HN Gopher Feed (2017-12-12) - page 1 of 10 ___________________________________________________________________
SEC Shuts Down Munchee ICO
300 points by LearnerHerzog
https://techcrunch.com/2017/12/12/sec-shuts-down-munchee-ico/___________________________________________________________________
azernik - 6 hours ago
Related to this bigger HN submission from yesterday ("Statement on
Cryptocurrencies and Initial Coin Offerings"):
https://news.ycombinator.com/item?id=15902054That statement was
released on the same day as the Munchee decision, and the Munchee
decision is linked from the statementContext (the Munchee decision
is in footnote 6): "I urge market professionals, including
securities lawyers, accountants and consultants, to read closely
the investigative report we released earlier this year (the ?21(a)
Report?)[5] and review our subsequent enforcement actions.[6]"
elmar - 6 hours ago
What about CryptoKitties? is it a security using the "Howey Test"?
Buttes - 4 hours ago
I'd say they're more like trading cards than anything.
RexetBlell - 6 hours ago
Yes, because they pay dividends in the form of new baby crypto
cats.
shawabawa3 - 6 hours ago
That's not how it works.The kitty tokens are more like a
product than a security I think as each kitty token is unique,
but I'm not a lawyer
joering2 - 5 hours ago
That's considered collectibles.Take this difference, for
example: if you buy a collectible Ford Shelby GT from 1964
and you pay 10x more what the previous owner paid, you do so
with hopes that its a good investment into collectible that
eventually someone will give you a better price in the
future. Your asumption/feeling of security (hence name
"securities" btw) is not guaranteed by anything more than
hope that someone will eventually pay more (they never may be
such person).Meanwhile if you buy Ford stock with the same
purpose of re-selling it later down the road for hopefully
higher price, you are being reassured aka "secured" by the
company financial standing, their technical analyze, current
market value, future strategy for the corp, etc. If these are
phony then hopefully/supposedly SEC steps in to protect you
from what most likely will turn out to be scam. Collectibles
(genuine one of course) do not come with guarantee/security
that their current value (what you personally gave for) will
remain in the future, or be repriced higher.
SilasX - 4 hours ago
Thank you for the explanation -- I was wondering how
securities law is written to exempt the classic-Ford case,
when "investors" expect a gain in value that isn't e.g.
related to dividends but rather popularity quirks. Your
distinction makes sense.
joering2 - 4 hours ago
You welcome!
stale2002 - 5 hours ago
No. Crypto kitties exists right now. They aren't using the money
to fund future development. They aren't making promises about
what the money will be used for. What you see is what you get.
whataretensors - 5 hours ago
It's almost as if they shouldn't be using a test invented in the
40s on new technology.
thisisit - 6 hours ago
> In short, Munchee was undone by two things: depending on the
token sale as a vehicle to raise cash for operations and using the
typically spammy and scammy marketing efforts most ICO floggers use
now, tactics taken directly from affiliate marketing handbooks.It
seems that most ICO do both the things. If not a self-inflicting
post about the token growth but at least the raising cash for
operations part.
pm90 - 5 hours ago
> It seems that most ICO do both the things.That doesn't make it
OK. I think what's happening here is that ICO's are raising large
enough funding to finally warrant involvement by the SEC.
option_greek - 5 hours ago
I don't get how the SEC differentiates between ICOs and
kickstarters (not considering the ICOs that promise their token
value to increase over time). How can there be any kind of
innovation in fund raising space if the SEC wants every thing to be
registered as securities. What bugs me the most is that many ICOs
are funded by virtual currencies (btc or eth) and still SEC
considers it self to have jurisdiction over the transactions that
grown-up individuals do. Instead of considering $1mil net worth
investors are accredited, SEC should have a certification test that
an individual can take to prove he understands finance. If someone
has $1mil, it doesn't prove a damn thing. It could very well be
that they inherited it or won in a lottery.
proaralyst - 5 hours ago
I think it's because ICOs give you a tradeable token; kickstarter
contributions cannot be traded for profit.
option_greek - 5 hours ago
Contributors can as well sell their future orders as backorders
on ebay or amazon or directly. Many successful kickstarters had
their products sold at much higher prices after they are
received (mainly the early bird ones).
tptacek - 4 hours ago
If the marketer of a Kickstarter promoted their product as an
investment-grade asset, they could indeed have legal
problems. People forget that a big chunk of what the SEC is
concerned about is marketing and promotion.
justrobert - 5 hours ago
In that case, the original buyer is the one who is receiving
the goods and then sending to their counterparty.
matthewaveryusa - 5 hours ago
I'm relatively ignorant but I think it's a matter of fungibility.
zemo - 5 hours ago
when you back a kickstarter you don't receive a store of value
that you can re-sell to another party. That's a vague statement
to be sure; you could say the same thing about beanie babies, for
example. But Ty did not sell beanie babies to people under the
auspices of resale value. Therein lies the rub: the crime is not
in selling a thing that has value that can be resold (since that
describes all property), it's advertising your product as an
investment vehicle.
austenallred - 5 hours ago
Well kickstarters aren?t securities, while many coins are. That?s
a pretty straight forward distinction. And the SEC has
jurisdiction if some part of the transaction or company is in the
United States. Also pretty simple.
dabockster - 4 hours ago
> How can there be any kind of innovation in fund raising space
if the SEC wants every thing to be registered as securities?That
regulation protects the layman who doesn't know that an ICO is a
glorified trust.
delinka - 5 hours ago
I believe Kickstarter projects are "pre-orders" and not
investment instruments.
slg - 5 hours ago
>and still SEC considers it self to have jurisdiction over the
transactions that grown-up individuals do.Umm, isn't that the
entire purpose of the SEC or even more broadly the purpose of all
contract, finance, and commerce laws? Just because someone is
moving bits around instead of pieces of paper doesn't mean the
law doesn't apply to them.
dragonwriter - 4 hours ago
> SEC considers it self to have jurisdiction over the
transactions that grown-up individuals do.The SEC considers
itself to have such authority because the laws passed by Congress
explicitly give it that authority. If you have a problem with
that authority existing in the SEC, your complaint should be
directed at Congress, not the SEC?s factually accurate belief in
the existence of its legal authority.
emodendroket - 4 hours ago
It's about time.
vasilipupkin - 5 hours ago
why is ethereum itself not a security by this logic. Clearly the
purpose of buying ETH in the ICO was appreciation, no?
bluesign - 4 hours ago
as long as they don't promote 'increase in value' and 'gain on
your investment' they are safe.
vasilipupkin - 3 hours ago
but did they not make any statements implying an increase in
value? why would you have participated in ETH ICO if you
didn't expect an increase in value?
bluesign - 2 hours ago
You can expect increase in the value, actually even everybody
can expect, but as long as there is no marketing of increase
in value, or misdirection it is fair game.If you are
investing in real estate, you have an expectation in increase
in value, but if the real estate agent is promising you,
increase in the value, and promising you to do the all
marketing, etc and selling part. Then it is something
else.The point is basically intentionally misleading
investor.
vasilipupkin - 2 hours ago
where in the howey test does it say anything about
marketing?It is an investment of money There is an
expectation of profits from the investment The investment
of money is in a common enterprise Any profit comes from
the efforts of a promoter or third party
PatientTrades - 6 hours ago
The hype will die down as the SEC gets involved and regulations are
pursued. Smart time to take profits in my opinion. Many will be
left holding the bag as we see a correction to more sustainable
levels. Bitcoin is here to stay, but these prices are not rational,
driven purely off of emotion.
elmar - 5 hours ago
What Is the Howey Test? - FindLawhttp://consumer.findlaw.com
/securities-law/what-is-the-howey..."The final factor of the Howey
Test concerns whether any profit that comes from the investment is
largely or wholly outside of the investor's control. If so, then
the investment might be a security. If, however, the investor's own
actions largely dictate whether an investment will be profitable,
then that investment is probably not a security."Howey Test
https://youtu.be/9lTS1Zofw8w
delinka - 5 hours ago
This seems, to me (a layman), to indicate that most any ICO will
fall under "security." Can anyone provide an example where an ICO
would not be a security as defined by the Howey Test?
oskarth - 2 hours ago
Interestingly, cash would seem to be a security under this
definition. Except it is explicitly exempted:> The term
??security?? means any note, stock, treasury stock, security
future, security-based swap, bond, debenture, certificate of
interest or participation in any profit-sharing agreement or in
any oil, gas, or other mineral royalty or lease, any
collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-
trust certificate, certificate of deposit for a security, any
put, call, straddle, option, or privilege on any security,
certificate of deposit, or group or index of securities
(including any interest therein or based on the value thereof),
or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to foreign currency,
or in general, any instrument commonly known as a ??security??;
or any certificate of interest or participation in, temporary
or interim certificate for, receipt for, or warrant or right to
subscribe to or purchase, any of the foregoing; but shall not
include currency or any note, draft, bill of exchange, or
banker?s acceptance which has a maturity at the time of
issuance of not exceeding nine months, exclusive of days of
grace, or any renewal thereof the maturity of which is likewise
limited.From The Securities Exchange Act of 1934 (N.B.
IANAL).So, will cryptocurrencies, possibly including ICOs, be
exempted? Only history will tell.
munk-a - 2 hours ago
I wonder if you were to declare an intent to establish a new
nation in the Antarctic (say by purchasing some of Chile's
land) and to fund raise for fees associated with this new
nation you offered to sell people dollars of your soon-to-be
currency at some fixed price below the expected value, would
the SEC disapprove of such an action?(assuming it was
actually done in good faith and not discernibly a scam)
cptaj - 1 hours ago
The SEC would not have any jurisdiction there.
azernik - 1 hours ago
If you're doing the fund-raising in the US, they would
absolutely have jurisdiction.
lallysingh - 1 hours ago
We'll probably need better criteria for what's actually a
proper crypto 'currency' vs 'security' vs whatever else
first.
stale2002 - 2 hours ago
Nobody is saying that crytocurrencies 'in general' are going
to be declared securities.This is about ICOs. IE, a tokens
that are a 'FUTURE' promise for something that doesn't exist
yet.If Bitcoin was a security, the statement from the SEC
head would be very different.
oskarth - 2 hours ago
> Nobody is saying that crytocurrencies 'in general' are
going to be declared securities.I agree with you, but the
fact is plenty of people do. Maybe not in the corner of the
world, but look broader. This also wasn't the point.
[deleted]
michwill - 2 hours ago
I don't think you're right. Under this impression, most of
cryptocurrencies are securities. However, SEC said, they're
not: https://twitter.com/mikebutcher/status/940487575491497985
Alex3917 - 2 hours ago
"It has been asserted", i.e. that assertion is false and most
ICOs are securities.
[deleted]
michwill - 40 minutes ago
https://www.technologyreview.com/the-download/609756/as-
it-t...
TDL - 3 hours ago
The SEC Chairman released a statement this morning about
cryptos & ICOs. There is a mention of how an ICO can fall
outside of the securities designation in the
memo.https://www.sec.gov/news/public-statement/statement-
clayton-...
