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> 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 Tha
by IanCal 3y ago
> 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
That doesn't seem right. You're missing a really fundamental part of what makes a security a security. Let's steal the cut phrase from investopedia
> an investment contract, for the purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third part
Investing in a common enterprise is a really key part.
A random beeple NFT wouldn't meet that definition, even if marketed as "this hot new thing that's only going up in value". The SEC isn't stopping people buying daft things.
> The order finds that Impact Theory encouraged potential investors to view the purchase of a Founder’s Key as an investment into the business, stating that investors would profit from their purchases if Impact Theory was successful in its efforts
This is where it differed from many other NFTs that aren't securities.
- kranke155 3y agoPeople either self organised or were organised around discord chats with the purpose of pumping the price
- pclmulqdq 3y agoThe good news is that judges can read the law and interpret it without having a myopic focus on specific wordings. They also don't use investopedia as a legally-binding source. Whether an NFT (or any other crypto token) is a security is still very much up in the air, and I am assuming is not able to be uniformly defined. People making noises like "you are investing in a project" and "there will be airdrops to NFT holders" sure seem like they are trying to run an unregistered securities offering. On the other hand, tokens like LINK (which you spend to do call APIs) and NFTs that are sold purely for the art don't really seem like securities. Even tokens like ETH or BTC could be considered currencies/commodities rather than securities despite all of the "project" language.
- IanCal 3y ago> The good news is that judges can read the law and interpret it without having a myopic focus on specific wordings Hmm, sort of but the specific set of requirements here are important. That's the point of a test like this. > They also don't use investopedia as a legally-binding source. Sure, but it's literally a quote from the supreme court case, I was pointing out that I got that from investopedia. https://supreme.justia.com/cases/federal/us/328/293/ https://supreme.justia.com/cases/federal/us/328/293/ > Whether an NFT (or any other crypto token) is a security is still very much up in the air, and I am assuming is not able to be uniformly defined. Correct. NTFs are very simple data structures, it depends on the token and how it's sold as to whether it counts as a security or not.
- pclmulqdq 3y agoThe test does not include any specification of what must be an investment contract, though. Things like fields of orange trees have failed to pass the Howey test.
- Dylan16807 3y agoThe orange trees are there for the purpose of producing and selling oranges. In the case of a plain NFT, all labor associated with a piece of art is done before the NFT is sold. There is no enterprise generating profit for the owner. It's just an asset where they hope the value will increase.
- echelon 3y ago> It's just an asset where they hope the value will increase. If a16z invested in crypto / NFT companies that fail the Howey test, are they by extension culpable too?
- pclmulqdq 3y agoSure it is. And all that language about how you are buying into a project or this will be part of a future game with an economy is all part of that art too, right? And all the promises of airdrops are part of the art done beforehand, as are all of the promises that early buyers will be the "1%" of the new ecosystem?
- quickthrower2 3y agoWhat if I call the NFT: i_will_buy_this_back_with_the_proceeds_of_the_company_sale_in_2025?
- IanCal 3y agoMore likely to be a security then.
- paulddraper 3y agoIs that a contract?
- throwaway2037 3y agoThis posts reads like you don't understand the Howie Test. Literally, that decision blew away any offering designed to evade SEC rules. The Test is incredibly general and has never been defeated. Why do you think this time is different?
- Dylan16807 3y agoLots of things try to "evade" SEC rules by making them not apply, and many are successful. What does "never been defeated" mean, exactly?
- mrkeen 3y ago> What does "never been defeated" mean, exactly? Universal statements like this are hard to prove, and easy to disprove. All you need to do is provide one of your many successful examples.
- Dylan16807 3y agoI need clarification on what that sentence means before I can even look for a good example! Otherwise I'll just point at something that decided to not be a security and never had enforcement. There's a million kinds of collectible that fit that category. If it means that when the SEC invokes the rule it has never failed, then that probably just means they're going after the strongest cases. It doesn't mean you can't "evade" it.
- IanCal 3y agoI don't think it's different. NFTs are not all securities, right? Just because people speculate with them doesn't make them securities just like baseball cards aren't securities. NFTs can be securities, the ones the article is about clearly are.
- deleted 3y ago[deleted]