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

[TPTB_need_war]

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

+1 for entirely missing the point of the poll and thread.

Thus the entire poll is may be meaningless, because I think everyone is highly confused as to what an investment security is under the law.

[TPTB_need_war]

Apologies took me too long to get back to this thread, because I was sidetracked.

Disclaimer: I am not attorney and these are just my opinions backed by the research I will cite. Consult your own professional attorney for legal advice.

Before I read 2112's reply and make any further discussions directed to him, I want to first attempt to clarify my stance.

1. Anyone issuing or even reselling an unregistered security to a USA person is criminally culpable under the law. This means if you (regardless of your international location and citizenship) are correct in claiming that Bitcoin is an "investment security" and since Bitcoins are not registered with SEC, then you could go to jail or be fined for exchanging your Bitcoins (in the purchase of goods or services or on an exchange)! I believe Bitcoin is not an investment security, so it is very important we clarify what is and what is not an investment security under the USA law (and internationally as well):

https://en.wikipedia.org/wiki/Securities_Act_of_1933#Registration_process

Unless they qualify for an exemption, securities offered or sold to the public in the U.S. must be registered by filing a registration statement with the SEC. Although the law is written to require registration of securities, it is more useful as a practical matter to consider the requirement to be that of registering offers and sales. If person A registers a sale of securities to person B, and then person B seeks to resell those securities, person B must still either file a registration statement or find an available exemption.

2. In the USA, a 'security' is defined to be one of the following:

https://en.wikipedia.org/wiki/Security_%28finance%29#Notes

The United States Securities Exchange Act of 1934 defines a security as: "Any note, stock, treasury stock, 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 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."

Since crypto-currency isn't typically any of the listed items quoted above (note "preorganization certificate or subscription" requires an organization or business thus doesn't normally apply, and "transferable share" implies the share in some organization or business), then instead—or in the case of an "investment contract"—the Howey case applies:

https://en.wikipedia.org/wiki/Security_%28finance%29#Regulation

With respect to investment schemes that do not fall within the traditional categories of securities listed in the definition of a security (Sec. 2(a)(1) of the 33 act and Sec. 3(a)(10) of the 34 act) the US Courts have developed a broad definition for securities that must then be registered with the SEC. When determining if there is an "investment contract" that must be registered the courts look for an investment of money, a common enterprise and expectation of profits to come primarily from the efforts of others. See SEC v. W.J. Howey Co..

http://caselaw.findlaw.com/us-supreme-court/328/293.html

SECURITIES AND EXCHANGE COMMISSION v. W. J. HOWEY CO., (1946)

...

The term 'investment contract' is undefined by the Securities Act or by relevant legislative reports. But the term was common in many state 'blue sky' laws in existence prior to the adoption of the federal statute and, although the term was also undefined by the state laws, it had been broadly construed by state courts so as to afford the investing public a full measure of protection. Form was disregarded for substance and emphasis was placed upon economic reality. An investment contract thus came to mean a contract or scheme for 'the placing of capital or laying out of money in a way intended to secure income or profit from its employment.' State v. Gopher Tire & Rubber Co., 146 Minn. 52, 56, 177 N.W. 937, 938. This definition was uniformly applied by state courts to a variety of situations where individuals were led to invest money in a common enterprise with the expectation that they would earn a profit solely through the efforts of the promoter or of some one other than themselves.

In other words, an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical as ets employed in the enterprise. ... It embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.

...

A common enterprise managed by respondents or third parties with adequate personnel and equipment is therefore essential if the investors are to achieve their paramount aim of a return on their investments. Their respective shares in this enterprise are evidenced by land sales contracts and warranty deeds, which serve as a convenient method of determining the investors' allocable shares of the profits.

Thus all the elements of a profit-seeking business venture are present here. The investors provide the capital and share in the earnings and profits; the promoters manage, control and operate the enterprise. It follows that the arrangements whereby the investors' interests are made manifest involve investment contracts, regardless of the legal terminology in which such contracts are clothed. The investment contracts in this instance take the form of land sales contracts, warranty deeds and service contracts which respondents offer to prospective investors.