Sangermaine - 1 hours ago
The Chairman just reiterates what's long been the case in
securities law: whether an ICO, like any other instrument, is
a security depends on the facts of the case.
jMyles - 5 hours ago
Imagine it's a network-connected resource like server time or
file hosting. Those aren't securities right?So now just
imagine a token that has the same functionality.You receive a
token that does something useful. Do you use that token
wisely? Or do you make bad business decisions?There are tokens
that people are buying to use, not just to HODL.
yazaddaruvala - 4 hours ago
Imagine a piece of paper. Like what you'd find in a notebook.
Those aren't assets right?So now just imagine a token that
has the same functionality.You receive a token, it's made of
paper like the notebook but does something useful.Should that
token, the piece of paper be regulated? Lol yes, it's now
money! And all other assets or securities are regulated.
debacle - 4 hours ago
Paper has utility outside of its value. Most coins do not.
crankylinuxuser - 2 hours ago
I'd counter specifically with Ethereum or Filecoin.They
both represent either computation-time or file-storage-
and-bandwidth time.Ethereum could easily represent time
on a distributed AWS Lambda. And FileCoin can represent
an AWS S3 storage.It just so happens that they both are
also cryptocoin.It gets even uglier that the turning-like
machine in Ethereum/Solidity also exists, kind of, in
Bitcoin. In fact it was because it worked in Bitcoin they
developed Ethereum. So technically even Bitcoin can do
processing work. Makes everything a bit murkier to be
honest.
debacle - 2 hours ago
You're not countering anything. I'm aware of both. The
SEC is going to have to decide if these coins having
utilities makes up their value.These aren't new concepts.
People have been trying to get around regulation for
thousands of years.
hobbyjogger - 4 hours ago
Why do you not consider paper to be an asset?Pretty much
anything that can be bought and sold is an asset. Yes, that
includes notebooks and paper.
gamblor956 - 4 hours ago
Your metaphor doesn't make sense. Are you saying that the
token lets me write on it and make toy airplanes? Because
if so, then the token wouldn't be regulated...If you're
saying that the piece of paper represents ownership of
something, then the paper is most likely a security or
derivative, in which case it is already subject to
regulation. A token with the same functionality as this
piece of paper would be regulated, and vice versa...
tptacek - 4 hours ago
Which is it? Is it that these tokens aren't really
investments, but rather utility instruments people are buying
to obtain restaurant reviews? Or is it that it's so unfair
that the SEC requires these kinds of companies to register
before selling to the public like everyone else? It looks to
me like your argument is oscillating a bit.
jMyles - 4 hours ago
Well, the exciting part might be that the line between
investment and utility instrument is blurring. It seems to
me that these two categories needn't be separated by a
bright-line.
tptacek - 4 hours ago
A particular instrument might blur the lines in terms of
how it's packaged and promoted, but the underlying
activities aren't blurry at all. People who acquire an
asset in the hopes that its price will rise so they can
resell it on a secondary market are speculating
("investing"), full stop.Obviously, this isn't the first
time we've had offerings ostensibly taking these forms.
People used to buy comic books in the hopes of their
appreciation. Ty sold Beanie Babies to people who were
stockpiling them for eBay.The reason Ty didn't get in
trouble, but Munchee did, was that Ty was never stupid
enough to record videos extolling the once-in-a-lifetime
opportunity people had to 9x their investment in
restaurant review coupons. Again: a very significant
component of the SEC's concern is about marketing and
promotion.
stale2002 - 1 hours ago
Are you arguing that beanie babies and comic books are
securities? How about bars of gold?They are certainly
speculation. But I doubt the SEC would ever claim that
literal bars of gold (not notes, physical bars of gold)
are securities.
tptacek - 1 hours ago
They are not, but the reason they are not is instructive.
gamblor956 - 4 hours ago
If the coin represents ownership of a resource (or a right to
a resource), it can be a security (though it might be a
derivative instead, governed by a similar but entirely
separate set of rules).Being a security does not mean it
can't also be something useful; it just means that the
security aspects of it are potentially subject to securities
laws.EDIT: Beanie babies aren't securities because you
actually the beanie baby. However, a piece of paper
entitling you to ownership of a beanie baby could be a
security.
michwill - 3 hours ago
All right, but if the coin is inseparable part of the
resource, it cannot be a security. There is a thin line
here.Imagine a coin securitizing Bitcoin miners ("cloud
mining coin"). Yes, that's a security.Now imagine Ethereum.
It was ICO'd, talking in today's terms. Is it a security?
(hint: SEC just admitted it's not)
Animats - 2 hours ago
The SEC's position on the DAO was that they were not
going to apply their guidance retroactively to that one.
Going forward, though, they're cracking down.
joosters - 1 hours ago
Where did the SEC say the ethereum ICO wasn't a sale of
securities?
gamblor956 - 2 hours ago
All right, but if the coin is inseparable part of the
resource, it cannot be a security. There is a thin line
here.True, but then you're limited to things which can be
stored in a blockstream in the space allocated to a
single coin. There aren't many useful resources that
could fit into that space, even fewer that would
scale.Now imagine Ethereum. It was ICO'd, talking in
today's terms. Is it a security? (hint: SEC just admitted
it's not)Unless there is something about Ethereum that
I'm not aware of, it does not represent any sort of
ownership interest in another asset, it is the asset.
nostrademons - 4 hours ago
A pure payment system within an app. Say that someone builds a
social network that lets you easily get in touch with people
who have need of skills that you possess. They then introduce
a token system - call it "karma", maybe - that you can grant to
people who perform good deeds for you, and then if your karma
is positive, you can grant it to others in exchange for favors
or services. Since you only receive karma for actions you
perform and it doesn't rise in value based on the efforts of
the social network, it's not a security. It is a currency,
however, and could fall afoul of laws governing currencies.BTW,
a number of games successfully have things like this, eg.
Linden dollars in Second Life, gold in WoW, or tokens in
FarmVille.
tonysdg - 3 hours ago
Isn't that exactly how bounties work on the StackExchange
websites?
philipodonnell - 3 hours ago
> Since you only receive karma for actions you performThat
wouldn't really be an ICO, though, right? You have to be able
to convert it back and forth between another currency, not
just "earning" it through use of the software to be spent
only there and never changing hands.
detaro - 2 hours ago
You could bootstrap initial distribution through an ICO
(e.g. if people need an initial stock to be able to
distribute it to others). And e.g. in-game currency
commonly can be bought, but not sold through official
channels.
paulmd - 3 hours ago
> This seems, to me (a layman), to indicate that most any ICO
will fall under "security."Pretty much, yes. Securities are
defined very broadly in the US.Why does it surprise you that
these are securities? They very obviously are selling a
security to investors, who are purchasing it because they
expect the price to increase. Open-and-shut case.The fact that
there's crypto involved is irrelevant.It really sounds like
people are trying to pretend these laws don't apply because
they disagree with the laws in question. Which is fine, but
let's not pretend like there's any ambiguity here, because
there's not. It's extremely clear that almost all ICOs are
securities, and if you asked a lawyer I'm 100% sure that's what
they would tell you.
michwill - 3 hours ago
You're not correct. I think, less than 50% of ICOs are not
securities. But the way to prove is exactly this: ask a
lawyer
dc_gregory - 28 minutes ago
I think if you hold a non-obvious position like this, it'd
be great to explain your reasoning. I am def. curious as to
what you think here!
elmar - 5 hours ago
I would dare to say that even Ethereum and some other alt-coins
should be considered securities using this test.
anonymous5133 - 5 hours ago
Most are. Thats why it is so important that crypto startups
leave the usa to be outside the jurisdiction of the sec.
shafyy - 5 hours ago
Do you think it's better for the economy overall if they
are not regulated by the SEC?
jmalicki - 3 hours ago
Sometimes they're commodities, not securities, depending on
the particulars of the transaction (still regulated, just a
different set of regulations)https://www.coindesk.com/cftc-
no-inconsistency-sec-cryptocur...
vkou - 4 hours ago
Most countries have securities laws that are similar to
those of the United States.It's arguably easier to be in
compliance in a single market of 350 million people, then
in multiple markets, each governed by their own laws.
krrrh - 4 hours ago
There?s an assumption being made that the SEC has a vastly
different way of looking at investor protection than
securities regulators in other jusrisdicions. I?m sure
there will be some regulatory arbitrage going on, but if an
ICO is a security it doesn?t make it automatically illegal,
it just means they have to follow rules established that
are mostly there to legally bind the organization to
disclose information to investors and follow certain
governance standards.Some jurisdictions also don?t require
normal stock offerings to follow rules as strict as the SEC
does. It doesn?t stop the US from having many of the
largest stock markets in the world, and a very high level
of public participation in equity investing.
gamblor956 - 4 hours ago
It wouldn't matter if they're located outside the US. The
SEC has jurisdiction over all securities that are sold to
US persons, and most countries where you'd want to be
located have similar laws.
tptacek - 5 hours ago
Sure, they could be.
motbob - 5 hours ago
That quote is slightly misstated. It makes it sound like gold
bars would be securities (since any profit from reselling gold
would be "largely or wholly outside of the investor's control"
since the market for gold is so large and relatively
volatile).Rather than asking whether the potential profit is
outside of the investor's control, the question is whether the
profit is within the control of some other person or group.The
example that sticks in my mind is the idea that fruit trees can
be securities if they are maintained and harvested by non-
investors and the fruit sale profits go to the investors.
jdmichal - 2 hours ago
The fruit tree itself would not be the security. It's the thing
which gives the investors the right to their share of profits
which would be the security. Or, in other words, a security
secures your right of ownership to something else. In a
company, we typically call those things "shares". You either
own the tree directly, or you hold a security which secures
your right of ownership of the tree.So, if you own gold, you
don't own a security. You own the actual gold, and that chunk
of metal does not secure ownership of any other item. It can be
exchanged, of course, for ownership of something else, but
that's a function of its value as an object. Now, if you own a
share of a gold ETF, that is a security that describes your
rights to some chunk of metal.
elmar - 1 hours ago
On the video "Howey Test" the most interesting part for me is at
the end (2:55)https://youtu.be/9lTS1Zofw8w?t=175Where if no
single person or group is in charge, and decisions are taken by
all, is no longer considered a security. This little detail makes
the difference from security to not a security.
mrwong - 6 hours ago
Thats a good thing, more companies will leave US Jurisdictions
faster to take advantage of the funding liquidity the open Token
markets provide.Just like Mathematicians and Engineers were leaving
the soviet union in droves to pursuit a better future.
ceejayoz - 6 hours ago
These rules aren't new in the slightest. Anyone who thought ICOs
would allow them to evade the SEC was always deluding
themselves.Despite these long-standing rules, the US still seems
to do just fine attracting new corporations.
bunderbunder - 6 hours ago
Most these companies are very clearly focusing on a US market
first, so their pool of likely coin buyers is Americans. I'm
guessing that many of them also want to keep the option of
getting additional rounds of funding by selling equity rather
than scrip.If leaving US jurisdiction reduces the capital markets
that are most important to them, then I doubt they will decide
that it's worthwhile to do so just for the sake of being able do
ICOs.
hyprCoin - 6 hours ago
I don't think this is a good thing. We are going to lose some of
the brightest next generation startups to lesser jurisdiction
areas due to regulation created in the 40s.I really do not care
for the accredited investor scam.
s73ver_ - 5 hours ago
The JOBS Act changed some of those thresholds. However, there
is exactly zero reason why the reporting and transparency
regulations should be thrown out, regardless of whether you're
doing a paper security or a crypto coin.
hyprCoin - 5 hours ago
Why should a global decentralized currency be beholden to
local regulation?I guess the lesson is to do a fair launch
and run nicehash to control a large percentage of the
network. Then you don't have to abide by SEC regulation as
the coin does not represent a centralized organization.
s73ver_ - 1 hours ago
I've not heard any reason why these ICOs are any different
than any other security. Simply being "on a computer" never
should have been enough for patents, and it most definitely
isn't enough here.
hyprCoin - 1 hours ago
Look at chain coin. A crypto currency that was a scam
coin, people lost a lot of money and the original
developer dumped his supply.It did not die, different
people are now picking up the chain and making it a more
valuable currency.The point is not that these currencies
are "on a computer", the point is that they represent a
collective interest that lives beyond borders.
s73ver_ - 1 hours ago
And why couldn't that happen without the scam component?
hyprCoin - 1 hours ago
It likely wouldn't exist without the scam component. The
original developer never intended to follow through with
his vision, but it was a good enough vision that many
people decided it was worth investing in and working
towards.My point was that there are regularization
factors in the market that exist without a centralized
organization rubber stamping actions. Of course, that
doesn't fit the narrative that people, especially the
poor and intelligent, must be protected from themselves.
