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The 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 legall

The 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 ago
  The 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 ago
    The 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 ago
      Sure 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?
      - Dylan16807 3y ago
        I would say that a plain NFT doesn't have a game or airdrops. Impact Theory is not a plain NFT.
        pclmulqdq 3y ago
        I would agree with you that an NFT in itself does not constitute a security. An NFT as it was actually used by crypto people is a different story, though. And I would say that the "NFT as a pre-investment in a project" is the norm, not the exception in that regard.
- pama 3y ago
  Footnote in the Supreme Court opinion: “The term 'security' means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a 'security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing."
csomar 3y ago
People are trying to over-complicate this even though the lines are clear. The intent is here what matters regardless of the implementation. Are you selling a "future expected outcome" or are you selling an art piece (or whatever other junk) with no strings attached. Of course, selling the art piece without a proposition to an increase in value will not attract "investors". > Even tokens like ETH or BTC could be considered currencies/commodities rather than securities despite all of the "project" language. BTC is, also according to the SEC. The problem with ETH is that they did an ICO early on the life of the project. I think that's why the chairman of the SEC refused to answer. They don't want to make it not a security so that they don't create a precedent. ETH foundation ICO might be the biggest mistake they ever made. It'll never go away...
- semi-extrinsic 3y ago
  From what I've understood, the CFTC and the SEC have decided between them that the CFTC will worry specifically about BTC and ETH (and a few other coins that can reasonably be considered commodities), and the SEC will worry about the rest. That is likely why the SEC chairman doesn't want to comment on them.
  - deleted 3y ago
    [deleted]
- phire 3y ago
  Bitcoin is getting a pass mostly because nobody has any control over Bitcoin. There might be a loose community project, but Bitcoin is basically frozen in its current state, with no innovation. It's really hard to argue there is a common enterprise when there isn't really an enterprise at all. > ETH foundation ICO might be the biggest mistake they ever made It doesn't really matter if the Eth foundation did an ICO in the past or not, the simple fact that they are a coordinated project with a strong leadership structure who exercise quite a bit of control over the future of Eth is a strong indication that an "enterprise" exists. The main reason why SEC are hedging their bets over ETH is that they don't actually know if it's a security. It's not the SEC who defines what's a security or not (though they often offer advice). The definition of "security is actually defined by the courts, so the only way to know either way is a court case. And the SEC clearly wants to create some legal precedent by prosecuting cases that are much more obvious. Also... the status of something being a security isn't necessarily static. Just because Bitcoin is considered not a security now doesn't mean it will never be considered a security. If the bitcoin miners decided to band together and take active control over the direction of bitcoin innovation, then its current excuse would evaporate. If they transformed it into something that was obviously a security, then no amount of "But the SEC previously said bitcoin wasn't as security" will protect it.

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 ago
The 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 ago
  The 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 ago
    Sure 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?
    - Dylan16807 3y ago
      I would say that a plain NFT doesn't have a game or airdrops. Impact Theory is not a plain NFT.
      - pclmulqdq 3y ago
        I would agree with you that an NFT in itself does not constitute a security. An NFT as it was actually used by crypto people is a different story, though. And I would say that the "NFT as a pre-investment in a project" is the norm, not the exception in that regard.
pama 3y ago
Footnote in the Supreme Court opinion: “The term 'security' means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a 'security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing."

csomar 3y ago

People are trying to over-complicate this even though the lines are clear. The intent is here what matters regardless of the implementation. Are you selling a "future expected outcome" or are you selling an art piece (or whatever other junk) with no strings attached. Of course, selling the art piece without a proposition to an increase in value will not attract "investors". > Even tokens like ETH or BTC could be considered currencies/commodities rather than securities despite all of the "project" language. BTC is, also according to the SEC. The problem with ETH is that they did an ICO early on the life of the project. I think that's why the chairman of the SEC refused to answer. They don't want to make it not a security so that they don't create a precedent. ETH foundation ICO might be the biggest mistake they ever made. It'll never go away...

semi-extrinsic 3y ago
From what I've understood, the CFTC and the SEC have decided between them that the CFTC will worry specifically about BTC and ETH (and a few other coins that can reasonably be considered commodities), and the SEC will worry about the rest. That is likely why the SEC chairman doesn't want to comment on them.
- deleted 3y ago
  [deleted]
phire 3y ago
Bitcoin is getting a pass mostly because nobody has any control over Bitcoin. There might be a loose community project, but Bitcoin is basically frozen in its current state, with no innovation. It's really hard to argue there is a common enterprise when there isn't really an enterprise at all. > ETH foundation ICO might be the biggest mistake they ever made It doesn't really matter if the Eth foundation did an ICO in the past or not, the simple fact that they are a coordinated project with a strong leadership structure who exercise quite a bit of control over the future of Eth is a strong indication that an "enterprise" exists. The main reason why SEC are hedging their bets over ETH is that they don't actually know if it's a security. It's not the SEC who defines what's a security or not (though they often offer advice). The definition of "security is actually defined by the courts, so the only way to know either way is a court case. And the SEC clearly wants to create some legal precedent by prosecuting cases that are much more obvious. Also... the status of something being a security isn't necessarily static. Just because Bitcoin is considered not a security now doesn't mean it will never be considered a security. If the bitcoin miners decided to band together and take active control over the direction of bitcoin innovation, then its current excuse would evaporate. If they transformed it into something that was obviously a security, then no amount of "But the SEC previously said bitcoin wasn't as security" will protect it.