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So it's clearly not horizontal, right, and your argument is that there is a vertical common enterprise? I don't think it's all that poorly defined, but either

So it's clearly not horizontal, right, and your argument is that there is a vertical common enterprise? I don't think it's all that poorly defined, but either way, for a vertical the 11th circuit required that you must "show that the investors are dependent upon the expertise or efforts of the investment promoter for their returns." That's just not the case here. The show could end completely and "investors" (I don't think they are investors, either, but I'll go with you on this) continue to see returns. You've also got issues of control over the cards and the fact that people purchase them without intending to profit from them, both of which strike against you.

EGreg 3y ago
Just because a show could hypothetically end and the assets would go up, may not be a convincing argument. Hypotheticals could go either way. One company owns the IP, the rights to the characters, to produce shows, they have the expertise, and it is exactly the show and the brand that drives the demand for merchandise sales. This is well established. They advertise the merchandise. Now, without the advertisement, there could remain a niche group of people who would pay a lot for collectibles, but nowhere near the amount of people or capital under their management than during the heyday of the show actually airing and constantly making the memes (pokemon, yu gi oh, whatever) relevant and driving demand. By your argument, LBRY the company could fold and people would continue to use LBRY tokens. Which is exactly what happened. So does that mean it wasn’t securities sales after all? As for the other issues you mentioned, the court explicitly stated that just because some people buy the cards for consumptive use doesn’t mean they all do. You could buy 100 tickets to a ball game, but intend to only take your family, and scalp the rest. One of the criteria for a securities sale is did you buy more than you could ever conceivably use? And if you keep the cards in mint condition unopened that’s pretty much textbook definition of investing into collectables. Then the only question us how much are you relying on the expertise of the company producing Yu Gi Oh content to… continue to produce Yu Gi Oh and keep it relevant. Now, if Yu Gi Oh was in the public domain and lots of entities could keep the memes going, sure. It would be super decentralized (although a strict reading by the SEC could nevertheless see a “common enterprise” horizontally across all of them, much as they are considering now for Ethereum!) But since all these initiatives (Teenage Mutant Ninja Turtles, the music and movie industries etc.) work off massively relying on copyright protections, so they are the ONLY ones authorized to use / license the characters, then yeah you’re kind of relying on the efforts of a third party promoter to make sure a lot of people give a crap about your mint condition charazard collectibles! Do the following thought experiment … if some group were selling the same exact type of trading cards in the form of NFTs, and creating Telegram channels to promote them, creating all kinds of episodes featuring those characters, are they a “common enterprise”?
- ameister14 3y ago
  >By your argument, LBRY the company could fold and people would continue to use LBRY tokens. Which is exactly what happened. So does that mean it wasn’t securities sales after all? No, my argument is that the performance of the show is not directly linked to the price of the cards, among other things. LBC did not have continuing returns after the announcement that they were folding, and the theoretical use of the coins outside of investing is gone with the company. There's also the fact that there is no contract or common enterprise between purchasers of the cards and the makers of the Pokemon television series. LBRY had other functions that made the coins look more like securities. For example, they used LBC as security for debt, they promoted it as an investment opportunity, they acknowledged its growth aligned with their company and they encouraged people to hold on to the coins so that they would appreciate in value despite new issuances. The entirety of the value of the coin was based on the performance of the company. > the court explicitly stated that just because some people buy the cards for consumptive use doesn’t mean they all do. Sure. Most people buy the cards for consumptive use, though. It's not a small number. Some people do invest in them as collectibles, but that doesn't make them a security. > if some group were selling the same exact type of trading cards in the form of NFTs, and creating Telegram channels to promote them, creating all kinds of episodes featuring those characters, are they a “common enterprise?" Do you mean the group that made them, sold them and promoted them? Sure - if a group of people made some products, marketed and sold them together then they would likely be acting in common enterprise. It could be a partnership, especially if they pooled their sales. That's not really what is happening with Pokemon cards, though. I'm not arguing that The Pokemon Company or Nintendo can't issue securities, I'm just saying the products they make and sell for consumptive purposes are not in themselves securities.
  - EGreg 3y ago
    > and the theoretical use of the coins outside of investing is gone with the company Gone? Theoretical? LBRY has been and continues to be one of the most—used utility tokens out there. The tokens are used in a decentralized network to pay for streaming video. That’s the whole point — if the company has folded but the network continues then that proves there was a strong utility case. I am saying that just because there is utility doesn’t mean many of the sales weren’t also securities transactions. And the same goes for Yu Gi Oh. It doesn’t matter if there is a direct link with the price of the cards. When Yu Gi Oh is off the air and no one is advertising the toys and cards, are you really going to tell me demand will be unaffected? Children grow out of the toys, and new children will be marketed toys by OTHER groups that rise up after Yu Gi Oh. To say their efforts, expertise, advertising etc have no link to the demand for toys is a very dubious argument, some might even consider it preposterous. > if a group of people made some products, marketed and sold them together then they would likely be acting in common enterprise That was the prong of the Howey test that we were discussing. You claimed that there was no common enterprise with Pokemon. Yet the company behind Pokemon did all those things you mentioned — and it is in fact the exclusive rights holder to the IP, so no decentralized ecosystem can even legally rise up to dilute this common enterprise. That is how ALL of these media + merchandising plays work. Finally, using assets as security / collateral for debt doesn’t mean that the assets are investment contracts. I could use lots of commodities and other assets as collateral for debt. They could even be pegged to the dollar, and still be worth a dollar. USDT for instance could hardly be considered an investment contract, right?