PeterisP - 4 hours ago
A local currency should be beholden to local regulation.A
global decentralized currency should be beholden to every
local regulation in which it is used, since the users fall
under that jurisdiction - if it's not compatible with local
regulation, then it should stay away from that locality and
the people there.In particular, ICOs should care about USA
regulation if they want to attract money from people in
USA; they can freely ignore SEC iff they keep their
activities outside of USA and don't attempt to market their
"investment" to customers in USA.
eropple - 4 hours ago
> Why should a global decentralized currency be beholden to
local regulation?Because people, who are the important
factor here and not your burnt CPU cycles, live in those
localities and have generally agreed to live in this thing
called "society" where regulations are made within that
society's jurisdiction.
chickenfries - 3 hours ago
> Why should a global decentralized currency be beholden to
local regulation?I dunno why can't you declare your house
an independent country and live under your own rules?
orthecreedence - 4 hours ago
If it means people who welcome scams with open arms all go off
to an island somewhere, then yes this is a good thing.I love
how quickly people forget history then come crying to daddy
government when they get the paddling they so richly deserve
from a silver tongue devil who parted them with their money.
JumpCrisscross - 6 hours ago
You post a variant of this drivel on every regulatory- or China-
related thread [1].[1]
https://news.ycombinator.com/threads?id=mrwong
mrwong - 4 hours ago
So what?
JumpCrisscross - 4 hours ago
> So what?You're shouting baseless opinion. Over its
repetitions, moderated [1] and well-cited [2] responses [3]
have been repeatedly [4] levied against it [5]. Yet the
outburst never changes. You're talking for the sake of
talking, not to discuss.[1]
https://news.ycombinator.com/item?id=15791135[2]
https://news.ycombinator.com/item?id=15766911[3]
https://news.ycombinator.com/item?id=15791454[4]
https://news.ycombinator.com/item?id=15791143[5]
https://news.ycombinator.com/item?id=15766440
[deleted]
chickenfries - 3 hours ago
if you can?t make your point without personal attacks I?m
not going to be very persuaded.
pmarreck - 5 hours ago
"Regulation is damage and the Internet will route around it"
philfrasty - 6 hours ago
?Munchee was able to return all $15 million to the 40
investors...?Is this number correct? 40? 375.000$ on average seems
unlikely...
albertgoeswoof - 4 hours ago
Probably, this is one reason why a lot of the ICOs are being
scrutinised.A small number of investors buy up the tokens, the
ICO then sells out in record time and looks like it?s some kind
of amazing hot tech.As soon as the tokens become tradeable, the
value is immediately several times higher (due to the hype) and
the original investors cash out a large portion of their
investment.Due to the immense amount of capital they can then
rinse and repeat on every token sale and spread out their
portfolio across the entire crypto space. If a token does
skyrocket they?re invested enough to still profit.
fludlight - 6 hours ago
They probably had a lead investor who put in $10m, two or three
who put in $1m, and so on. The last 20 probably contributed less
than $20k each.
oh_sigh - 5 hours ago
A lot of people have a ton of btc and don't really view it as
real money
igorgue - 6 hours ago
Decentraland probably had 2 investors, Tezos god knows... So yeah
it's not that unheard off in the ICO market.
pcmonk - 3 hours ago
The article is very misleading here. The cease-and-desist letter
is clearer[0]. They intended to raise $15 million, but the SEC
stopped them within a day of their ICO launch, when they had only
raised about $60,000[0]
https://www.sec.gov/litigation/admin/2017/33-10445.pdf Fact 27
rthomas6 - 2 hours ago
These rules will only apply to companies within the jurisdiction of
the SEC, correct? Hypothetically, I don't see how the SEC could
shut down ICOs from companies registered outside the US, even from
Americans.
itake - 2 hours ago
companies run into problems if American citizens "invest" in
them.
zachruss92 - 1 hours ago
Honestly, i'm kind of annoyed by everyone offering an ICO for
[insert irrelevant product here]. It's creating a misleading
advertising scheme built on top of a current tech _craze_ that will
likely leave a lot of "investors" out of money.The problem is that
you're giving money to a relatively unknown company while
speculating that the company will create inherent value. Unlike
with stocks, you don't have ownership in the company or any voting
rights. There is nothing stopping the company's creators from
distributing the ICO money to themselves (there might be a board,
but since the company isn't public who knows who the board is).In
this case the SEC is right to step in so there aren't a ton of
unregulated securities going around and a lot of consumers
potentially getting screwed.Even with cryptocurrencies like
Bitcoin, it can be scary. You're literally getting into the ForEx
market, which is known to be one of the riskiest markets in
existence. With other currencies, at least they're backed by a
government that (at least at least attempts) to regulate it's value
and protect it from manipulation. With bitcoin, I saw that 40% of
all coins in existence are owned by less that 1,000 people. How do
we know that the current price inflations aren't a manipulation (or
collusion) to jack up the price, sell for USD, then crash the
market? It's not illegal/collusion because Bitcoin isn't
regulated.This is definitely a rant, but I have some serious
concerns as to where this market is going. Would love to hear
other's thoughts.
Hermel - 1 hours ago
ICOs are in a hype. But there is real value. First, they can be
used to bypass a lot of (but not all) regulation. This is good,
because the financial sector is overly regulated (and wrongly
regulated). Second, there are applications that are not possible
in the traditional financial system. For example, the smart
contracts behind the Bancor system (another overvalued ICO)
provide automated market-making on the blockchain. These smart
contracts have a capital buffer no one can touch and that is used
for completely transparent market making, thereby ensuring that
you can always buy or sell shares. I won't go into detail, but it
basically solves the liquidity problem for penny stocks.In the
medium run, I see ICOs as a light-weight alternative to IPOs, but
not as a seed-funding instrument. This is non-sense.
workthrowaway27 - 1 hours ago
The SEC isn't going to let them be used to bypass regulation.
Sangermaine - 1 hours ago
>First, they can be used to bypass a lot of (but not all)
regulation.It's entertaining that many seem to believe this for
no apparent reason, but the SEC (and other regulators around
the world) doesn't seem to agree.
exelius - 1 hours ago
Agreed there is real value, but creating a shadow banking
system that is governed by unregulated actors isn't the
solution. What's to stop a sophisticated bad actor like say,
North Korea from manipulating cryptocoin markets in order to
scam a bunch of Americans out of US Dollars? I know there is
some belief that they're behind the recent Bitcoin rally...
Obi_Juan_Kenobi - 1 hours ago
You mean an ICO that operates in an extremely competitive market,
has no product to speak of, and doesn't leverage decentralized
networks in any way, shape, or form isn't a good investment? Who
would have thought?!> that 40% of all coins in existence are
owned by less that 1,000 peopleThat was a terrible piece of
reporting. The reality is that 1000 addresses hold about 40% of
coins. Addresses are not identities; one person can have as many
addresses as they want, and businesses (like exchanges) may have
a single address that holds the vast majority of their cold
storage. The upshot is that we don't know how well Bitcoin is
distributed.Some of those large addresses are exchanges, and are
indicated as such on many sites, or held by institutions. They
hold large amounts of coin, yet represent the holdings of
thousands of individuals. There are also several large addresses
that are very similar (i.e. each containing a given number of
coinbase rewards) and are very likely to be held by a single
early miner. There are also some number of "Satoshi" coins held
by the creator of Bitcoin. Some estimate that Satoshi mined
~1million coins, though there is nothing definitive about this
figure. There are probably at least 100,000.Bitcoin market
'manipulation' falls into two categories: 'legitimate'
manipulation that requires buying and selling coins in a bid to
move market sentiment in their favor, and 'illegitimate'
manipulation that requires inside knowledge of an exchange, such
as full view of orderbooks for stop hunting, etc. The first kind
exposes the manipulator to significant risk (especially from
other 'whales', and is far less lucrative than many would
believe. For a net gain, they must move the price in the
opposite direction from their net buys/sells. The 'illegitimate'
manipulator can only affect particular exchanges (insider
trading, or else hacking), and thus you can choose an exchange
you trust the most.
zachruss92 - 50 minutes ago
Makes sense about 1000 addresses not 1000 people. I didn't
consider that.The cold storage aspect is interesting. What
happens if the drive is corrupted? Can this type of content be
raid(ed)/duplicated?
ifdefdebug - 45 minutes ago
drive is irrelevant, as long as you have the private key on a
piece of paper you can reconstruct your wallet anywhere
bluetwo - 3 hours ago
What is the world of blockchain going to look like in a year?
jMyles - 5 hours ago
I'm disappointed in us, HackerNews. A thread about an ICO being
shut down and most people in the thread are luke-warmly celebrating
the SEC. Is this the compassion, sophisticated society we're
working to build?The SEC, like the rest of the state, is focused on
keeping wealth in the hands of the wealthy. This action does not
protect anyone's freedom or agency. Instead, it ensures that the
only people who benefit from good ICOs (and none of us can now know
if Munchee was going to be one) are "accredited investors". This
is an insidious phrase which simply means "have a net worth of at
least $1,000,000, excluding the value of one's primary
residence."This is just another action to divide-and-conquer by
class. The internet will not tolerate these hijincks; it will
simply shift economy and influence elsewhere. But will we?
ryanwaggoner - 4 hours ago
Instead, it ensures that the only people who benefit from good
ICOs are accredited investorsIt also ensures that the only people
who lose money from bad ICOs (the vast, vast majority of them)
are accredited investors.
cookiecaper - 4 hours ago
There is a major difference in what people say and what people
do. It is easy to say "I don't mind losing $10k" when you believe
that there's a non-negligible chance you will come out with $10M.
