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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 sti

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community's various inventions, but they certainly didn't give anything their approval that they have since withdrawn.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”.
- ameister14 3y ago
  I honestly don't think a year and a half from conception and marketing of the assets to charges by the SEC is all that slow, especially in a new market.
- Animats 3y ago
  > 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”. They did that a few years back for ICOs, sending out "You seem to be doing an ICO. Tell us why you don't need to register this as a security". The ICO market mostly evaporated. A few ICOs did a securities registration. Embarrassing questions have to be answered in a securities registration. Like "Who are you?" "Where do you live?" "What's your previous financial experience?" "Do you have a criminal record?". Crypto people are scared of that stuff.
  - junofan 3y ago
    Got a link to the registration form? Would like to learn more.
    - Animats 3y ago
      SEC contacting ICO issuer regarding need for registration.[1] Form D, for small (under $5 million) issuers with a limited number of stockholders.[2] Free to file. Useful for legit small businesses, but not so much for crypto, because crypto issuers want a big "market cap" and lots of HODLrs. Form S-1, for large issuers.[3] This is the classic paper form as a PDF, but today you file this as an XML document. Software to format the XML file is available from several companies. Anyone can download those files and analyze them, plus, at last, the SEC web site has a decent web search interface that displays the financial info. Filing fee is $110.20 per $1,000,000 raised. Misstatements on a form S-1 are felonies. One of the main reasons crypto bros hate this process. [1] https://www.sec.gov/news/press-release/2017-227 https://www.sec.gov/news/press-release/2017-227 [2] https://www.sec.gov/education/smallbusiness/exemptofferings/formd https://www.sec.gov/education/smallbusiness/exemptofferings/... [3] https://www.sec.gov/files/forms-1.pdf https://www.sec.gov/files/forms-1.pdf
Animats 3y ago
> The problem is that they now have clarity and don't like it. Yes. Any hope for looser rules from Congress went away when Sam Bankman-Fried went to jail. (He's currently complaining about the jail food in Brooklyn.) If you want to know if the SEC will allow something unusual, you can ask the SEC for a "no-action letter". Three token issuers have obtained such letters.[1] Those are for game tokens, not Make Money Fast schemes. There's also the route of registering your new thing with the SEC as a security. A few companies did that.[2] The STX token is a registered security. Didn't do much, but it's legal. Registration is no guarantee of success, but it forces enough disclosures and auditing that a "rug pull" is less likely. Enough is on record that the people ripped off know who to go after. [1] https://www.kramerlevin.com/en/perspectives-search/the-secs-limited-guidance-on-crypto-tokens-in-no-action-letters.html https://www.kramerlevin.com/en/perspectives-search/the-secs-... [2] https://www.axios.com/2023/03/06/crypto-register-sec-securities-exchange-commission https://www.axios.com/2023/03/06/crypto-register-sec-securit...

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”.

ameister14 3y ago
I honestly don't think a year and a half from conception and marketing of the assets to charges by the SEC is all that slow, especially in a new market.
Animats 3y ago
> 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”. They did that a few years back for ICOs, sending out "You seem to be doing an ICO. Tell us why you don't need to register this as a security". The ICO market mostly evaporated. A few ICOs did a securities registration. Embarrassing questions have to be answered in a securities registration. Like "Who are you?" "Where do you live?" "What's your previous financial experience?" "Do you have a criminal record?". Crypto people are scared of that stuff.
- junofan 3y ago
  Got a link to the registration form? Would like to learn more.
  - Animats 3y ago
    SEC contacting ICO issuer regarding need for registration.[1] Form D, for small (under $5 million) issuers with a limited number of stockholders.[2] Free to file. Useful for legit small businesses, but not so much for crypto, because crypto issuers want a big "market cap" and lots of HODLrs. Form S-1, for large issuers.[3] This is the classic paper form as a PDF, but today you file this as an XML document. Software to format the XML file is available from several companies. Anyone can download those files and analyze them, plus, at last, the SEC web site has a decent web search interface that displays the financial info. Filing fee is $110.20 per $1,000,000 raised. Misstatements on a form S-1 are felonies. One of the main reasons crypto bros hate this process. [1] https://www.sec.gov/news/press-release/2017-227 https://www.sec.gov/news/press-release/2017-227 [2] https://www.sec.gov/education/smallbusiness/exemptofferings/formd https://www.sec.gov/education/smallbusiness/exemptofferings/... [3] https://www.sec.gov/files/forms-1.pdf https://www.sec.gov/files/forms-1.pdf

Animats 3y ago

> The problem is that they now have clarity and don't like it. Yes. Any hope for looser rules from Congress went away when Sam Bankman-Fried went to jail. (He's currently complaining about the jail food in Brooklyn.) If you want to know if the SEC will allow something unusual, you can ask the SEC for a "no-action letter". Three token issuers have obtained such letters.[1] Those are for game tokens, not Make Money Fast schemes. There's also the route of registering your new thing with the SEC as a security. A few companies did that.[2] The STX token is a registered security. Didn't do much, but it's legal. Registration is no guarantee of success, but it forces enough disclosures and auditing that a "rug pull" is less likely. Enough is on record that the people ripped off know who to go after. [1] https://www.kramerlevin.com/en/perspectives-search/the-secs-limited-guidance-on-crypto-tokens-in-no-action-letters.html https://www.kramerlevin.com/en/perspectives-search/the-secs-... [2] https://www.axios.com/2023/03/06/crypto-register-sec-securities-exchange-commission https://www.axios.com/2023/03/06/crypto-register-sec-securit...