...

The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.

3. Per they SEC vs. Howey test above, any crypto-coin that has an entity which is selling or offering to sell those digital tokens (even if they mined them) and buyers of those tokens believe they have a reasonable expectation of future profits "solely" (or I assume even primarily) due to the efforts (in the common enterprise) of the entity which is making representations (i.e. promotions or other actions) that caused buyers to believe this, then that crypto-coin is an investment security and the said entity is culpable under the securities act. In other words, the said entity is acting as a security (i.e. a backing) for the expectation of future gain, as opposed to some tokens where the investors were not relying on the efforts of any said entity to drive future profits. If the investors are not basing their expectation of future profits on the representations or efforts (in the common enterprise) of any entity which is selling or offering to sell the tokens, then there is no backing and no security.


4. Since I have heard numerous times from Monero investors that Monero has the best chance to increase in value because of its impressive development team (even been suggested to me that I should not create my own crypto-token software and protocol because a solo developer can't match the effort of Monero's development team), since those development team members admitted they have mined or purchased Monero tokens which they sometimes sell or offer to the investors of Monero, then someone please explain to me why Monero is not an unregistered investment security and why those development teams are not culpable under the USA law? Instead of Monero developers putting out disclaimers about the expectations of investors on their efforts, they instead go into every altcoin thread promoting their own coin and thus implicitly reinforcing the view that their efforts in doing these actions are essential in maintaining the promotion of Monero as having the best investment future. Another distinction for Monero is that their coin is unfinished and thus by definition the investors are depending on the developers efforts in the common enterprise. I thus argue Monero is an "investment security" because there is an implied "investment contract" between the developers controlling Monero and the investors. One could even add the argument that ostensibly they may have added anonymity so the selling of their shares would be untraceable (not that I am supporting pressing that additional argument but just presenting it as an argument one might make).


5. In the case of Bitcoin, afaik (at least since 2013) there has always been a disclaimer on bitcoin.org about expectations. It appears to me that the Bitcoin core development team is not promoting and making representations. Although I think most investors think the Bitcoin development team is important, they do not base their expectations of future profits on the Bitcoin development team, but rather they think Bitcoin has an inevitable path regardless of the efforts of the Bitcoin development team, i.e. that the team could be replaced if necessary because Bitcoin is already a phenomenon that is larger than the Bitcoin development team. I thus argue Bitcoin is no "investment security" because there is no implied "investment contract" between any entity controlling Bitcoin and the investors.

[TPTB_need_war]

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.

My prior post today is to make it clear that "promoting" is one of the modes of making something a security. The generative essence point you continue to err on is that "the nature of the underlying security" is defined by the actions of the entity that would be culpable for registering them. The economic case is made by this definition of what a security is in terms of a backing (securing) the reasonable expectation of future gains. You can't separate the two. You can't have the chicken without the egg, nor vice versa.

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.

Again you continue to conflate separate concerns. "plain and innate desire for attention and self-promotion" is not the defining characteristic for making the "investment contract" which causes a sale to be an "investment security". Observe the following quoted example (of myself) as a clear exception and thus proof of your error when you ASS-U-ME I would self-promote to investors rather than promote and sell my software and protocol to users that desire to have a token based representation of clicks on the internet, a cool new paradigm for users (not for investors!). Self-promotion is also a way of getting users interested in playing the game I am creating, and thus buying a copy of it. And why can't I crowdfund a virtual game with tokens making it clear the sale is for users (users need tokens to play the game) and not for anyone who expects any investment contract. Perhaps you forgot this game is about exchanging the tokens for actions, and if investors are choosing to misuse the game to exchange tokens for fiat (which is a regulated activity!) the fact of life is I can't control how people abuse software for non-intended usage. Sorry if it disappoints you that I don't need an attorney and underwriter broker leeches to for the simple benign and humble act of creating and selling my programming labor to users of the software I create. This has been an activity I have been doing my entire life. Your condescending attitude about my desire to not have to consult with attorney for the simple act of selling software to users, sounds like you are extortionist trying to scare or belittle me into paying for services or advice I may not need.

