Which crypto-coins are "investment securities"? Implications?

[smooth]

You pretty much know if you have commitments to funding. You talk to people. You gauge market sentiment and the competitive landscape.

Then you are putting yourself in jeopardy on economic reality grounds. Even if the fine print says people can cancel, if everyone understands that it isn't really going to happen, then it isn't real.

I specifically wrote refutations to #2 and #3 up thread.

I understand. I nevertheless consider them to be issues of significant concern, especially when all is taken together.

[2112]

IANAL, but I spent a lot of time on the meetings with lawyers, including securities lawyers (but not related to cryptocoins).

Only the developers truly have the influence to alter the protocol and have it widely adopted. So in my mind the test is whether the developers are acting like an organized controlling manager of the coin.

A) under common law systems:

Your idea of "managerial control" is way to narrow. You've completely neglected the promotion and sales of securities and "managerial control" of said sales and promotion.

Therefore most of your analysis in invalid. One could probably come up with a case where the "security" itself is valid, but was promoted and sold in an invalid way.

B) under civil law systems:

The story is completely different. Under those systems the securities law tends to root in the Roman law concept of "depositum irregulare".

One more thing you seem to be neglecting is that the current prevailing common law definition of "conspiracy" doesn't require a proof of communication between the distributed co-conspirators. It is sufficient for prosecution to show that all "conspirators" acted in furtherance of their common goal.

[TPTB_need_war]

All posts of course are appreciated, but please do not expect me to just wither when a point appears to have holes in it.

IANAL, but I spent a lot of time on the meetings with lawyers, including securities lawyers (but not related to cryptocoins).

Only the developers truly have the influence to alter the protocol and have it widely adopted. So in my mind the test is whether the developers are acting like an organized controlling manager of the coin.

A) under common law systems:

Your idea of "managerial control" is way to narrow. You've completely neglected the promotion and sales of securities and "managerial control" of said sales and promotion.

Therefore most of your analysis in invalid. One could probably come up with a case where the "security" itself is valid, but was promoted and sold in an invalid way.

You have a circular illogic. There can't be any security if it didn't meet the Howe test, thus the promotion of said product was not a management of a common enterprise nor the promotion of the sale of a security.

I hope you can see that can't have a promotion of a security, if it never is a security.

B) under civil law systems:

The story is completely different. Under those systems the securities law tends to root in the Roman law concept of "depositum irregulare".

Securities law doesn't apply. Nothing met the Howe test so there were no securities involved.

One more thing you seem to be neglecting is that the current prevailing common law definition of "conspiracy" doesn't require a proof of communication between the distributed co-conspirators. It is sufficient for prosecution to show that all "conspirators" acted in furtherance of their common goal.

Well yes I guess if you can prove there was a conspiracy to hide that the buyers of the crowdfund were acting in conspiracy with the developer to continue to expect his managerial control and entreprenurial performance while obfuscating it, but then according to the Howe test you also need to prove the money transferred was used in the common enterprise and not just for the personal use of the developer it was transferred to. You could try to prove that the money was a conspiracy for an advance on his salary for future efforts. But the market value of the asset he sold at crowdfund must be taken into account. Since the crowdfund is a market price, I doubt you can make the argument it was for future salary, since the crowdfund contract will expressly state it is not for that.

In civil law you only need to prove the preponderance of the evidence and not beyond any reasonable doubt. But at least that removes the criminal liability.

[TPTB_need_war]

You pretty much know if you have commitments to funding. You talk to people. You gauge market sentiment and the competitive landscape.

Then you are putting yourself in jeopardy on economic reality grounds. Even if the fine print says people can cancel, if everyone understands that it isn't really going to happen, then it isn't real.

Now you are grasping at straws.

I talk to people all the time in private messages (and public forum discussions) and gauge interest level. It is completely detached from potentially anonymous buyers of a crowdfund. Polling the market is not a conspiracy.