When that $10k gets lost and the $10M never shows up, the tune is
different. Humans will always deflect blame.When this happens to
a substantial number of people, the discontent is palpable enough
to threaten social stability and the civil order. The SEC was
formed specifically to prevent, mitigate, and respond to such
incidents before they have the opportunity to escalate.Call this
what you will and take offense if you must, but the consequences
of anarchy are not at all as rosy as most "anarcho-capitalists"
imagine in their thought experiments.
drawkbox - 3 hours ago
The SEC is one of the US's best institutions. It was created in
1933/34 as a reaction to investment/banking scams that led to the
Great Depression.The Securities Exchange Act of 1934 [1] IS the
best thing that ever happened to US markets being trustworthy,
looking out for smaller investors and the meteoric rise of our
markets since 1934.Yes it is a layer or wall for innovation at
times, and have failed to catch all fraud/scams at times, but
overall people should be glad the SEC is there to make sure
people aren't being taken left and right on investments. The only
people that are usually dealt a blow from the SEC are
scammers/sketchy investments. Even if some financial innovation
is delayed or harder it is always better to be trustworthy than
not. The SEC makes US investments trustworthy.[1]
https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...
jMyles - 1 hours ago
That an agency was necessary when it was created - and that it
has done good in the intervening time - is not in itself a
sufficiently compelling reason for it to continue to exist.In
this particular case, I think it's clear that the SEC (as well
as the FDA, to which it is being compared throughout this
thread) will be decreasingly necessary as our species moves
into the information age.
chickenfries - 3 hours ago
Thank you. I really get the feeling that the people pleading a
special case for ICOs are really lacking historical knowledge
and perspective. They ask questions like "why can't the market
decide what a trustworthy investment is" like we didn't already
have a period where that was the case.
tptacek - 4 hours ago
You can sell stock to anybody. My kids can (and have) bought
stocks. The SEC is not trying to keep securities out of the hands
of the little people.Rather, what's happening here is that
operators of ICOs would like to exempt themselves from the
disclosure rules that apply to all other publicly traded
companies. They don't want to register with the SEC. They don't
want to spend $5k-$10k a quarter on publishing their financials
(those financials would probably be on the cheaper end of the
scale, since they'll be disclosing basically no meaningful
revenue).Congress and the SEC went out of its way to make
streamlined public trading for new enterprises possible with the
JOBS act and Title IV. Over a billion dollars of new issuances
have apparently happened under Title IV's "mini-IPO" rules, which
exclude the most financially onerous costs of IPO for issuances
under $50MM (that is: for virtually all ICO-scale raises).Tech
startups haven't used Title IV because, by and large, they can
get better deals from venture capitalists. That's not a
conspiracy; it's simple statistical selection. The best companies
have access to the most reliable capital. The flip side of that
coin (no pun intended) is adverse selection, which is what you
have when a trivial restaurant review application tries to raise
$15MM on a new cryptocurrency dedicated to funding restaurant
reviews.ICO enthusiasts want to paint this as retail investors
being excluded from "10000%" gains. They're betraying themselves
right there, by arguing with a straight face that there are
10000% gains to realistically be had by retail investors. Really,
what they're making is a special-pleading argument: the companies
they back don't have their shit together enough to raise large
amounts any other way, and they sure would like to be exempted
from the rules that apply to everyone else.
paradroid - 4 hours ago
It says - right there in the SEC statement - that their top
priority is essentially to protect Main Street.
beering - 4 hours ago
GP writes specifically about how the SEC "does not protect
anyone's freedom or agency", which is a typical libertarian
viewpoint. I.e. that the gov't shouldn't regulate anything
about disclosures, published financials, etc.E.g. if a company
wants to sell and promote a new radical weight loss drug, it
should be up to each individual consumer to decide whether it's
trustworthy, not the FDA.Not agreeing or disagreeing with this
line of thinking, but I think you're arguing from a different
angle.
malvosenior - 4 hours ago
For me it?s much simpler and more fundamental than that. I
think people can make their own choices and it?s not the
state?s place to meddle in those choices. If someone wants to
get a second mortgage on their house to buy an ICO, I say more
power to them. Why shouldn?t people be able to take risks
they?re comfortable with? Some of those risks might pay off.
Regardless, even if it was the equivalent of flushing money
down the toilet, I don?t see it as anyone?s right to interfere
with that personal sovereignty.
pjc50 - 4 hours ago
> Why shouldn?t people be able to [invest in pyramid
schemes]https://en.wikipedia.org/wiki/Albanian_Civil_War"The
Albanian Civil War, also known as the Albanian rebellion,
Albanian unrest or the Pyramid crisis, was a period of civil
disorder in Albania in 1997, sparked by Ponzi scheme
failures. The government was toppled and more than 2,000
people were killed."
malvosenior - 4 hours ago
All meaningful progress comes with some risk. You can argue
that the status quo is worth preserving but some of us will
never agree with that.
tptacek - 4 hours ago
Why can't people make their own choices and purchase any
cancer drugs they choose, regardless of whether the FDA has
vetted them at ludicrous expense?Why can't people make their
own choices and buy poultry off the back of a van rather than
from an FDA-inspected distribution chain?Why can't people
make their own choices and dine at restaurants that can offer
lower prices in exchange for not undergoing inspections, or,
for that matter, city building code inspections? Believe it
or not: having invested in more than one local food venture,
those expenses are intimidating and a blocking issue.You can
believe all regulations are pointless and that the market
would handle those issues better than the state. I don't
agree, but you'll have an intellectually coherent
argument.Otherwise, you should find an argument specific to
the particular regulation that's troubling you today.
malvosenior - 4 hours ago
I would make all of those arguments so I guess I?m
intellectually coherent:)
wilg - 3 hours ago
How does your argument handle the issue that it's not
possible to ask every single person in the country to
understand how cancer drug safety works, how food safety
for poultry works, what makes a restaurant kitchen safe,
and how to properly construct a building that won't fall
on your head? All those in addition to the hundreds of
thousands of other things I'd have to deeply understand
in order to keep myself safe?It is not possible or
reasonable to expect people to have enough information on
all of these topics in their heads at every moment they
might make a decision.Not only that, the people who want
to open a restaurant in an unsafe building or sell you
tainted meat have a clear incentive to hide that
information from you and from everyone else.In this
world, how could anybody make a good decision on the
thousands of things we buy or use during daily life? Even
with perfect information, which is strongly
disincentivized?Regulations solve this issue by hiring
the government to figure out and enforce the best way to
prevent these issues so that every time we go out to
dinner we don't have to ask the waiter "Which of these
walls is load-bearing?".
malvosenior - 2 hours ago
Reputation and expert advice cover this. Check Yelp to
see if anyone got crushed to death before you dine and
you should be fine. Snark aside, there?s a lot more
transparency now than when these laws were designed. A
lot more competition too. The market will weed out truly
bad actors.
tptacek - 4 hours ago
That's totally fine. I do not even a little bit agree
with you, but it's fine to be a hard libertarian or an
ancap. But most people aren't ancaps, so a persuasive
argument against ICO regulation is probably one that
doesn't depend on your audience themselves being ancaps.
malvosenior - 4 hours ago
I think you?re greatly overestimating the popularity of
your opinion. If a ton of people didn?t agree with me the
SEC wouldn?t need to step in and put a stop to it. It?s
that so many people want to do this that they are now
meddling.
tptacek - 3 hours ago
I absolutely agree that lots of non-ancaps think the SEC
should stay out of ICO regulation. But so far as I can
tell, they haven't these arguments through. I've seen
only two forms of pro-free-ICO argument on this
thread:(1) Special pleading arguments that suggest that
despite the fact that tech startups have little to no
inventory, trivially simple expenses, no financing
obligations outside their equity raises, and, for the
forseeable future, no significant revenue --- that is,
despite the fact that tech startups have virtually none
of the attributes that make producing audited financials
expensive --- they should be exempt from SEC disclosure
rules.(2) Arguments suggesting that adults should be free
to enter into contracts without protections because
regulations have been obsoleted by the Internet.Argument
(2) I get, and acknowledge. I do not agree with it, but
fine.Argument (1) though makes no sense, and if someone
would take the time to pursue it carefully, I'd be
thankful.
malvosenior - 3 hours ago
I agree with you. Argument 1 makes no sense.
orthecreedence - 4 hours ago
> Why shouldn?t people be able to take risks they?re
comfortable with?Because when enough of these nimrods makes
the wrong decision at the same time, you get catastrophic
failure and the rest of society is left holding the bag.They
then go whining to the government which, in turn, enacts
regulations to keep these things from happening again.
tptacek - 4 hours ago
If we're just recapitulating the statism-vs-anarcho-
capitalism argument, we can probably put a bow on this part
of the thread and everyone agree to disagree.
orthecreedence - 3 hours ago
I don't think I'm arguing against rugged individualism as
an ideology, moreso the belief that the choices we make
as individuals don't affect the people around us, which
seems to be the repeating mantra from anarcho-
capitalists.
malvosenior - 4 hours ago
You can go to Vegas right now and blow your life savings.
Should that be illegal too? We need to stop the
mollycoddling and let people make their own decisions (and
yes not bail them out if those decisions turn out to be
wrong).
tptacek - 3 hours ago
You can indeed do that. But very few people do, because
when you try to mortgage your house to bet your life's
savings at a craps table, your spouse refuses to sign the
paperwork, because everyone knows that for a working
class family, spending $10,000 at a casino means you have
a problem.The same is not true of investments, which can
be very persuasively marketed to normal people without
gambling problems. Which is why the SEC cares so much
about how securities are marketed and promoted, and why
you can sell stock in virtually anything as long as you
(1) register and (2) publish audited financials
documenting how crazy your business idea is.
malvosenior - 3 hours ago
If the ?problem? is marketing then the solution is
counter-marketing, not regulation. Ideas should compete
against each other and not be forced with the threat of
violence (the state).You?re right in that we
fundamentally disagree so won?t go anywhere here. I
appreciate you arguing in good (enough) faith though.
orthecreedence - 3 hours ago
> you get catastrophic failure and the rest of society is
left holding the bag.You didn't respond to what I said.
When enough people make a large mistake, the effects go
beyond just the individuals. At that point, it's no
longer a "personal choice," it's damaging to the whole.
malvosenior - 3 hours ago
I did: ?and yes not bail them out if those decisions turn
out to be wrong?Of course any action at scale will have
impact beyond the individual. I do not believe the state
(or anyone else) can determine what?s best for everyone.