Does it really matter if users accidentally misspell it 'clicks' or 'clickz' (or 'fucks' hehe), if they are using the same protocol when doing it.

Note it is actually quite desirable to present this project of as "less serious" to investors (although I am very serious about targeting large markets with my software) and solely targeted towards users so that I can't be accused of promoting some investment security. I am trying to create software that targets large markets, because I want to use the software. I am not targeting investors. I only want to be funded for my efforts to create this user software (not investment focus) because I do have bills to pay. And there are other users who may also want this software and protocol and want to crowdfund me to create so they can use the software and protocol too. Any expectation of gains in exchange value to fiat or whatever is your own to make and I offer no such representations and I will disclaim profusely that these tokens are for investors. These clickz tokens are targeted for users of the software and protocol. If I do a crowdfunding, it will be explained clearly that these tokens are for users and no gains in exchange value should be expected.

I want to speak to people who think ion is a better name than clickz. Why?

Who are we creating this altcoin for? As a pump & dump (targeting only the readers of this forum and Reddit) for starry-eyed, crypto-nerd investors who think ions are so "ray gun" cool? Or as a serious attempt to go spread microtransactions to a billion users on the internet?

Ion means nothing to your sister, mother, and your grandma. Go ask them. Feedback to me your market canvassing results.

For the men you ask (who don't read this forum), ask them what type of internet services, function, or product an ion would connote for them. I doubt any of them will say money, microtransactions, social networking, or any answer related to any of our target markets.

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.

Erik Vorhees was allegedly or ostensibly involved in a common enterprise making representations of expected profits to investors.

If I am selling software to users with clear disclaimers that the product is like a virtual game with no expectations of future gains promised and that the software is designed for users of this game and not for investors, then whether the tokens have exchange gains is irrelevant. No one gets prosecuted for making a game where the score doesn't always go higher for every user. What are you smoking that is causing you to conflate orthogonal cases and continue to cite case law to me that is inapplicable?

[TPTB_need_war]

stan you are conflating issues and glossing over the relevant definition of a "security" in the other thread linked from the OP of this thread. Try to read again my posts more slowly and carefully. I will also make a few more clarifying posts in that other thread.

(not to be condescending, but also no time to repeat myself again)

I have tried to clarify what I think the USA law says a security is:

https://bitcointalk.org/index.php?topic=1218269.msg12795383#msg12795383

Can anyone tell me after that post why Monero is not an unregistered investment security under USA law?

There is no "promise of profits".
There is no "enterprise" because there is no business or company.
Furthermore, there is no investment at all but only exchange between bankers.
A crypto-currency is nothing more than a network of bankers that will accept and use a token.
Did you not see on blockchain.info how it says "be your own bank"?
BANK: the store of money or tokens held by the banker in some gambling or board games.

If you review the thread I linked to, which has more details on what the legislation and case law has stated, I think the conclusion is that the determination of whether an implicit "investment contract" has been formed is tied into whether there are those who are selling (and/or offering for sale, including reselling) shares in a "common enterprise" wherein they are "promoting the reasonable expectation of profits/gains" and another condemning characteristic is when those who have those reasonable expectations, are depending on the efforts and/or promotion of those aforementioned promoters or trusted controllers of the common enterprise. So it appears that when the developers of the coin have created a community promotion wherein there is a reasonable expectation of profits backed by the efforts and promotion of those developers who are in control of the common enterprise, then a security (dependency on the developers to deliver gains) has been formed and thus these shares need to be registered and regulated under the law. IANAL, but that is my interpretation.