I specifically wrote refutations to #2 and #3 up thread.

I understand. I nevertheless consider them to be issues of significant concern, especially when all is taken together.

Well of course you consider anything to weaken a competitor of Monero to be something worth spreading FUD about.

If people aren't dumb, I am sure they can figure it out that developer who has put his life for 3 years into something isn't going to just disappear and let his baby just die. And surely if the product is any good, there will be other devs offering to work on it and receiving donations.

The entire argument for open source is that the community takes over what is worthwhile to the community.

I am simply amazed after all your dogma to me about the glory of open source and nothing can beat Monero because open source always wins then when I talk about using open source to sustain a product after release, you think the users of crypto-currency aren't going to trust in open source. Thus you are saying it isn't open source that is keeping Monero strong but rather some promised control by some key persons such as fluffypony. But did fluffypony ever promise anything?

[2112]

I hope you can see that can't have a promotion of a security, if it never is a security.

False. "Pork belly" is not a security. "Pork belly futures/options/participation shares" were securities subject to the regulation and oversight.

In civil law you only need to prove the preponderance of the evidence and not beyond any reasonable doubt. But at least that removes the criminal liability.

Miscommunication. You seem to be thinking of USA exclusively. I'm writing to a worldwide audience because this forum is not limited to the "American" readers.

https://en.wikipedia.org/wiki/List_of_national_legal_systems
https://en.wikipedia.org/wiki/Common_law
https://en.wikipedia.org/wiki/Civil_law_(legal_system)

[TPTB_need_war]

I hope you can see that can't have a promotion of a security, if it never is a security.

False. "Pork belly" is not a security. "Pork belly futures/options/participation shares" were securities subject to the regulation and oversight.

Sorry those are securities as defined under the law:

http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/

WHERE THE TERM ‘SECURITY’ COMES FROM
A security implies an investment method or instrument that is secured against something else.

BUT IF CURRENCY CAN BE A SECURITY, THEN BITCOIN IS A SECURITY BECAUSE IT’S A TYPE OF CURRENCY, RIGHT?
Wrong. Bitcoin is not really a type of currency, at least not of the type recognized as securities. No entity or assets back up Bitcoin value. Bitcoin value is entirely virtual—a Bitcoin is only worth what another person thinks its worth. This is different than currency issued by countries.

Bitcoin is backed by no entity, no commodity, no organization.

In civil law you only need to prove the preponderance of the evidence and not beyond any reasonable doubt. But at least that removes the criminal liability.

Miscommunication. You seem to be thinking of USA exclusively. I'm writing to a worldwide audience because this forum is not limited to the "American" readers.

https://en.wikipedia.org/wiki/List_of_national_legal_systems
https://en.wikipedia.org/wiki/Common_law
https://en.wikipedia.org/wiki/Civil_law_(legal_system)

Well almost anything one can do in life could make one culpable to multiple jeopardy  when considering the vagaries of a multiple of legal systems and common laws. My point was to address the reasonably well defined securities regulatory law where it is so encoded. I considered the USA and EU (not each EU country) for starters.

It seems to me that if what you've done is reasonably in line with the very strict USA securities law, you've done good disclosure (i.e. enumerated risks, what you provide and don't provide, etc), and you've done a fair deal and not egregiously harmed any one, then the risks are about the same as committing 3 felonies a day just by breathing.

[smiletyson]

Is this topic related to bitcoin? I assume no, so it should be moved to the Altcoin Discussion.

[TPTB_need_war]

Is this topic related to bitcoin? I assume no, so it should be moved to the Altcoin Discussion.

This is related to whether Bitcoin is classified as an investment security. As well as any other crypto-coin.

Do you not care if Bitcoin is legal or not?

Why would you assume this thread is not related to Bitcoin? I specifically mentioned Bitcoin upthread. Maybe because you didn't read the thread and just aren't interested? Or is it because there is a preponderance of discussion about how to crowdfund a coin to try to avoid classification as investment security? Note that has not been the only mode discussed nor is it the only choice in the poll, nor is this thread closed to discussions of the other choices in the poll, one of which applies to Bitcoin.

