’ll know is if they sue one of the innovators doesn’t seem particularly healthy either. It’s exactly why you can’t be held criminally accountable for something you did before it became a crime, and we should hold regulators to the same expectations.
- xigency 3y agoIf the largest governments in the world agree that crypto-hashes are stores of value then it really seems like BitCoin won.
- ninepoints 3y agoThe Zimbabwe dollar was a currency. An awful one but it was a currency nonetheless. Did it "win" by your metric I wonder.
- maerF0x0 3y agoI really enjoy a lot of Tom Bilyeu's content, but I've noticed he seems to lack a filter for great ideas from charlatans. And in some regards fair enough, it can be hard, but he's also building a brand and company around some folks who seem to be exaggerating their claims. For example Raoul Pal.
- for_i_in_range 3y agoHe interviews fantastic minds, and also clowns dressed up as intellectuals. Jay Shetty and the MindValley guy to name a few.
- opportune 3y agoThis seems reasonable. From what I am able to pick up, they thought they had found some clever loophole to ICO by selling NFTs. Despite the C&D some of their founders key benefits are still up: https://founderskey.io/images/fk/legendary-key.png https://founderskey.io/images/fk/legendary-key.png Basically 1. until the platform is implemented the key is basically an IOU. However, it can be sold and transferred for a profit AIUI so it’s not like a crowdfunded game where you get some similar benefits as those can’t be sold for a profit. 2. all your NFT corresponds to is a literal key representing the benefits Impact Theory will make available to you in the future so per the Howey Test you are purchasing a contract (not a specific piece of art or cosmetic) yielding profits from the sole efforts of a third party (Impact Theory). Honestly, they probably could have gotten away with it if they had been a little less lazy! I bet if they tried to raise money by selling some kind of character art (that currently exists like a normal NFT, not a custom avatar they’ll give you one day) that they’d eventually also display in their final product they’d have been fine. The interesting takeaway though is that it seems like you can’t do kickstarter-style crowdfunding through transferable NFT ICOs, at least in this form in which you got nothing but a key.
- _trampeltier 3y agoSome people argue with baseball, pokemon or whatever cards. I mean they have at least more or less a real usecase. But how about rare sneakers? The are really just for collecting and trading.
- CryptoBanker 3y agoWait, what’s the real usecase for baseball cards beyond collecting and reading? Asking as a baseball fan
- carabiner 3y agoThey can be used in shrines that produce the finite Baseball Energy.
- paxys 3y agoThe difference is that no one selling baseball cards or sneakers is saying "if you buy this you get a share of my entire business".
- kylebenzle 3y agoBaseball cards are in every way exactly like NFTs. Collectibles for children.
- justin101 3y agoNot being from the US, this is probably a stupid question. But why can't people in the US sell willingly and freely sell things (legitimate or otherwise) to other willing buyers without government interference/participation? I guess I used to think the US was the "land of the free" I guess I understood that people used this phrase in a literal way. Im wondering, when American's use the phrase "land of the free" perhaps I am misunderstanding, and it's really generally used in an ironic way? Can someone please explain?
- deleted 3y ago[deleted]
- IOT_Apprentice 3y agoWell first there are taxes. Secondly some things like narcotics are not alllowed to be sold. Other controlled substances as well.
- paxys 3y ago"Can't people in the US go out and shoot other people, because it is the land of the free?" No, there are still laws, and fraud is illegal.
- deleted 3y ago[deleted]
- mherdeg 3y agoI hate to dunk on this type of art while it's down but > Impact Theory agreed to destroy all Founder’s Keys in its possession or control What does this mean practically -- like they delete the files that would allow them to transfer control of the NFT? What even are these things, are they just text files in a distributed file system that list the owner's name or what?
- bl4ckneon 3y agoThey would most likely "burn" them which means giving control, transferring ownership, of those NFTs to a wallet address that no one controls which means they are out of circulation. I assume they see using a standard NFT contract which doesn't have any way of taking control of those NFTs once ownership is to that burner address. It would be impossible.