I have proposed that no security would be created if the developer of a crypto-token protocol and implementing software instead does a crowdsale (and/or just launches with distribution via mining debasement) where it is made very clear in the pronouncements and actions of the developer that the tokens created by this protocol and software are being offered to users of the tokens for using the protocol network, and disclaims prominently and profusely that no one obtaining these tokens should have any expectations of future gains based on any exchange value. The developer should not be targeting his marketing (such as forum activities, naming, etc) to individual public investors and rather to selling his software and protocol to users, for example via a crowdfunding to gain funding to complete or repay loans he incurred to do the programming. He should not make public announcements of the available of tokens to  investors. One way perhaps to make this very clear, is to limit the maximum size that any one person can donate at the crowdfunding to perhaps $500 or what ever would be considered too small to be a reasonable worthwhile investment in the first world. In other words, there are many users of a new technology (even include other developers who can work on ecosystem projects) who have an interest in using the real world product (thus they need some tokens to use it) who have an interest in its success and in interacting with the product, that have nothing to do with a reasonable expectation of profits on those tokens. Whereas if you are constantly trolling in these forums acting as if you want to funnel all the speculators to your coin, then ostensibly you are not targeting usership but rather speculation and thus arguably (and implicitly) promoting a security.

One issue I am still trying to work out is how accepting placements from angel investors would mesh with the crowdfunding direction for funding programming of software and protocols for users?

Apparently there are several types of exceptions to requirements to register securities in the USA, which seem to revolve around accredited and/or sophiscated investors:

http://thismatter.com/money/stocks/exempt-securities.htm

These all appear to place restrictions on when the shares of the angel investors can be sold and also require subsequent registration. Apparently sales to non-USA angel investors is complete exception to all requirements (but may trigger requirements in the non-USA angel investor's domicile or tax jurisdiction).  What is worrisome is that such may trigger all shares (even those sold to users and not investors) to be classified as security especially if these shares are divisible and fungible (become mixed up) as is the case for crypto-currencies.

Thus it appears one would be best pay their angel investors back in cash (with any agreed interest rate or equation of return), classifying these as loans are investments in the programmer, and not in the final protocol and software which is sold and provided to users, not investors. Angel investors who wanted to convert this cash to shares would have to do so on some open exchange market (and again with disclaimers from the developer in force that no reasonable expectations of gains should be expected and shares should be obtained for use and not for investment and if they choose to ignore that, there is nothing the developer can do to prevent markets from forming). This has been a very important epiphany for me.

Also, I am not in the US and cannot really give an opinion.

I presented details on why I think Europeans and others also are affected. I don't know why Europeans think (if they do so or if not why they are often say it is only a USA problem) they are immune to securities regulation?

Of course we are not, but (apart from a few Eastern European countries) taxing and tax collection seems to be more relaxed over here, in addition until I don't cash out in fiat I don't have to worry. If I convert it to fiat then I have to pay a CGT but that's all.

I argue the powers-that-be do hope you are so willfully ignorant of the law, so they can entrap you. I reviewed the EU legislation and they are very busy advancing the securities law and the definitions are sufficiently broad that they could start to interpret securities law very similar to USA courts do in some EU court that gains powers as the EU is federalized (reducing national sovereignty) as this sovereign debt smashup crisis comes crashing down 2016 - 2018. The powers-that-be appear to have planned it out very well to trap you Europeans who boast to yourselves how you don't have to pay taxes on income abroad and yet the powers-that-be are busy formulating a G20 coordination on unified taxing so that no one escapes paying taxes and regulation. The global economic collapse is the way they will get all the nations to accede to this coordination to hunt down all capital.

You are just buying a little time before your demise.

[TPTB_need_war]

I did review the thread; nowhere did I see how a cryptocurrency (a network of bankers that will accept and use a token) can be considered a "common enterprise" because a cryptocurrency is essentialy a resource (bank). The promoters do not operate a business; no one can expect anything of them.

Yes, the courts could classify your crypto as a security, but take a look at the TOS page on banx.io regarding BANX shares and you will see that these crypto-shares are really just 'donations to a for-profit company'. As far as other cryptos go, it is quite a stretch to say that they represent interest in a company, business, or enterprise.

I don't think you understand the key essence of the thread.

The Howey decision clarifies the "investment contract" clause of the Securities Act, that promoting a reasonable expectation of gains where the investors have any reason to base their decisions to purchase on those pronouncements has converted what they are promoting into an "investment security", because of the implicit "investment contract" created by those pronouncements and the resultant "reasonable expectations" of investors.