Such a thing is not possible and instead is used as cover
to remove personal freedom.
orthecreedence - 3 hours ago
Ah, I'm sorry, I missed that part of your response. In
that case, your point is taken (I disagree, but that's
fine).
jMyles - 4 hours ago
Man, as usual, you make some good points but summarize your
position with an out-and-out strawman:> ICO enthusiasts want to
paint this as retail investors being excluded from "10000%"
gains.If this is your best impression of the intentions of
token developers, I really think that you need to engage in
better listening.Obviously our perspectives differ re: the role
of the state in the information age. Over the past - what has
it been, three years - I haven't yet convinced you that the
state is subject to deprecation by dint of the connectivity of
the internet. I may yet.But even if I can't, I really think
that you will benefit from realizing that much of the crypto-
blockchain experimenting is about finding ways to replace
functionality of the state, or to subvert its more violent and
insidious tendencies.To use the current example, I can imagine
something like MUN eventually replacing the various regimes of
inspection and regulation around food service. Perhaps you
gasp, and say, "how can we do that?! The streets will run with
the blood of the dead from e. coli!"However, this both assumes
that the state does a good job at regulating food (it doesn't)
and that a decentralized solution won't (it can). The state
exacts nothing short of brutality on our food supply, from
effectively subsidizing factory farms to forcing farmers at
gunpoint to destroy raw milk [0]. That last event happened
down the road from my partner's family, by the way.Now, I have
no idea of the impact that MUN may have had - perhaps it wasn't
going to do any of the good in the world that I'm imagining.
But neither do you! Neither does anybody!I don't want the same
thing to happen for GRMD and cannabis, for SPANK and adult
services, and so on. These are good ideas that deserve a
chance to work in the world if they can.It's no secret that I'm
working on a blockchain-driven KMS, NuCypher. And I put a lot
of heart into my work. I'm very excited about what it can mean
for people who want to share secrets in a key-managed way but
don't want to trust the likes of Amazon and Google.When I put
in the extra hours, I'm largely motivated by the thoughts of
who might benefit: Chinese dissidents who need a safe place to
chat online. Medical providers who want to share records in a
trustless way. File-sharing applications who color outside the
lines of the stone-age IP infrastructure present in much of the
world.This is exciting stuff, and I much prefer to bring it to
life without needing to constantly be in a confrontational
position re: three-letter agencies. It's seriously time to re-
evaluate the role of the state and make sure that we focus on
reducing the violence that it brings to our world.0:
https://www.theorganicprepper.com/michigan-dept-of-agri-forc...
tptacek - 4 hours ago
This is all fine, but if you want to be persuasive outside of
niche sites, you'll find arguments that make sense to people
who aren't anarcho-capitalists.
kelvin0 - 4 hours ago
Seems to me they were not engaged in anything different from video
games which allow you to purchase ingame virtual currency. What's
the difference? Genuine question.
tptacek - 2 hours ago
If you promoted an in-game currency as an opportunity to profit
on resale, you would have similar legal problems. Especially if,
like Munchee, you did it for a video game that didn't really
exist yet, so that your in-game currency had no plausible value
other than for speculation.
haldean - 4 hours ago
For one, there isn't a market where you can buy and sell them;
usually the developer decides on the price, and you can't
exchange them back into USD.
cwkoss - 3 hours ago
Also, the terms of service usually forbid sale between
individuals
eximius - 7 hours ago
For better or worse, this sets a fairly clear precedent. Will be
interesting to watch people try to get around it.
deweller - 6 hours ago
I am a co-founder in the cryptocurrency space. Our lawyers were
smart and advised us against releasing a utility token ICO
because they predicted that these SEC actions would be coming.Our
approach to "get around" this is to file all the necessary
paperwork for a legal security and then only sell the token to
accredited investors.
Nursie - 5 hours ago
Yeah that doesn't sound so much a workaround as it does "doing
things properly"
IncRnd - 6 hours ago
Did they discuss Title IV of JOBS with you?
cptaj - 1 hours ago
What I don't like is the "accredited investors" part. That just
means its going to be just as hard as getting stock which is
prohibitive to a lot of investors in the world.
homakov - 6 hours ago
What are the steps and costs to do same? Who is accredited
investors btw?
tptacek - 6 hours ago
https://www.sec.gov/files/ib_accreditedinvestors.pdfGenerally
: earning over 200k/yr, or having a net worth over 1MM
excluding your house.
whataretensors - 6 hours ago
tldr; 10000% returns are limited to club members only
tptacek - 5 hours ago
tldr; exemption from SEC disclosure laws that protect
investors of all classes are limited to club members
only.
komali2 - 5 hours ago
Wait, and people are arguing that this process isn't an
arbitrary class lock out?
tptacek - 5 hours ago
I don't know what "class lock out" means, but the
restriction is pretty obviously there to prevent people
from staking their livelihoods and financial futures on
unvetted offerings.The idea is that people who have high
incomes or high net worths (a) either are financially
sophisticated, or can trivially afford financially
sophisticated advisors, and (b) are unlikely to be
staking so much on a single deal that their long term
outcomes will be at risk.
komali2 - 5 hours ago
How do you correlate existent material wealth with any of
your claims?What's to stop an inheritor from making a
poor investment with all their capital? Or a lottery
winner? Or ANYBODY with that kind of money, really?Why is
it presumed that at "arbitrary net worth 1 million," a
person is "financially sophisticated?"If the sec wants to
I guess "protect people from themselves," why don't they
have an actual certification system that is based on a
demonstration of knowledge?Finally, why aren't people
with a net worth of under 1 million protected from other
poor financial decisions, since in your mind they are not
"financially sophisticated" and thus are more likely to
engage in payday loans or other predatory financial
institutions?
tptacek - 5 hours ago
Actually, I agree that the RegD numbers are arbitrary.
They should be much higher: they haven't tracked
inflation. A person with 200k in annual income in 2017 is
by no means necessarily in a position where they can
safely invest in securities that have exempted themselves
from disclosure requirements to their investors.
DennisP - 4 hours ago
On the other hand, someone with $150K income and $800K
net worth can easily afford a $5K investment, and is
probably sophisticated enough to not be completely stupid
about it. It makes more sense to use percentages rather
than a fixed cutoff (and in fact that's what the JOBS Act
does).
tptacek - 4 hours ago
And, in fact, even if you make $50k a year, you can
invest up to low-thousands in RegCF regulated issuances,
or even more in a Reg A+ mini-IPO issuance.By and large,
the entities pursuing 8-figure ICOs are those that (a)
don't want to spend $10,000-$20,000 to engage with the
SEC and adhere to their disclosure rules, and (b) aren't
credible enough to raise from accredited investors.What's
crazy to me is the notion that a business venture that
can't scrap together $20,000 should somehow obviously be
entrusted with $15,000,000 of retail investor money.
dahdum - 3 hours ago
> 'Why is it presumed that at "arbitrary net worth 1
million," a person is "financially sophisticated?'It's
not so much proving they are financially sophisticated as
it is saying they have enough that "they are on their
own". For instance, I can't recall many people caring
about the wealthy who lost so much in the Madoff scandal.
Most opinions seemed to be "they should have known
better".> 'If the sec wants to I guess "protect people
from themselves," why don't they have an actual
certification system that is based on a demonstration of
knowledge?'You can actually be exempt from the
income/wealth requirements if you are an investment
advisor / registered broker. I believe you can be an
executive at the issuer and be exempt to.> 'Finally, why
aren't people with a net worth of under 1 million
protected from other poor financial decisions, since in
your mind they are not "financially sophisticated" and
thus are more likely to engage in payday loans or other
predatory financial institutions?'SEC doesn't regulate
those. I agree predatory lending should be reigned in
though.
dangero - 5 hours ago
But how are you going to make the coin available for liquid
trading in the future?
Alex3917 - 6 hours ago
> Our approach to "get around" this is to file all the
necessary paperwork for a legal security and then only sell the
token to accredited investors.How does this square with the SEC
commissioner's statement yesterday that not a single ICO has
registered to do a security offering?
Kubuxu - 6 hours ago
By requiring all investors to be accredited you are exempt
from the long registration process with SEC. The law in
question is "Rule 506(c) of Regulation D", see:
https://www.sec.gov/fast-answers/answers-rule506htm.html
[deleted]
sillysaurus3 - 6 hours ago
Can you give a brief checklist (or notes, or anything at all)
regarding the necessary paperwork? What's involved?
[deleted]
s73ver_ - 5 hours ago
Can I ask why you'd still go ahead with a token after all that,
instead of doing a normal security? With all the same reporting
and other regulations as a security, what does being a token
get you?
subroutine - 5 hours ago
You mean, exactly like authorized shares of common stock?How is
this any different than traditional corporate
capitalization?Did you set aside a large pool of tokens for a
potential investor who prefers convertible equity?A reserve for
an option pool? How will employee stock
options..erm..sorry..'token options' plan work?If your company
is successful, and a great offer comes up to exit, what's the
plan for M&A using tokens?Most importantly, why would investors
want coin over stock? Are they given all the same legal company
equity rights as traditional stock?
52-6F-62 - 6 hours ago
So basically, follow the existing law that governs securities
and investments. I personally don't see a big problem with
that, considering the laughable scams that have occurred over
the past six months.I am curious, though, how that works with
proposed international investors. (I'm not well educated in the
financial space)I hope that these actions clear house of the
scams, and open room for good projects to exist without some
shade of doubt cast over them?at least not for the reasons
there exists some kind of shade now.
erikpukinskis - 6 hours ago
> I personally don't see a big problem with thatIt protects
the monopoly the investor class has on investments like
these.
kordlessagain - 5 hours ago
> It protects the monopoly the investor class has on
investments like these.False.If anything, it exposes
consistently larger "chunks of value" to the risk involved
in the investment. Given accredited investors are used to
evaluating risk it simply allows the to participate freely
in the unknown risks of these types of investment vehicles
without getting smaller investors involved in the mix. (It
also prevents them from using their position against lower
investment amounts made by lower accredited
individuals.)The "protection" afforded here is to the
common investor, who by definition does not carry a large
store of value with them. By preventing them from investing
directly, by way of limiting their involvement based on
their stored values, the SEC is protecting the "collective
stored value" of the lower classes. And, this makes sense,
given the dollar's value is based in part on what people
are willing to pay for a given set of objects. This is the
responsibility of the Fed to US.An analogy would be the Yap
allowing their children to go and mine Rai Stones by
themselves. No sensible society would allow this to occur,
given the dangers. And, yes, I'm comparing lower accredited
investors to children, when considering the amount of
knowledge they may carry with them regarding risk.
jrs95 - 5 hours ago
Who the hell in the "lower classes" is investing their
money? Even a good share of middle class Americans have
no investments at all or so few that their net worth is
either negligible or negative. The idea that the SEC
needs to be "protecting" these people when buying lottery
tickets and cigarettes is legal is laughable.
justrobert - 5 hours ago
And yet anyone can buy 3x leveraged ETF/ETNs and not
understand how the products are structured. Some of
those products, due to the structure, will always lose
value over time as the futures used to replicate them are
normally in contango.So some financial products where
they will always drift to zero are fine, but investments
in companies that have a chance to profit aren't allowed.
tptacek - 4 hours ago
You can create a company that has ludicrously limited
opportunities to return its capital, and sell those to
the public. You simply have to comply with the SEC's
registration and disclosure rules --- in particular, you
have to publish quarterly audited financials confirming
your limited prospects.That is the difference between the
"3x leveraged ETF" and the "company that has a chance at
profit" in your example, not some weird value judgement
the SEC is making.
njarboe - 3 hours ago
But you can bet $20,000 on the single spin of the
roulette wheel and the expected value is negative.If you
are allowed to do investing when young and at low levels,
like many other things in life, you could learn some
great lessons and maybe you won't sell your 1/2 million
dollar IRA investments for 1/4 million in a market
downturn.