EGreg 3y ago

Just because a show could hypothetically end and the assets would go up, may not be a convincing argument. Hypotheticals could go either way. One company owns the IP, the rights to the characters, to produce shows, they have the expertise, and it is exactly the show and the brand that drives the demand for merchandise sales. This is well established. They advertise the merchandise. Now, without the advertisement, there could remain a niche group of people who would pay a lot for collectibles, but nowhere near the amount of people or capital under their management than during the heyday of the show actually airing and constantly making the memes (pokemon, yu gi oh, whatever) relevant and driving demand. By your argument, LBRY the company could fold and people would continue to use LBRY tokens. Which is exactly what happened. So does that mean it wasn’t securities sales after all? As for the other issues you mentioned, the court explicitly stated that just because some people buy the cards for consumptive use doesn’t mean they all do. You could buy 100 tickets to a ball game, but intend to only take your family, and scalp the rest. One of the criteria for a securities sale is did you buy more than you could ever conceivably use? And if you keep the cards in mint condition unopened that’s pretty much textbook definition of investing into collectables. Then the only question us how much are you relying on the expertise of the company producing Yu Gi Oh content to… continue to produce Yu Gi Oh and keep it relevant. Now, if Yu Gi Oh was in the public domain and lots of entities could keep the memes going, sure. It would be super decentralized (although a strict reading by the SEC could nevertheless see a “common enterprise” horizontally across all of them, much as they are considering now for Ethereum!) But since all these initiatives (Teenage Mutant Ninja Turtles, the music and movie industries etc.) work off massively relying on copyright protections, so they are the ONLY ones authorized to use / license the characters, then yeah you’re kind of relying on the efforts of a third party promoter to make sure a lot of people give a crap about your mint condition charazard collectibles! Do the following thought experiment … if some group were selling the same exact type of trading cards in the form of NFTs, and creating Telegram channels to promote them, creating all kinds of episodes featuring those characters, are they a “common enterprise”?

ameister14 3y ago
>By your argument, LBRY the company could fold and people would continue to use LBRY tokens. Which is exactly what happened. So does that mean it wasn’t securities sales after all? No, my argument is that the performance of the show is not directly linked to the price of the cards, among other things. LBC did not have continuing returns after the announcement that they were folding, and the theoretical use of the coins outside of investing is gone with the company. There's also the fact that there is no contract or common enterprise between purchasers of the cards and the makers of the Pokemon television series. LBRY had other functions that made the coins look more like securities. For example, they used LBC as security for debt, they promoted it as an investment opportunity, they acknowledged its growth aligned with their company and they encouraged people to hold on to the coins so that they would appreciate in value despite new issuances. The entirety of the value of the coin was based on the performance of the company. > the court explicitly stated that just because some people buy the cards for consumptive use doesn’t mean they all do. Sure. Most people buy the cards for consumptive use, though. It's not a small number. Some people do invest in them as collectibles, but that doesn't make them a security. > if some group were selling the same exact type of trading cards in the form of NFTs, and creating Telegram channels to promote them, creating all kinds of episodes featuring those characters, are they a “common enterprise?" Do you mean the group that made them, sold them and promoted them? Sure - if a group of people made some products, marketed and sold them together then they would likely be acting in common enterprise. It could be a partnership, especially if they pooled their sales. That's not really what is happening with Pokemon cards, though. I'm not arguing that The Pokemon Company or Nintendo can't issue securities, I'm just saying the products they make and sell for consumptive purposes are not in themselves securities.
- EGreg 3y ago
  > and the theoretical use of the coins outside of investing is gone with the company Gone? Theoretical? LBRY has been and continues to be one of the most—used utility tokens out there. The tokens are used in a decentralized network to pay for streaming video. That’s the whole point — if the company has folded but the network continues then that proves there was a strong utility case. I am saying that just because there is utility doesn’t mean many of the sales weren’t also securities transactions. And the same goes for Yu Gi Oh. It doesn’t matter if there is a direct link with the price of the cards. When Yu Gi Oh is off the air and no one is advertising the toys and cards, are you really going to tell me demand will be unaffected? Children grow out of the toys, and new children will be marketed toys by OTHER groups that rise up after Yu Gi Oh. To say their efforts, expertise, advertising etc have no link to the demand for toys is a very dubious argument, some might even consider it preposterous. > if a group of people made some products, marketed and sold them together then they would likely be acting in common enterprise That was the prong of the Howey test that we were discussing. You claimed that there was no common enterprise with Pokemon. Yet the company behind Pokemon did all those things you mentioned — and it is in fact the exclusive rights holder to the IP, so no decentralized ecosystem can even legally rise up to dilute this common enterprise. That is how ALL of these media + merchandising plays work. Finally, using assets as security / collateral for debt doesn’t mean that the assets are investment contracts. I could use lots of commodities and other assets as collateral for debt. They could even be pegged to the dollar, and still be worth a dollar. USDT for instance could hardly be considered an investment contract, right?