My interpretation is that you are overemphasizing the "common enterprise" because Howey decision and court decisions hence have stated all special cases will still apply to the economic reality that the Securities Act's (stated) purpose is to protect unsophisticated (unaccredited) investors from losses due to faulty disclosure.  Just because the shares are coordinated in a decentralized protocol, doesn't mean the promoters have not created an implied investment contract with the buyers. The "common enterprise" is the mutual participation in the decentralized system of shares. Participation as a user does not in my view cause the shares to be "investment securities", as any game token wouldn't be an investment security if the tokens are not promoted to investors (and especially if there are disclaimers from the "controlling or influential entities" stating no investment gains should be expected at all and that the tokens are intended for users only). Rather it is the promotion of the shares to investors that does. And IMO it is much more likely to be prosecuted when those doing the promoting are "controlling or influential entities" in that "common enterprise", i.e. the developer(s) who can introduce new features and whose reputation drives investor confidence and ditto influential community members or foundation, especially those endorsed by the lead developer(s).

[TPTB_need_war]

Continuing to clarify my understanding of the law and case law I read briefly. Disclaimer is IANAL, so consult your own attorney.

Cross-referencing and wondering why no one wants to rationally discuss this topic?

https://bitcointalk.org/index.php?topic=1218269.0

IANAL, but IMHO anything with centralised issuance (i.e. Ripple) is likely to fall under these laws, although it does depend on whether anyone cares enough to do anything about it. Personally I don't mine, so any coins I have are either bought or donated, which I think covers us fairly well, but obviously that requires a volunteer dev team.

In my reading and remember the disclaimer that IANAL, the existence of a "centralized issuer" (or assumption that "issuer" must directly receive the buyer's funds) does not appear to be the key finding of the 1946 SEC vs. Howey Supreme Court decision which clarified the meaning of "investment contract" from the original Securities Act of 1933.

It appears that the implicit "investment contract" (which is created when the shares are offered and/or issued) is created when the investor is able to form "reasonable expectations" of future profit or gain that depend on or are based on the promotion or efforts of the entity which is in the position to create this level of expectation. In other words, if there are shares issued (by any means) and there are individuals or legal entities who for what ever reason are interpreted by investors to be capable of creating a reasonable expectation of future gains or profits from the said shares, then those shares are now securities because in effect the investors's capital (and expectations thereof) are being secured by these "promotion or efforts". This is all of course w.r.t. to a "common enterprise" meaning for example in our case a cyptocurrency, but the decision specifically disavows that any particular circumstances would weaken the general rule, so the cryptocurrency's protocol and issuance between decentralized or centralized is irrelevant. What is relevant is whom do investors believe is in control and who was actually in control? Evidence that can be presented would include the ability to move prices in small markets with their pronouncements (a form of promotion), being a lead developer or in the lead developers' primary channel of public communication and making representations to potential investors in the coin.

In short, my interpretation is that if you want your cryptocoin to not be an illegal unregistered, investment security (due to an implied investment contract), then the developers and affiliates or close associates and key community members, should make no discussions at all about investment in the coin except to state that the coin is not for investors and losses should be expected. And to instead communicate with users and potential users of the coin. And if any money is raised from the community, make sure this clearly selling software to users where the tokens are required to use the software and protocol (or donations for development of the software with no tokens given in return) and that the project is for users of the software. Avoid any association with investing, except of course for free market activities that no one can control, e.g. that investors buy your tokens on a decentralized exchange. And all public communication should disclaim any investing purpose nor expectation of gains.

What is not clear to me is that if when the shares are created (i.e. issued) there is no implied investment contract and thus the shares do not fall under any regulation of the Securities Act, but later some outside party is able to create "promotions or efforts" that cause new buyers of those existings shares to have "reasonable expectations" of gain, do those pre-existing shares become securities. So far until I see case law otherwise or other convincing arguments, I assume the courts would rule that only the state at the time of issuance matters. But as in most things, it will probably depend on the specific circumstances. For example, if the developer is not able to squelch such outsider from creating such expectations amongst the investment community by for example threatening to do actions would could destroy the perceived control of the outsider (e.g. threatening to quit developing so the outsider's promotion is ignored and refuting the claims of the outside promoter), then perhaps it can be said the developer has been derilict in maintaining the perception that the software is not for investors. And note that the typical lockup period for shares that are unregistered, legal securities is 1 year, so after 1 year I think the developer wouldn't have to do anything assuming that the original issuance (and perhaps also the entire 1 year hence) was devoid of any implied investment contracts on those shares.