Also would Blockstream side-chains denominated in BTC and two-way pegged to the Bitcoin block chain, not apply to Bitcoin? Would how side-chains are structured so as to not be illegal unregistered investment securities not be relevant to BTC?

[BARR_Official]

IMO the coins which promise dividends are definitely securities.  That doesn't include staking rewards.  If a coin doesn't pay dividends in another currency or coin, and it isn't advertised as a share of ownership, then it wouldn't fit all definitions of a security.  It might fit the narrow definition regarding management, but it would simultaneously fit the definition of a currency or commodity. 

[2112]

Sorry those are securities as defined under the law:

http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/

Are you seriously trying to cite an "invitation for comments" from some law firm as a legal precedent having valid legal standing in USA law?

I mentioned "pork bellies" as a good example. Although pork bellies are not traded on Chicago Mercantile Exchange since 2011, the legal analysis of "When and how a pig can become a security subject to regulation?" is still a valid exam problem for the law students.

Well almost anything one can do in life could make one culpable to multiple jeopardy  when considering the vagaries of a multiple of legal systems and common laws. My point was to address the reasonably well defined securities regulatory law where it is so encoded. I considered the USA and EU (not each EU country) for starters.

It seems to me that if what you've done is reasonably in line with the very strict USA securities law, you've done good disclosure (i.e. enumerated risks, what you provide and don't provide, etc), and you've done a fair deal and not egregiously harmed any one, then the risks are about the same as committing 3 felonies a day just by breathing.

And my points are:

a) you have no legal training
b) you seem to lack even amateur's appreciation of https://en.wikipedia.org/wiki/Adversarial_system and how it applies to a common law land like USA
c) you are misapplying reasoning rooted in https://en.wikipedia.org/wiki/Inquisitorial_system to an old case from 1946 https://en.wikipedia.org/wiki/SEC_v._W._J._Howey_Co.

d) you seem to be searching for a https://en.wikipedia.org/wiki/Affirmative_defense loophole to https://en.wikipedia.org/wiki/Securities_Act_of_1933#Regulation_S

While I understand and commiserate with your general position about societal over-lawyering I also observe that your legalistic divagations are of very low quality.

Much better divagations were posted by John Nagle in 2011:

https://bitcointalk.org/index.php?topic=46486.0

but regretfully many of the links are no longer working. The AdSurfDaily case he mentioned ended in imprisonment of Bowdoin in 2012. It would be a much better source for a precedent involving cryptocurrencies in 2015 than some old cases from the 1st half of the 20th century.

[TPTB_need_war]

Sorry those are securities as defined under the law:

http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/

Are you seriously trying to cite an "invitation for comments" from some law firm as a legal precedent having valid legal standing in USA law?

Much better divagations were posted by John Nagle in 2011:

https://bitcointalk.org/index.php?topic=46486.0

I was citing the Supreme Court case of SEC vs. Howe. Even I see Nagle doesn't quite understand (or articulate) the generative essence of that case. And you were so far off in the thread, I just smiled.

Your appeals to authority are for b-listers who get their nose bent out-of-joint:

http://esr.ibiblio.org/?p=1404

I’m going to be specific about what I mean by “ego” now, because otherwise much of this essay may seem vague or wrongheaded. I specifically mean psychologial egotism, not (for example) ethical egoism as a philosophical position. The main indicators of egotism as I intend it here are are loud self-display, insecurity, constant approval-seeking, overinflating one’s accomplishments, touchiness about slights, and territorial twitchiness about one’s expertise. My claim is that egotism is a disease of the incapable, and vanishes or nearly vanishes among the super-capable.