ChuckMcM - 3 hours ago
That phrase, and the combination of 'monopoly' and
'investor class' tends to jar me because as I see it the
truth is exactly opposite to the sentiment expressed.
Rather than protect the 'investment class' it protects
people who can't afford to lose all of their
investment.Part of the problem is a sort of systemic
survivor bias where the accredited investors rarely talk
about all the times they lost all of their investment, and
instead focus on the ones where they made money (the more
disproportionate the better). The reality is the most of
the investment opportunities that are offered only to
accredited investors lose money, and what that translates
to is that most people, if allowed to invest in these
things, would lose money they couldn't afford to lose.It
can be hard to see that when an angel investor crows about
a huge payday from someone they helped get started. And in
hindsight it is "easy" to see how that deal made perfect
sense. But imagine if you were allowed in on Uber's last
fundraising round and now they are in danger of a 40% 'down
round' courtesy of SoftBank? That second mortgage you took
out on the 'hottest startup in the bay area' starts looking
like you're going to have to pay it back by your own
labor.Another argument I have heard made is "Hey, it's my
money and who are you to tell me how to invest it?" (note
told in the first person even though the 'you' reading this
or commenting on it may have never made such an argument).
I totally understand and resonate with that argument, but
when you do invest it with someone who was very slick and
had you completely believing that they could turn dog poo
into gold, and it turns out after you lost your entire
investment that they never really could and there was
evidence in their books or history that, had you known, you
never would have invested. Then you want them punished some
how, but for what? Lying through omission and tricking you
out of your money? And we have a system for that, its a
bunch of regulations, imposed by the SEC, which allows the
SEC to fine or jail people who violate them. And they
include things like FD or Full Disclosure rules which
demand they cannot lie to you by omission or it is on them.
And if an investment is legit and they want to offer it to
non-accredited investors, then the person selling the
securities will go through the necessary hoops and there
won't be an issue selling them to you.
hackinthebochs - 3 hours ago
> Rather than protect the 'investment class' it protects
people who can't afford to lose all of their
investment.The problem is that this isn't a binary. To
protect the hapless grandparents from losing their
retirement, it also restricts knowledgeable but not rich
people from making informed decisions for themselves.
bdcravens - 3 hours ago
The "investor class" are prepared to handle loss. This
isn't free money that oligarchy are keeping from the poor.
Perhaps the floor is currently too high, but you should
absolutely have savings before you consider investments
where you stand to lose. In other words, an "investment
class".
itamarst - 6 hours ago
And by "investments" you mean "worthless and fraudulent
garbage", if we're talking about ICOs. Honestly garbage is
probably worth more, might be recyclable or
compostable.More broadly, there's a whole set of finance
research showing that the investments that accredited
investors get access to (private equity, VC, etc.) aren't
any better that normal investments on a risk-adjusted
basis.
sillysaurus3 - 6 hours ago
And yet, that worthless fraudulent garbage is one of the
few ways to get rich.If Oculus had done an ICO instead of
a kickstarter, my $400 wouldn't have been merely a
preorder. The $400 would've become quite a handy sum by
the time Oculus got acquired.That requires integrating
ICOs into the existing startup structures, but it's worth
trying.
wpietri - 2 hours ago
> And yet, that worthless fraudulent garbage is one of
the few ways to get rich.They are a much, much better way
to get poor. There's a reason we have the laws we do: a
long history of amateurs getting taken to the cleaners by
professional fraudsters.
mikestew - 5 hours ago
And yet, that worthless fraudulent garbage is one of the
few ways to get rich.The worthless fraudulent garbage is
an even a better way to get poor. Which is why there is a
financial test to make such investments: ?does this
person have that kind of money to piss away??
DennisP - 4 hours ago
But that should be a percentage of net worth, rather than
a binary function that flips at an arbitrary $1M.
mikestew - 4 hours ago
As Mason said to Dixon, ?ya gotta draw the line
somewhere?. Percentage of wealth as a measure misses one
key aspect: accumulating a million dollars isn?t that
hard. You can either work a middle-class job and not piss
away every penny as fast it comes in, or you?re so loaded
that a million dollars is what you keep in the checking
account for emergencies. In the former case, you don?t
get $1MM being an idiot at finances. Yeah, that leaves
out the gal with $900K, but see first sentence. For the
latter, you lose $500K, who cares? You?ll still eat
tomorrow.Of course there are numerous counter-examples.
Rap artist M. C. Hammer comes to mind. A rich person can
afford a bad investment or two, but not a string of them.
teraflop - 2 hours ago
> You can either work a middle-class job and not piss
away every penny as fast it comes in"Middle class", using
the conventional definition of 67%-200% of median
household income, is about $40k to $110k a year. The
median within that range is about $65k. Let's say you pay
about 25% in taxes, and manage to save 1/3 of what's
left. That's about $16k/year, which means it would take
that household an entire lifetime to save up a million
dollars.
jonknee - 1 hours ago
> That's about $16k/year, which means it would take that
household an entire lifetime to save up a million
dollars.~23 years if you add $16k a year and compound at
8% (below average S&P return for our lifetimes). If you
increase contribution along with pay increases the time
to a million will be less, small changes in return % also
make a huge difference.Not exactly overnight, but also
completely doable.
mikestew - 2 hours ago
which means it would take that household an entire
lifetime to save up a million dollars.Well, then, I guess
they best not be pissing away what little they have on
dodgy ICOs. I mean, perhaps I?m wrong on the math, but
you still haven?t convinced me of the case that those
making $65K/year should get to dump their retirement
money into dodgy investments. Rather, you?ve furthered
the case against.
dabockster - 4 hours ago
The line of thinking here seems to be that, to get to
$1M, you probably have learned a lot more than someone
making only $50-60k a year. So not only would you have
the capital, you'd also have the common sense not to make
a poor investment.
crankylinuxuser - 2 hours ago
But it also continues the idea "Only the rich may get
richer. These things are not for the little guy."Unless
we want to equate "Not having a great deal of money as
someone who is too stupid to know how to invest."
saalweachter - 2 hours ago
Frankly I think there's also some sort of "sympathy
level" in the law.If a little old lady living on a fixed
income loses all her meager savings to a huckster we feel
a lot worse for her than if a Wall Street 1%er with three
houses loses all his savings to the same huckster.Which
might not be the fairest or most logical way to
legislate, but laws are about feelings as much as
anything else.
Gargoyle - 1 hours ago
People with a million dollars are no better at detecting
bad investments than people without. If anything, they're
worse because they imagine themselves to be far more
sophisticated than they actually are. I've witnessed this
time and again.
dabockster - 4 hours ago
> If Oculus had done an ICO instead of a kickstarter, my
$400 wouldn't have been merely a preorder. The $400
would've become quite a handy sum by the time Oculus got
acquired.And Oculus could have just as easily took your
$400 and vanished without a trace. Or you could have
unknowingly purchased shares that were worthless to begin
with.
ryanwaggoner - 4 hours ago
And yet, that worthless fraudulent garbage is one of the
few ways to get rich.Historically, this has not been
true. Depending on your definition of "rich", very few
wealthy people have gotten there by investing in other
people's companies where accreditation was required. Most
wealth is built by via ownership of your own company,
real estate (which is a type of company), or by investing
in public markets. These pathways are all still available
to you, and almost certainly still represent a better
long-term risk-adjusted return than ICOs.If Oculus had
done an ICO instead of a kickstarter, my $400 wouldn't
have been merely a preorder. The $400 would've become
quite a handy sum by the time Oculus got acquired.This
actually is an interesting point, but it does require
some serious cherry-picking. I'd be interested to see the
data behind a scenario where all the funded startups for
the last decade had been ICOs instead of venture-backed.
I doubt it'd look so rosy in that scenario, especially
when you consider that many more failures would likely
have been funded, based on how easy it is to raise money
from an ICO based on nothing other than a pretty website
template.
kekeblom - 2 hours ago
Considering that an ico in oculus?s case would mean that
they would issue a token which could be exchanged against
a device, I fail to see how the token could increase in
value in any significant way.
ryanwaggoner - 1 hours ago
I guess I was thinking more of Oculus as platform than as
device.
cstejerean - 5 hours ago
Why would your ICO have been worth anything at all during
an acquisition? If it isn?t tied to equity in the company
(to avoid securities violations) then what exactly would
have given it value in an acquisition? Who would have
bought it from you for more money and why?
sillysaurus3 - 5 hours ago
I meant conceptually. If the startup ecosystem embraces
ICOs, then that type of thing can happen.Right now we'd
just have to settle for "If Oculus got acquired, the
price probably would have gone up." But you could imagine
starting a company that promises to incorporate tokens
into the structure somehow: Perhaps the founder would say
they'll only sell to acquirers that are willing to offer
token holders $x, where $x is based on the price over the
last month before being acquired. Then it'd be in the
founder's best interest to sell as little of the token as
possible to cover operations, since otherwise it reduces
their chances of getting acquired -- just like normal
investment.Also it incentivizes founders to make the
company do well: if they can tap into funding when needed
(because they have premined coins they can sell), they're
less beholden to the valley. That means a smart 18 year
old can single-handedly launch and fund a company; no
permission needed from some cabal of investors.Moot was
15 when he launched 4chan. If you believed in its future,
you could've (a) supported it by buying their token, and
(b) possibly made some return on that belief.Obviously,
all of the normal caveats apply: most investments don't
work out. But everyone knows that.If I want to put $2k
into a company, why is the government stepping in to stop
me? I can go waste $2k at the casino or squander it
however I want. It's my money.Bitcoin itself can be
thought of as an ICO. When people buy Bitcoin, we're
buying into Satoshi's vision for the future. It's not
merely because it's useful. So why is that legal, but
ICOs aren't?The overall point is that this is a powerful
model, and it could become even more powerful. The rest
of the world is embracing it, so the US could find
themselves left out by getting too draconian.
[deleted]
dkersten - 5 hours ago
If the ICO tokens are tied to some reward on acquisition,
then how is it any different from other securities? May
as well just sell equity at that stage (perhaps through
something like seedrs, which accepts small investments
too). If it?s basically just a security like any others,
why should it bypass the regulations?If it walks like a
security and it quacks like a security, then everything
else is just a technicality: it?s a security.Also, what
benefit does using a cryptocurrency even buy you here
other than as a technicality to attempt to sidestep the
laws?Maybe the laws should be relaxed to open it up to
more laypeople, but given how easily people get burned
and scammed at this stuff, I?m not fully convinced (penny
stocks anyone? Or even Bitcoin: yes some people got rich
and others will get rich in the future, but there?s a
very high chance that a lot of laypeople who bought in
recently because of the price surge are going to lose a
lot of money). The point of ?accredited investor? is that
they can afford to lose their investments.
DennisP - 4 hours ago
Someone with $800K in savings who makes $150K/year can
easily afford to lose a $5K investment, but is not an
accredited investor.That's why we have the JOBS Act now.