Again to make sense of this, refer to my reply to americanpegasus, wherein I explained that when shares are issued/created and they are securities (due to for example an implied investment contract), then all those shares transferred (by any means including mining) that did not comply with the exemptions to registration, are ostensibly ILLEGAL forever (but I have yet to verify this except the law doesn't seem to make sense otherwise). Any one who touches those (especially those promoting them to other investors) is apparently committing wire fraud and other crimes, but please check with an attorney to verify. Whereas, when shares are issued/created and there is no implied investment contract (only a relationship with users of the software in our crypto-token application as I suggest), then my interpretation is these are not securities and thus not illegal even if they are transferred in any quantity to users (of our software our case) who would otherwise be non-accredited and non-sophisticated investors if there did exist an implied investment contract.

Once the cryptocurrency has become bigger and uncontrollable by any group (and assuming the original issuance did not create illegal, unregistered securities) and no one believes any one can effect the price appreciably with any efforts or promotion, then investing discussions can be freely held without any risk of creating an implied investment contract as specified above. I do believe Bitcoin has reached this level. The altcoins not yet. And the way the altcoins are being managed, all of them so far are probably unregistered, ILLEGAL, investment securities.

[neurotypical]

Bitcoin had the best model to be honest. It got launched, everyone was free to access the software and start mining. Sure, the creator mined some, but who in hell would know that they would be worth anything? It was worth 0 back then. That's the main difference. Never will be the same post-Bitcoin. The scenario cannot be recreated. Now everyone is looking for "that coin". When people was back in the day playing with Bitcoin, they did it out of curiosity. The early investors mined and bought something that was basically worthless. They deserve a lot more Bitcoin than a guy that comes years later when it's stablished and very promising technology.

[TPTB_need_war]

The following 2001 Appeals Court decision should be more convincing about what I have been warning about Altcoin developers and communities primarily marketing their coins to investors for the purpose of investment gains, thus creating an implied "investment contract" criteria for a security under the durable 1946 SEC vs. Howey Supreme Court test.

Note tokens distributed via mining are still a form of "specific consideration in return for a separable financial interest" because one has to invest in mining (for PoW) and shares (PoS) in order to participate in mining:

http://lawbitrage.typepad.com/blog/2014/11/cryptoequity-regulation.html

Under Howey, it doesn't matter whether the investment capital comes in the form of legal tender, digital currency, or some other valuable asset. Bitcoin ponzi schemer Trendon Shavers found that out the hard way.

The Howey test must be understood to be extremely general:

https://scholar.google.com/scholar_case?case=12097435876434110828&hl=en&as_sdt=6,33

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, Appellant,
v.
SG LTD. et al., Defendants, Appellees.

Nos. 01-1176, 01-1332.
United States Court of Appeals, First Circuit.

Heard August 2, 2001.
Decided September 13, 2001.

Relying upon a dictum from Howey discussing "the many types of instruments that in our commercial world fall within the ordinary concept of a security,", the district court drew a distinction between what it termed "commercial dealings" and what it termed "games." Characterizing purchases of the privileged company's shares as a "clearly marked and defined game," the court concluded that since that activity was not part of the commercial world, it fell beyond the jurisdictional reach of the federal securities laws. Id. In so ruling, the court differentiated SG's operations from a classic Ponzi or pyramid scheme on the ground that those types of chicanery involved commercial dealings within a business context. Id.

We do not gainsay the obvious correctness of the district court's observation that investment contracts lie within the commercial world. Contrary to the district court's view, however, this locution does not translate into a dichotomy between business dealings, on the one hand, and games, on the other hand, as a failsafe way for determining whether a particular financial arrangement should (or should not) be characterized as an investment contract. Howey remains the touchstone for ascertaining whether an investment contract exists — and the test that it prescribes must be administered without regard to nomenclature.

