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I 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 o

I 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 ago
Not 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.
- wpietri 3y ago
  The burden of proof to prove a crime still falls on the accuser. Nothing has changed there. I also don't think the interpretation has changed at all. We're still using the Howey test. The SEC took no immediate position on the cryptoetcetera community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn. I'll note how much the more socially legitimate end of that community have been asking for "regulatory clarity". The problem is that they now have clarity and don't like it. And I'm sure they don't. They were hoping to sweep aside the regulatory regime set up in 1934, which was in response to the crash of 1929. But I don't think we need any particular safe harbor for people who tried to dodge regulators and lost.
  - dcow 3y ago
    I have very little skin in the game and certainly haven't dabbled in the NFT world. And I “don’t like” the idea that a regulator can essentially leverage ambiguous language to prosecute after the fact just to leave innovators on their toes. This is required to achieve your goal of innovators asking “should I be doing this”, because otherwise there are clear guidelines and nobody is left wondering. Nothing has changed about the legal system, you’re right, but you expressed a desire to live in a more ambiguous regulatory regime where people are unsure whether they’re committing crimes or not because we’re okay with a changing interpretation of how regulations apply. That rubs me the wrong way and frankly feels pretty dystopian. Yeah I agree that practically it’s good to not have a bunch of buffoons running around doing quasi-legal securities offerings by a different name. But would it really have hurt to have the SEC say “we’ll be applying the Howey Test to NFTs, if you plan to sell one we’d recommend consulting a lawyer versed in securities law before proceeding”. Were consumers really damaged when their founders keys weren’t worth anything? Who in their right mind even treats a founders key as an honest security? Seems like there’s some blame on both sides here. It’s conversely not great to have consumers not using their brains, applying zero scrutiny, and buying into whatever the new street fad is then wailing for the Uncle SEC when their little crypto tokens became worthless. In short, I don’t think you need an ambiguous regulatory regime to achieve a climate of healthy innovation. You just need the SEC to not drag its feet on action and a little up front “hey don’t be idiots we consider this stuff a security <insert reminder of penalties for violation of securities law> so do your homework”.

dcow 3y ago

Not 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.

wpietri 3y ago
The burden of proof to prove a crime still falls on the accuser. Nothing has changed there. I also don't think the interpretation has changed at all. We're still using the Howey test. The SEC took no immediate position on the cryptoetcetera community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn. I'll note how much the more socially legitimate end of that community have been asking for "regulatory clarity". The problem is that they now have clarity and don't like it. And I'm sure they don't. They were hoping to sweep aside the regulatory regime set up in 1934, which was in response to the crash of 1929. But I don't think we need any particular safe harbor for people who tried to dodge regulators and lost.
- dcow 3y ago
  I have very little skin in the game and certainly haven't dabbled in the NFT world. And I “don’t like” the idea that a regulator can essentially leverage ambiguous language to prosecute after the fact just to leave innovators on their toes. This is required to achieve your goal of innovators asking “should I be doing this”, because otherwise there are clear guidelines and nobody is left wondering. Nothing has changed about the legal system, you’re right, but you expressed a desire to live in a more ambiguous regulatory regime where people are unsure whether they’re committing crimes or not because we’re okay with a changing interpretation of how regulations apply. That rubs me the wrong way and frankly feels pretty dystopian. Yeah I agree that practically it’s good to not have a bunch of buffoons running around doing quasi-legal securities offerings by a different name. But would it really have hurt to have the SEC say “we’ll be applying the Howey Test to NFTs, if you plan to sell one we’d recommend consulting a lawyer versed in securities law before proceeding”. Were consumers really damaged when their founders keys weren’t worth anything? Who in their right mind even treats a founders key as an honest security? Seems like there’s some blame on both sides here. It’s conversely not great to have consumers not using their brains, applying zero scrutiny, and buying into whatever the new street fad is then wailing for the Uncle SEC when their little crypto tokens became worthless. In short, I don’t think you need an ambiguous regulatory regime to achieve a climate of healthy innovation. You just need the SEC to not drag its feet on action and a little up front “hey don’t be idiots we consider this stuff a security <insert reminder of penalties for violation of securities law> so do your homework”.