I'm hoping some ICOs start using it.
jonknee - 5 hours ago
Or maybe your Oculus ICO would have been worthless
because it wasn't an equity offering...
zeroxfe - 5 hours ago
> And yet, that worthless fraudulent garbage is one of
the few ways to get rich....for the founders of said
fraudulent garbage and perhaps a small number of very
lucky people.
tptacek - 5 hours ago
There is a reason you need to be an accredited investor
to buy startup stock, and it isn't because the elite
banksters are trying to protect their monopoly (startup
venture capital for early-stage --- anything prior to,
say, a B-round --- startups is a rounding error).Changing
the word "stock" to "coin" doesn't change any of the
underlying dynamics.
mbesto - 3 hours ago
> it isn't because the elite banksters are trying to
protect their monopolyTo quote The Dude "Well, that's
just like your opinion, man". I think your point is that
the intention of the law is so that people are
manipulated into buying securities they can't afford
(e.g. scams). This is true, however some would argue
that this legislation is yet another reason the rich
continue to stay rich, which is a legitimate argument. So
I wouldn't be so dismissive of that opinion.
cycrutchfield - 3 hours ago
The laws exist for a good reason, and it's because
historically many folks with insufficient means lost
their shirts due to such scams. A judgment was made that
between restricting such risky schemes to those with the
means to handle that risk ("the rich") and letting people
lose their shirts, restricting such risky schemes was the
lesser of two evils.And I tend to agree.
tptacek - 3 hours ago
Can we be clear that the law does not restrict "risky
schemes", but rather "schemes that refuse to follow
disclosure laws"? There are thousands of publicly traded
companies and a lot of them are batshit. What allows them
to trade without SEC molestation is that they (a)
register, (b) publish audited financials, and (c) follow
the SEC's rules about promotion.The difference between a
restaurant review coupon ICO and a pink sheet biotech
firm isn't risk. Both will almost certainly fail. The
difference is that the ICO refuses to publish audited
financials, and demands the right to shoot Youtube videos
extolling a once-in-a-lifetime opportunity to 9x an
investment.That's what the SEC is protecting retail
investors from.
tptacek - 3 hours ago
I do not understand the underlying logic of this
argument. It seems to suggest that but for pesky SEC RegD
rule, there'd be 10,000% appreciation opportunities for
everyone, not just the wealthiest investors.How do people
making this argument think money works? People that can
commit $20,000,000 to an investment with the stroke of a
pen are going to get the best opportunities no matter how
they're structured: they can offer better terms.
Literally the only thing retail investors could
conceivably offer to compete with them is "willingness to
be screwed over without recourse".Stipulate a future in
which essentially no ICO is regulated, and most new
venture raises happen with publicly traded ICOs. Follow
that thought to its conclusion and explain to me how the
best opportunities are going to provide 10,000% gains,
rather than markets acting the way all logic in either
direction about ICOs dictates they must act, and pricing
risk and opportunity accordingly?I see how, in the post-
free-ICO world, you'll be able to bet that restaurant
review coupons will 10x your money. Coupons for
everything. 10x your money on dog washing and cat
sharing; that'll happen too.What I don't see is why the
truly credible teams doing truly important work with a
real chance of success are going to offer securities on
those same terms. How does that work? How stupid would
you have to be to look at a market where restaurant
review coupons are worth $15MM because they're certain!
to 9x your investment, and then go to market with the
next generation of, say, the Cisco Catalyst 9400 switch
on those exact same terms?Aren't restaurant review
coupons in some sense the ceiling on how too-good-to-be-
true these ICO deals can be? I mean: that business is
obviously not going to work. A reasonably sophisticated
person can only put money on it in the hopes that someone
dumber will buy it off them in a week or two.
sillysaurus3 - 2 hours ago
Aren't restaurant review coupons in some sense the
ceiling on how too-good-to-be-true these ICO deals can
be? I mean: that business is obviously not going to work.
A reasonably sophisticated person can only put money on
it in the hopes that someone dumber will buy it off them
in a week or two.Your argument hinges on the assumption
that the government should protect people from this
outcome. If they make a bad bet, it's their bet to
lose.Right now, churches ask for thousands of dollars via
mail. People send them with the hopes that they are
"planting a seed" and to "watch that seed grow." All of
this behavior goes on without society collapsing.What's
the key difference? Why do people need to be protected
when suddenly they have a chance of winning real returns,
however remote?
tptacek - 1 hours ago
View few people mortgage their houses and send the
proceeds to a church expecting to pay for their kids
college tuitions.
mbesto - 41 minutes ago
> I do not understand the underlying logic of this
argument.Just because you don't understand the logic of
the argument doesn't invalidate it.
tptacek - 32 minutes ago
That's obviously true, but doesn't get us anywhere.
pishpash - 3 hours ago
Is there any access at all, even through other funds? If
not then there is a problem. Maybe prohibiting
advertising and soliciting is enough. Maybe place some
limits. But there are no good reasons I can think of to
blanket prohibit investment itself to the "non-
accredited".
tptacek - 3 hours ago
Yes; the money venture capitalists invest comes from
other funds, among them things like pension funds.A fact
people seem to overlook in these discussions is that
unless you can see the future, you can't just invest in
Google and Airbnb; you invest in a sample of the whole
tech startup market. And when you do that, by and large,
you underperform the S&P 500.Funds and endowments invest
as VC LPs not simply because they want access to the
insane deals that startups provide, but because they want
decorrelated investments: they want some of their money
allocated to investments that will perform differently
than the market as a whole. When you have billions under
management, it makes total sense to throw tens of
millions at tech startups.
ShabbosGoy - 5 hours ago
Aren?t ICOs covered under Reg CF of the JOBS Act though?
That was the whole point of the JOBS act: to provide
access to capital that an entrepreneur normally wouldn?t
be able to obtain.An ICO is not a bad alternative to pre-
seed funding.
tptacek - 5 hours ago
I don't know how many other restrictions apply, but
apparently for RegCF, you can only take small amounts
from non-accredited investors, and you have to raise less
than 1MM.
philipodonnell - 3 hours ago
This perspective is... naive. When accredited investors
became a thing it may have started as a paternalistic
"protect the poor from themselves", but now it merely
serves to limit the supply of investors (read:rich) to a
relative few who can dictate more favorable terms to
those seeking that capital (read:poor).When the primary
determination is whether you already _have_ money, rather
than education, professional history, earning potential,
or a history of demonstrated ability to make informed
investment decisions... it becomes extremely difficult to
argue that its anything other than an artificial class
barrier.
caust1c - 2 hours ago
> When the primary determination is whether you already
_have_ money, rather than education, professional
history, earning potential, or a history of demonstrated
ability to make informed investment decisions...This is
the case because many regulations (Tax code, laws) favor
the wealthy. If we didn't have the SEC regulations, then
the clever and wealthy would prey on the poor and
uneducated. This is textbook what happened in the
20s.Honestly, the SEC is probably one of the last decent
regulatory bodies of our government.
tptacek - 3 hours ago
What I think is naive is the idea that opening investment
in something up to the public would somehow harm the
financial sector, rather than generating billions in
profits for it.
sillysaurus3 - 2 hours ago
http://www.paulgraham.com/divergence.htmlVC funding will
probably dry up somewhat during the present recession,
like it usually does in bad times. But this time the
result may be different. This time the number of new
startups may not decrease. And that could be dangerous
for VCs.When VC funding dried up after the Internet
Bubble, startups dried up too. There were not a lot of
new startups being founded in 2003. But startups aren't
tied to VC the way they were 10 years ago. It's now
possible for VCs and startups to diverge. And if they do,
they may not reconverge once the economy gets better.This
logic works in reverse, too: if funding becomes
dramatically easier thanks to ICOs, startups have no
reason to court VCs anymore. And that could be dangerous
for VCs.
tptacek - 2 hours ago
Who cares about the VCs? VCs are an insignificant
component of the financial system. I don't agree that
ICOs would be harmful to VCs, but even if they were: the
larger financial system would profit enormously from
retail investment in fly-by-night startups.
sillysaurus3 - 2 hours ago
This subthread was about class barriers and investors.
You expressed ICOs might not be harmful to them, so I
mentioned a way they might be. Not sure where the
financial sector topic came from.What exactly would the
problem be with letting people crowdfund startups (i.e.
equity)? Why not follow Filecoin's lead? I've been
reading your arguments and you haven't really articulated
your concerns; just persuasive cases that the status quo
should be maintained.The next Google/FB/Netflix might
very well start using the model here, if you let it. But
only if they have access to capital. And right now, that
means VCs.
tptacek - 1 hours ago
Again: you're suggesting that when we talk about the
interests of rich financiers, we're talking about the
VCs. I'm sure not. If there's a financial power center to
be concerned about, it's Goldman Sachs, not Sequoia. The
fact that ICOs might somehow impact some tiny corner of
the finance industry doesn't matter if it's going to
juice things for the giant investment banks.
jakelazaroff - 2 hours ago
Why would ICOs make startups less reliant on VCs, other
than the fact that (for the time being) ICOs let startups
skirt investment regulations they'd otherwise have to
adhere to?I agree with tptacek's general thesis here:
there's not any inherent difference between ICOs and
"normal" early-stage investing that justifies an utter
lack of regulation of the former but not the latter.
indubitable - 5 hours ago
This also deters entrepreneurship from otherwise less
established entities. The risk with regulations like this
is that in attempting to keep out the scammers, you also
end up keeping out smaller by otherwise completely
authentic entities.In the worst case you end up keeping out
smaller players, yet the scammers find creative ways around
the system. Take, for instance, patents. They were
initially envisioned as a way for independent inventors to
ensure their ideas were not stolen. But a century of
absurdly complex rules and regulations paired with extreme
fees mostly keeps out very small scale inventors. On the
other hands, the scammers are seemingly as active as ever
and completely inappropriate patents are still regularly
granted. So what have we truly accomplished?
s73ver_ - 5 hours ago
If you're deterred by this kind of thing, then perhaps
you're the kind of "entrepreneur" that should be
discouraged. We absolutely do not need any more scammers
in this space.
[deleted]
indubitable - 4 hours ago
SEC compliance comes with extensive fees, delays, and a
century of legalese. Coin offerings do not have to fall
in the tens of millions of dollars. It's a practical way
for smaller startups to raise small amounts of money. For
instance the first company that started Musk's rise was
Zip2 - and it was started with money that was in the 5
figures. A coin offering instead of angel investors could
have been an interesting option for a similar company now
a days. For companies on this scale, having to hire a
legal team to ensure compliance is a significant
burden.How much do you think this will end up costing
companies to comply with? Ultimately we'd all like to
have 100% honest ICOs. But you have to balance the cost
of compliance with the expected results. Many ICOs
already block American investors and that was before
this. How will this effect the rates of scams? How will
this effect the rate of perfectly up and up ICOs that are
not made available to US investors?
s73ver_ - 1 hours ago
If you're only focusing on the costs of compliance, then
you're looking at the wrong thing."Coin offerings do not
have to fall in the tens of millions of dollars."The
amount of money does not matter; a scam is a scam."For
companies on this scale, having to hire a legal team to
ensure compliance is a significant burden."That sucks for
them. But the alternative is far, far worse."A coin
offering instead of angel investors could have been an
interesting option for a similar company now a days."Why?