A fairly recent Supreme Court opinion demonstrates that the "commercial world" to which the Howey Court alluded actually encompasses the total universe of financial instruments available to investors, rather than the subset of financial instruments envisioned by the district court (i.e., "commerce" as opposed to "games"). In that case, Justice Marshall wrote:

In defining the scope of the market that it wished to regulate, Congress painted with a broad brush. It recognized the virtually limitless scope of human ingenuity, especially in the creation of "countless and variable schemes devised by those who seek the use of the money of others on the promise of profits," and determined that the best way to achieve its goal of protecting investors was "to define `the term "security" in sufficiently broad and general terms so as to include within that definition the many types of instruments that in our commercial world fall within the ordinary concept of a security.'" Congress therefore did not attempt precisely to cabin the scope of the Securities Acts. Rather, it enacted a definition of "security" sufficiently broad to encompass virtually any instrument that might be sold as an investment.

The Howey Court established a tripartite test to determine whether a particular financial instrument constitutes an investment contract (and, hence, a security). This test has proven durable.

substance governs form, and the substance of an investment contract is a security-like interest in a "common enterprise" that, through the efforts of the promoter or others, is expected to generate profits for the security holder, either for direct distribution or as an increase in the value of the investment.

The Supreme Court has long espoused a broad construction of what constitutes an investment contract, aspiring "to afford the investing public a full measure of protection." The investment contract taxonomy thus "embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits."

The Howey test has proven to be versatile in practice. Over time, courts have classified as investment contracts a kaleidoscopic assortment of pecuniary arrangements that defy categorization in conventional financial terms, yet nonetheless satisfy the Howey Court's three criteria.

A. Investment of Money.

The first component of the Howey test focuses on the investment of money. The determining factor is whether an investor "chose to give up a specific consideration in return for a separable financial interest with the characteristics of a security."

B. Common Enterprise.

The second component of the Howey test involves the existence of a common enterprise. Before diving headlong into the sea of facts, we must dispel the miasma that surrounds the appropriate legal standard.

1. The Legal Standard. Courts are in some disarray as to the legal rules associated with the ascertainment of a common enterprise. See generally II Louis Loss & Joel Seligman, Securities Regulation 989-97 (3d ed. rev.1999). Many courts require a showing of horizontal commonality — a type of commonality that involves the pooling of assets from multiple investors so that all share in the profits and risks of the enterprise.

Other courts have modeled the concept of common enterprise around fact patterns in which an investor's fortunes are tied to the promoter's success rather than to the fortunes of his or her fellow investors. This doctrine, known as vertical commonality, has two variants. Broad vertical commonality requires that the well-being of all investors be dependent upon the promoter's expertise.

In contrast, narrow vertical commonality requires that the investors' fortunes be "interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties."

We hold that a showing of horizontal commonality — the pooling of assets from multiple investors in such a manner that all share in the profits and risks of the enterprise — satisfies the [Howey] test. Adopting this rule also aligns us with the majority view and confirms the intimation of Rodriguez. Last, but surely not least, the horizontal commonality standard places easily ascertainable and predictable limits on the types of financial instruments that will qualify as securities.

C. Expectation of Profits Solely From the Efforts of Others.

The final component of the Howey test — the expectation of profits solely from the efforts of others — is itself divisible. We address each sub-element separately.

1. Expectation of Profits. The Supreme Court has recognized an expectation of profits in two situations, namely, (1) capital appreciation from the original investment, and (2) participation in earnings resulting from the use of investors' funds. These situations are to be contrasted with transactions in which an individual purchases a commodity for personal use or consumption. The SEC posits that SG's guarantees created a reasonable expectancy of profit from investments in the privileged company, whereas SG maintains that participants paid money not to make money, but, rather, to acquire an entertainment commodity for personal consumption.