It’s not only scientific fields where this is true. For various reasons (none of which, fortunately, have been legal troubles of my own) I’ve had to work with a lot of lawyers. I’m legally literate, so a pattern I quickly noticed is this: the B-list lawyers are the ones who get all huffy about a non-attorney expressing opinions and judgments about the law. The one time I worked with a stratospherically supercompetent A-list firm (I won’t name them, but I will note they have their own skyscraper in New York City) they were so relaxed about recognizing capability in a non-lawyer that some language I wrote went straight into their court filings in a lawsuit with multibillion-dollar stakes.

I'll get back to your unspecific strawmen in due time. You are may or may not have a point, yet avoid making a specific point and toss around vagaries instead. Make your case with specifics. I did.

If you find that I am annoyed, then yes because I expect you to cite for me specific case law and give examples and show that you know what the fuck you are talking about, and not just spout off appeals to authority, insults, and vague intersections of general concepts. So far, I've seen you commit logic errors in this thread, and on quick glance maybe more in that thread with Nagle.

You can very well be trained in many concepts and be able to spout off babble, but can you elucidate convincingly.

d) you seem to be searching for a https://en.wikipedia.org/wiki/Affirmative_defense loophole to https://en.wikipedia.org/wiki/Securities_Act_of_1933#Regulation_S

Sigh. Demonstrating how one is not involved in an "investment security" per the Howe test precedent is not an affirmative loophole defense. It is a defense against the alleged crime. The prosecution must prove the defendant has met the test under the Securities Act and subsequent clarifying case law of what an "investment security" entails.

And you are totally off in left-field again (as you were in the thread with Nagle) in that Regulation S safe harbor is not the defense I was citing. I was citing the defense that no investment security was ever created per the Howe test which defines what constitutes an investment security.

c) you are misapplying reasoning rooted in https://en.wikipedia.org/wiki/Inquisitorial_system to an old case from 1946 https://en.wikipedia.org/wiki/SEC_v._W._J._Howey_Co.


The AdSurfDaily case he mentioned ended in imprisonment of Bowdoin in 2012. It would be a much better source for a precedent involving cryptocurrencies in 2015 than some old cases from the 1st half of the 20th century.

You cite that as a precedent but it is entirely inconsistent with the genre of scenario I was describing in this thread.

http://networkmarketinglaw.com/securities-law/v-bowdoin-dc-cir-march-18-2011/

The Indictment alleges that Mr. Bowdoin perpetrated a scheme to defraud the members of ASD. Specifically, it alleges that Mr. Bowdoin solicited prospective customers to ASD based upon, among other things, his promise to use their funds to operate what was represented to be a profitable Internet advertising company capable of providing high returns on the funds they paid to ASD. Over the course of two years, Mr. Bowdoin is alleged to have made numerous misrepresentations and omissions in order to raise funds including: claiming to be operating a legitimate Internet advertising company; asserting that ASD had independent revenue to pay members the returns promised; representing that Mr. Bowdoin’s only run-in with law enforcement consisted of a traffic ticket, when he had been convicted already of criminal securities violations; representing that the revenue methodology and numbers ASD published in support of its payouts were true and accurate, when ASD was really managing its revenue to ensure that it only paid out about one percent (1%) of a member’s investment each weekday and one-half a percent (.5%) on the weekends; representing that ASD was not required to register with the United States Securities and Exchange Commission (SEC); and representing that Mr. Bowdoin was operating ASD in a far different manner than that which he followed.

First of all, the defendant was managing a common enterprise using the advertiser's funds and make representations to them. I already pointed out in my scenario up thread, that there would never be any operating common enterprise where funds were received and investors were waiting on returns from the common enterprise being managed by the developer.

Your cited case law is inapplicable and I refer back to SEC vs. Howe until you can find another case which overturns it w.r.t. to my scenario.

Otherwise please take your amateurish snobbish crap and very low powers of logic and discernment else where, because you are wasting my precious and scarce time.

[2112]

Hey, this discussion is getting really cool and entertaining. I'm going to quote your response in full so we can get back to it few years from now.