If the only reason is that they don't have to comply with
the reporting and transparency regulations, then it's not
a good reason."But you have to balance the cost of
compliance with the expected results."Why? And, quite
frankly, why should an ICO be treated any differently
than any other security? They are exactly the same; and
have absolutely nothing differentiating them from
traditional securities."How will this effect the rate of
perfectly up and up ICOs that are not made available to
US investors?"I'm going to say it won't. Perfectly up and
up ICOs will be able to get compliance, and will thus be
open to all.
chickenfries - 3 hours ago
If an ICO is perfectly up and up they should abide by the
same regulation as other securities. If you can?t afford
the regulation then you can?t afford to sell securities.
It seems like ICO boosters have a hard time believing
that everyone isn?t a libertarian who wants there to be
no regulation on ICOs.
kodablah - 2 hours ago
> If you can?t afford the regulation then you can?t
afford to sell securities.People are growing tired of the
pay-to-play barriers to entry. Why can't we have the
regulations without the financial burdens? (Hint: the
answer is not about following the regulations themselves,
but artificially limiting supply to make for easier
enforcement. Otherwise there are too many to meaningfully
regulate.)
s73ver_ - 1 hours ago
"Why can't we have the regulations without the financial
burdens?"If you can find people willing to work for your
without pay, you can.
kodablah - 1 hours ago
I'm questioning the amount of work required as the
burden, not the humans. IIRC, the SEC filings require
multi-thousand dollar fees. Many government services do
not (or not at that level). Do you believe all of those
other government services are making people work without
pay? I don't think it's fair that you blindly assume the
fees are equal to the administrative costs when it seems
clear to me they are set at a level to detract the
action.
s73ver_ - 1 hours ago
If you've got evidence to back up that claim, feel free.
Remember, however, that the people the SEC employs for
doing this are expensive.
chickenfries - 1 hours ago
How many government services require hours of work by
lawyers per application?If you can't cough up a few
thousand dollars or take our a small business loan to
hire some lawyers, why should I believe that you're
trustworthy enough to skirt regulations?
kodablah - 1 hours ago
I'm saying the application shouldn't require hours of
work by lawyers any more than filing for an LLC or my tax
filings require individual lawyer review.In my head, I
read the last statement like "why should the law trust
you if you don't have enough money, and why should you be
allowed to do something without the law's trust?" I
believe enforcement should be reactive on regulation
skirting within reason. Akin to an audit, an arrest, or
anything else. You agree to abide by laws, you may even
sign something or fill out a form to that effect. That
there is an extra step to see if you "really" agree seems
to be a way to artificially limit filing counts. I admit
I am not that knowledgeable on possible history where too
many did fraudulent filings requiring this individual-
lawyer-review preemption.
chickenfries - 1 hours ago
No I think people in general are quite happy with the SEC
and pay-to-play barriers. The boosters looking to make
money of ICOs and such may be tired of the SEC, but
that's like saying unlicensed drivers are tired of the
cops.
kodablah - 1 hours ago
> I think people in general are quite happy with the SEC
and pay-to-play barriersI think you are probably right.
But as crowdfunding (er, "crowd investing") becomes more
available to the masses and the SEC cracks down on it
more, a whole group of people that otherwise were
unfamiliar w/ these rules aren't going to remain happy. I
would not be surprised to see the barriers relaxed (but
not the regulations of course).
antr - 6 hours ago
you call it "investor class monopoly" (if such thing
exists), I call it protecting citizens who can be easily
duped
jMyles - 5 hours ago
It's basically "think of the children!" except you extend
childhood to all of life. Perfect, really.
tptacek - 5 hours ago
You can sell securities to anybody, including
(presumably) children. You simply have to register them
with the SEC and follow the disclosure rules all the
other thousands of publicly traded companies have to
follow.Heck, after the JOBS Act, it got even easier to do
this under Reg A+, which allows for a lightweight IPO for
raises under 50MM --- which describes most ICOs.What's
happening in this thread is simply special pleading for a
particular type of enterprise to be exempt from those
rules.
vkou - 4 hours ago
It's mindboggling how people are perfectly OK with
raising 50-200 million dollars with an ICO, when they
don't have a team, or a working product, but they can't
possibly afford the expense and hassle of compliance,
auditing and disclosure.
michwill - 3 hours ago
There are two things here:* It's not OK to raise 200M
with no team and product;* Compliance only creates
obstructions, not protection.
tptacek - 2 hours ago
RegA+ companies don't require SEC proxy statements,
director and 10% stockholder reporting, SOX independent
audits, SOX internal controls documentations, or SOX CEO
certification. Pretty much all they're required to do is
create a quarterly audited financial report. How is that
"obstruction, not protection"? What kind of company that
ordinary people should invest in can't produce an audited
financial report? Charities and nonprofits product
audited financials!
vkou - 49 minutes ago
Thanks for bringing this up. I didn't realize just how
lax the rules regarding being a Regulation A Plus company
are.You don't need to be an accredited investor to invest
in one. You just need to limit your investment to no more
then 10% of your salary, or net worth, whichever is
greater.There are currently over 150 Reg A+ companies in
the United States. I am eagerly waiting for people
lambasting how the accredited investor rule keeps out
little people... To explain why little people aren't
falling head over heels to invest in RegA+ corps.
michwill - 2 hours ago
Reg A+ is indeed easier than an IPO. I've seen some
companies doing that, and it's 1 year pushback, to say at
least.One year is an insanely long time these days!
antr - 5 hours ago
Except the majority (let's say 99%) of all adults have
zero financial literacy
pishpash - 3 hours ago
Yet they are expected already to operate as if they do.
What's one more thing?
whataretensors - 6 hours ago
Yet they don't protect people from pay day loans or from
gambling. They only 'protect' intelligent people from
getting out of the system they've rigged.They also don't
protect workers from getting worthless secondary 'common'
stock.Keep regurgitating their lies. It's working for
them.
mrep - 5 hours ago
That's completely different. Those are regulated so you
know the exact deal you are getting up front.
option_greek - 5 hours ago
The common stock is one of the most direct way of
screwing workers. I guess anything is okay as long as it
is part of fine print.
tptacek - 5 hours ago
When you take out a mortgage to bring more capital to a
craps table, literally everybody involved knows you have
a problem. The same is obviously not true for securities
and speculative assets.
igorgue - 6 hours ago
It's almost predictable how people will respond here to a
comment like this...You're 100% right.
bdcravens - 3 hours ago
Indeed. "Investor class" just means having enough saved,
or enough income, that you are prepared to make
investments where you can lose money. It's like saying
those with FICO's over 480 have a monopoly on the ability
to get a car loan, or that those with basic math skills
have a monopoly on programming jobs.
kodablah - 2 hours ago
> It's like saying those with FICO's over 480 have a
monopoly on the ability to get a car loan, or that those
with basic math skills have a monopoly on programming
jobs.Wrong. It's like saying there is a LAW requiring a
certain credit score or a certain set of math skills. I
don't have anything to add on whether investor
accreditation is fair or not, but comparing federal law
and regulations to loan or hiring opinions/choices is
disingenuous. The comparison to predatory loan
regulations or legal certification requirements for
hiring would in fact be more apt.
bdcravens - 1 hours ago
That makes sense.
gst - 5 hours ago
> I hope that these actions clear house of the scamsWouldn't
the scams just get launched from other countries that don't
have to care about the SEC?
thrill - 5 hours ago
Just like the valid entrepreneurial efforts will.
abritinthebay - 5 hours ago
Sure, and they?ll join Nigerian Email Scams where they
belong
tarsinge - 6 hours ago
Good projects which will then be only available to accredited
(i.e. already rich) investors? This defeats the purpose for
me
sdenton4 - 5 hours ago
If you're smart enough to tell a good investment from a
scam, why don't you have enough money to be an accredited
investor?Or, in other words, by the time the plebes are
jumping in on crazy new financial scheme X, you're well
enough into bubble phase that restricting investment is
probably fine.
hackinthebochs - 3 hours ago
>If you're smart enough to tell a good investment from a
scam, why don't you have enough money to be an accredited
investor?Do you not see the obvious chicken-and-egg
problem here?
tarsinge - 4 hours ago
Have you seen the requirements to get accredited? How do
you get there starting with a modest capital without
taking insane risks?But beyond that I don?t understand
why regulation on investment is seen as ok, but
regulation in loans to prevent people to drown in debt
(which is kind of worse) is frowned upon. I?m not even
the most liberal person, but if people are free to lose
more than they have (or buy guns, or destroy their health
with sugar, or what else) then why are they not free to
put their money where they want?
chickenfries - 3 hours ago
Because lots of people losing all of their money on bad
investments has effects on the whole economy, see the
Great Depression.
tarsinge - 3 hours ago
But when it?s institutions like in 2008 it?s ok?
chickenfries - 3 hours ago
No, that's a problem too? Why does everyone respond with
"oh so you think payday loans and subprime mortgages are
OK?"Do you actually want to go back to a time before the
SEC. That's how you get a Great Depression.
bluesign - 4 hours ago
Will be easy, i think to evade:- setup a system that looks like
it will increase value of your token over time(as MUN case: ?As
more users get on the platform, the more valuable your MUN tokens
will become?)- don't make any promises about increase in
value/income about your token.- let people discover and share, or
promote on side channels.IANAL but as far as I searched, I guess
as long as you don't make any value increase claims etc, you are
totally safe
pmarreck - 5 hours ago
Good news: ICO's are now technically a security!Bad news: ICO's
are now technically a security!
Kiro - 3 hours ago
Is CryptoKitties a security then?
[deleted]
KyleTokenReport - 4 hours ago
To put this in perspective, Token Report analyzed its database of
ICOs and found each one that currently uses similar language to
Munchee; or, promises returns to investors.
https://medium.com/tokenreport/token-report-whos-been-breaki...
nickbauman - 2 hours ago
I keep hearing pundits talk about cryptocurrencies as being
"outside the regulation of any government" over and over. They need
to stop saying this.
nugget - 6 hours ago
I'm confused; if you can't use ICO proceeds to fund operations,
then what can you spend them on? Where is the money supposed to
go?
CPLX - 6 hours ago
The money for funding operations is supposed to flow through a
registered or otherwise legal security instrument, which this ICO
was not. The law hasn't changed, just the supposedly innovative
ways of pretending the law doesn't exist.
csomar - 6 hours ago
Nope. You can use the ICO like the IPO. You just need to follow
the regulation required. Obviously, they opted for an ICO to
avoid that.
PeterisP - 6 hours ago
The money can (and probably should) go to fund operations,
however, you're supposed to register such ICOs with the SEC and
follow the proper process just as any other release of securities
to investors.
mc42 - 6 hours ago
I believe this is part of their announcement on how the SEC will
be handling ICOs, but
IANAL.https://news.ycombinator.com/item?id=15902054