I think you clearly plan to promote and distribute a security in the USA but you plan to sidestep the registration requirements by claiming that your security is not a security.

In the nascent days of securities regulation in the USA one Charles Ponzi traded Universal Postal Union International Reply Coupons. UPU IRC clearly weren't securities, yet Ponzi was successfully prosecuted.

In the nascent days of Bitcoin regulation in the USA one Erik Vorhees launched several Bitcoin-based securities while simultaneously running diversionary campaigns like "Let's end one debate: Commodity vs Money" https://bitcointalk.org/index.php?topic=47111.0 . He settled with SEC by disgorging all profits (repurchased all his securities) and paying some fine.

In the criminal defense there is a maxim that anyone who defends himself pro se had hired a fool for his defense counsel. I have a feeling that you've also hired a fool for your securities counsel.

IANAL, but I really like to talk with them and I will be watching this space for further developments. The past experience with Bitcointalk was that no real IAAL will post in this thread, but I would love to be proven wrong.

Also could you do all the readers a favor and start spelling Howey correctly? You keep spelling it "Howe test" which makes it hard to search for the actual precedents.

Sorry those are securities as defined under the law:

http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/

Are you seriously trying to cite an "invitation for comments" from some law firm as a legal precedent having valid legal standing in USA law?

Much better divagations were posted by John Nagle in 2011:

https://bitcointalk.org/index.php?topic=46486.0

I was citing the Supreme Court case of SEC vs. Howe. Even I see Nagle doesn't quite understand (or articulate) the generative essence of that case. And you were so far off in the thread, I just smiled.

Your appeals to authority are for b-listers who get their nose bent out-of-joint:

http://esr.ibiblio.org/?p=1404

I’m going to be specific about what I mean by “ego” now, because otherwise much of this essay may seem vague or wrongheaded. I specifically mean psychologial egotism, not (for example) ethical egoism as a philosophical position. The main indicators of egotism as I intend it here are are loud self-display, insecurity, constant approval-seeking, overinflating one’s accomplishments, touchiness about slights, and territorial twitchiness about one’s expertise. My claim is that egotism is a disease of the incapable, and vanishes or nearly vanishes among the super-capable.

It’s not only scientific fields where this is true. For various reasons (none of which, fortunately, have been legal troubles of my own) I’ve had to work with a lot of lawyers. I’m legally literate, so a pattern I quickly noticed is this: the B-list lawyers are the ones who get all huffy about a non-attorney expressing opinions and judgments about the law. The one time I worked with a stratospherically supercompetent A-list firm (I won’t name them, but I will note they have their own skyscraper in New York City) they were so relaxed about recognizing capability in a non-lawyer that some language I wrote went straight into their court filings in a lawsuit with multibillion-dollar stakes.

I'll get back to your unspecific strawmen in due time. You are may or may not have a point, yet avoid making a specific point and toss around vagaries instead. Make your case with specifics. I did.

If you find that I am annoyed, then yes because I expect you to cite for me specific case law and give examples and show that you know what the fuck you are talking about, and not just spout off appeals to authority, insults, and vague intersections of general concepts. So far, I've seen you commit logic errors in this thread, and on quick glance maybe more in that thread with Nagle.

You can very well be trained in many concepts and be able to spout off babble, but can you elucidate convincingly.

d) you seem to be searching for a https://en.wikipedia.org/wiki/Affirmative_defense loophole to https://en.wikipedia.org/wiki/Securities_Act_of_1933#Regulation_S

Sigh. Demonstrating how one is not involved in an "investment security" per the Howe test precedent is not an affirmative loophole defense. It is a defense against the alleged crime. The prosecution must prove the defendant has met the test under the Securities Act and subsequent clarifying case law of what an "investment security" entails.

And you are totally off in left-field again (as you were in the thread with Nagle) in that Regulation S safe harbor is not the defense I was citing. I was citing the defense that no investment security was ever created per the Howe test which defines what constitutes an investment security.

c) you are misapplying reasoning rooted in https://en.wikipedia.org/wiki/Inquisitorial_system to an old case from 1946 https://en.wikipedia.org/wiki/SEC_v._W._J._Howey_Co.


The AdSurfDaily case he mentioned ended in imprisonment of Bowdoin in 2012. It would be a much better source for a precedent involving cryptocurrencies in 2015 than some old cases from the 1st half of the 20th century.

You cite that as a precedent but it is entirely inconsistent with the genre of scenario I was describing in this thread.

http://networkmarketinglaw.com/securities-law/v-bowdoin-dc-cir-march-18-2011/

The Indictment alleges that Mr. Bowdoin perpetrated a scheme to defraud the members of ASD. Specifically, it alleges that Mr. Bowdoin solicited prospective customers to ASD based upon, among other things, his promise to use their funds to operate what was represented to be a profitable Internet advertising company capable of providing high returns on the funds they paid to ASD. Over the course of two years, Mr. Bowdoin is alleged to have made numerous misrepresentations and omissions in order to raise funds including: claiming to be operating a legitimate Internet advertising company; asserting that ASD had independent revenue to pay members the returns promised; representing that Mr. Bowdoin’s only run-in with law enforcement consisted of a traffic ticket, when he had been convicted already of criminal securities violations; representing that the revenue methodology and numbers ASD published in support of its payouts were true and accurate, when ASD was really managing its revenue to ensure that it only paid out about one percent (1%) of a member’s investment each weekday and one-half a percent (.5%) on the weekends; representing that ASD was not required to register with the United States Securities and Exchange Commission (SEC); and representing that Mr. Bowdoin was operating ASD in a far different manner than that which he followed.

First of all, the defendant was managing a common enterprise using the advertiser's funds and make representations to them. I already pointed out in my scenario up thread, that there would never be any operating common enterprise where funds were received and investors were waiting on returns from the common enterprise being managed by the developer.

Your cited case law is inapplicable and I refer back to SEC vs. Howe until you can find another case which overturns it w.r.t. to my scenario.

Otherwise please take your amateurish snobbish crap and very low powers of logic and discernment else where, because you are wasting my precious and scarce time.

[2112]

Here's a short quote from a first Google result when searching for a properly spelled "Howey test":

The courts have rejected attempts to narrow the definition of a security. As one opinion put it, “In searching for the meaning and scope of the word ‘security’ . . . form should be disregarded for substance and the emphasis should be on economic reality.”

Courts have frequently examined the promotional materials associated with an instrument in determining whether it is a security.  If the materials promise things like great returns or guaranteed income, the court will almost certainly find the instrument to be a security, and therefore subject to federal securities regulations.

Edit: Another relevant quote from the same article:

A common enterprise is a venture ‘in which the “fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment . . . .”’  It is not necessary that the funds of investors are pooled; what must be shown is that the fortunes of the investors are linked with those of the promoters, thereby establishing the requisite element of vertical commonality. Thus, a common enterprise exists if a direct correlation has been established between success or failure of the promoter’s efforts and success or failure of the investment.

[TPTB_need_war]

I think you clearly plan to promote and distribute a security in the USA but you plan to sidestep the registration requirements by claiming that your security is not a security.

I think I have clearly stated that I intend to create a cryptographic protocol (thus operating over a network of computers which I will not control) that has a genesis block of tokens, and I will offer to release this software code to the open source in exchange for payment for my efforts to deliver those works in an operational condition. Those who fund this work from me by paying for my contracted work, will each get private keys to these tokens on the genesis block. The genesis block is actually orthogonal to the protocol, because the protocol could be used with a different genesis block if the community-at-large so desired (and some of the source code will probably be launched to open source after some delay to give more time for the buyers' genesis block to have some exclusivity in the public market-at-large). Due to open source, the community-at-large (not just those who purchased my software) can then do what it likes with my software, as pertains to defining, assigning, using, furthering, forking, or replacing any value attached to those tokens in the so called genesis block.

The economic case is entirely clear. I work to design and code software; I get paid by a community that collectively wants such software to be produced; and the community agrees the software is released as open source.

The developer might also purchase or receive some of those tokens, and thus become an interested member of the community of open source and might even want to contribute code patches over time to this open source project, as any other member of the community-at-large may. Every owner of these tokens in a ledger of an open source project has the only control that anyone can have over this open source project, since no one has represented to the market that they are the controlling entity and attempting to retain such control. And no representations have been made to the buyers thereof, in fact disclaimers ad nausuem will be made to the contrary, so that participants are in no way mislead about the situation. There is no representation nor any way for anyone involved to know if these digital markings in some ledger will have any future utility or value. This is just a protocol and a network that is not owned by any entity. If the community-at-large replaced the genesis block then the developer would likely have to follow the whims of the public and contribute his patches if any to this replacement genesis block.

Your other points continue to belie the ability to separate concerns that are clearly delineated in the law as orthogonal. I will respond to those in detail in a future post, but really if you don't have anything new and just repeating the same myopia, eventually I am going to see this as a waste of time. But I'll go one more round (or so) to see if you can (or have) presented any new point. That you apparently don't realize that you continue repeating the same point is instructive of your inability to extract the generative essence from orthogonal concerns which was quite apparent to me in the way you were responding in Nagle's thread.

I understand your general line of thinking is that obfuscating the essence of the economic truth in some wording of case law is not a justifiable defense. But the economic case is clear. No warranties nor representations of anything backing the tokens has been made which is the required essence of what constitutes a 'security' (the reason for the word 'secured' by something). This is totally unsecured (as in no backing, not meaning cryptographically insecure which is an orthogonal use case of the definition of secure). If you can make any argument that tokens are backed by anything, then they are backed by the future whims of the community-at-large, the decentralized protocol, and any pre-sale design decisions such as delayed open source release of some of the code. The key test is that no entity is in control (nor managing) of anything that can argued to be the backing for the tokens. The economic case is clear that at the time of sale when the backing starts, there is no entreprenurial or managerial effort on the part of any entity that is capable of making representations about that backing to the holders of those tokens. The holders are in control of the only control of the backing that any entity could have. It is open source and subject to the collective outcome of the community and market-at-large. That is what differentiates it from the other cases you have cited as precedents, thus rendering your citations inapplicable.

And with that explanation it should be much easier for voters to select the correct choice from the poll, but I tend to think voters are not reading the OP and they are voting for what they think is NOT an investment security or basing their vote on their misunderstanding of what a "security" is under the law.

[jehst]

The reason you're not getting feedback is because the question is confusing. This poll is too complicated and seems to require supplemental reading just to understand what you're asking.

[Hellacopter]

The reason you're not getting feedback is because the question is confusing. This poll is too complicated and seems to require supplemental reading just to understand what you're asking.

the poll published isn't so simple to facilitate understanding for everyone as you noticed here
I think OP have to re write his topic and reorganize his poll to make it as simple as easy for everyone to participate

[2112]

Your other points continue to belie the ability to separate concerns that are clearly delineated in the law as orthogonal. I will respond to those in detail in a future post, but really if you don't have anything new and just repeating the same myopia, eventually I am going to see this as a waste of time. But I'll go one more round (or so) to see if you can (or have) presented any new point. That you apparently don't realize that you continue repeating the same point is instructive of your inability to extract the generative essence from orthogonal concerns which was quite apparent to me in the way you were responding in Nagle's thread.

Certain facts bear repeating, both now in this thread and in the past in the other threads.

You and other people tend to be missing the fact that most successful securities prosecutions in the USA were against promoters and sales agents. The courts spent very little time considering the nature of the underlying security. Most of the time was spent analyzing the "economic reality" of the promoter who sold "something" to the buyers and the promoter gained money while buyers lost money.

Erik Vorhees got of relatively easy because he astutely traded the Bitcoins raised by his issues and (after advice of his counsel) preempted prosecution by simply rebuying/repaying all the holders of his securities. Because the buyers had no loss to show the SEC had very weak case that basically consisted of "missing paperwork".

If you can design your "cryptographic protocol" in such a way that its users/buyers are highly unlikely to lose money and the managers/sellers are highly unlikely gain the money at the expense of the former, then it is the best defense against any prosecution in any jurisdiction.

One thing that you have in common with all the others successfully prosecuted in the USA is your plain and innate desire for attention and self-promotion. Conceivably you could be raising about the same money working quietly behind some figureheads (either persons or organizations). This is how the traditional securities industry is organized: the responsibility is spread over multiple layers underwriters, syndicators, sales brokers, etc. It seems like you abhor working with other professionals on the equal terms and always want to do it alone. In particular I clearly sense that you didn't even go to a friendly lunch with some securities lawyer. Your style of argumentation shows that you can't distinguish between "arguing the case" and "arguing with a person". Theoretically you could change and obtain a securities counsel and listen to his advice. But I feel that that would completely go against your personality and your goals in life.

TL;DR: Yup, it is the promoters that most often get prosecuted in the securities litigation.

[TPTB_need_war]

Just want to be fair and let others know that Dash discussion leaked into another thread about regulation of "investment securities":

You'd pointed to Dash specifically at one point and I'd still argue the infeasibility of prosecution on that kind of scale, its at most 3.2k [masternodes] responsible for decision making at the moment but add third party services that allow any amount to take part in an MN and it's potentially every user in the system, add the complications of worldwide distribution, anonymity and hosting in countries with no such laws and its completely impractical to enforce.

One very incriminating question is whether Evan (and any others) conspired to instamine what I understand was basically greater than 50% of the money supply as of the time that the masternodes were created. And thus given the recent chart showing Dash's protocol is paying up to 50% per annum return on the coins locked up while running a masternode, then it means basically their conspiratorial group could control greater than 50% of the masternodes and money supply right now, and thus very much control the coin. If it ever goes to court then most certainly forensic evidence will be applied and I understand some others are fairly certain they can prove beyond any reasonable doubt the culpability. I haven't dug into that evidence so I can't offer my opinion on the veracity of those claims. And going off on that tangent of proving something about Dash is off-topic to this thread.

Notwithstanding even if it was impossible to prove sufficient control over the masternodes by Evan and other conspirators, it would still be the case that Evan and his group used funds extracted from the common share of the tokens in managing the common enterprise and the community follows their managerial control. Thus per my understanding of USA securities law, Evan's group is managing unregistered investment securities and thus are liable to be in prison for a long time. I really pity him at this point. Perhaps he got himself into something he didn't realize and now can't easily extract himself from it. Evan stated that he comes from the financial industry, so one would ponder that maybe he should have known better.

Unless Evan has connections with the SEC and others in the financial industry that can protect him, based on my recent research linked from the OP of this thread, I think he has a world of hurt ahead of him. I do believe the authorities are just letting these scams pile up on top of each other, so they can bring a wave of massive regulation once the economy turns down hard in 2017 or 2018. The authorities will become very motivated once the economy goes south.

I don't personally have any vendetta nor need to bury Dash with my words. You raised the issue, so I am responded honestly as to what I believe to be the facts as I know them.

[TPTB_need_war]

From the wide range of distribution of the voting (and the apparent desire to say all crypto-currency is a "security" which is obviously incorrect), I feel the legal issue must still not be sufficiently unambiguous.

I need to sleep first before attempting to make some clarifying posts.

[madmadmax]

Only Bitcoin is an investment security, it leverages the most zero to one growth and innovation, plus Bitcoin is anti-fragile like any currency.