In Forman, apartment dwellers who desired to reside in a New York City cooperative were required to buy shares of stock in the nonprofit cooperative housing corporation that owned and operated the complex. Based on its determination that "investors were attracted solely by the prospect of acquiring a place to live, and not by financial returns on their investments," the Forman Court held that the cooperative housing arrangement did not qualify as a security under either the "stock" or "investment contract" rubrics. The Court's conclusion rested in large part upon an Information Bulletin distributed to prospective residents which stressed the nonprofit nature of the cooperative housing endeavor.

We think it noteworthy that the Forman Court contrasted the case before it with Joiner. In that case, economic inducements made by promoters in conjunction with the assignment of oil well leases transformed the financial instrument under consideration from a naked leasehold right to an investment contract. The Joiner Court found dispositive advertising literature circulated by the promoters which emphasized the benefits to be reaped from the exploratory drilling of a test well. Id. ("Had the offer mailed by defendants omitted the economic inducements of the proposed and promised exploration well, it would have been a quite different proposition.").

The way in which these cases fit together is instructive. In Forman, the apartment was the principal attraction for prospective buyers, the purchase of shares was merely incidental, and the combination of the two did not add up to an investment contract. In Joiner, the prospect of exploratory drilling gave the investments "most of their value and all of their lure," the leasehold interests themselves were no more than an incidental consideration in the transaction, and the combination of the two added up to an investment contract.

Seen in this light, SG's persistent representations of substantial pecuniary gains for privileged company shareholders distinguish its StockGeneration website from the Information Bulletin circulated to prospective purchasers in Forman. While SG's use of gaming language is roughly analogous to the cooperative's emphasis on the nonprofit nature of the housing endeavor, SG made additional representations on its website that played upon greed and fueled expectations of profit.

This is not to say that SG's gaming language and repeated disclaimers are irrelevant. SG has a plausible argument, forcefully advanced by able counsel, that no participant in his or her right mind should have expected guaranteed profits from purchases of privileged company shares. But this argument, though plausible, is not inevitable. In the end, it merely gives rise to an issue of fact (or, perhaps, multiple issues of fact) regarding whether SG's representations satisfy Howey's expectation-of-profit requirement.

2. Solely from the Efforts of Others. We turn now to the question of whether the expected profits can be said to result solely from the efforts of others. The courts of appeals have been unanimous in declining to give literal meaning to the word "solely" in this context, instead holding the requirement satisfied as long as "the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise." This liberal interpretation of the requirement seemingly comports with the Supreme Court's restatement of the Howey test. (explaining that "the touchstone is the presence of an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others").

We need not reach the issue of whether a lesser degree of control by a promoter or third party suffices to give rise to an investment contract because SG's alleged scheme meets the literal definition of "solely." According to the SEC's allegations, SG represented to its customers the lack of investor effort required to make guaranteed profits on purchases of the privileged company's shares, noting, for example, that "playing with [the] privileged shares practically requires no time at all." SG was responsible for all the important efforts that undergirded the 10% guaranteed monthly return. As the sole proprietor of the StockGeneration website, SG enjoyed direct operational control over all aspects of the virtual stock exchange. And SG's marketing efforts generated direct capital investment and commissions on the transactions (which it pledged to earmark to support the privileged company's shares).

[TPTB_need_war]

Below I explain in detail why I think there are only two ways crypto-tokens are not investment securities:

• All the tokens are obtained for free, or essentially free when they issued. To correspond with how restricted securities normally become unrestricted without reporting under some exemptions, ideally 6 months to a year should have transpired before these tokens are significantly resold to the public for consideration greater than significantly no cost, so that it can't be argued there was a transfer gimmick obfuscating the actual economic substance; or
• The tokens are primarily obtained for use cases and/or for furthering the Inverse Commons that is the platform, and not any significant expectation of appreciation of value of the tokens.

Bitcoin had the best model to be honest. It got launched, everyone was free to access the software and start mining. Sure, the creator mined some, but who in hell would know that they would be worth anything? It was worth 0 back then. That's the main difference. Never will be the same post-Bitcoin. The scenario cannot be recreated. Now everyone is looking for "that coin". When people was back in the day playing with Bitcoin, they did it out of curiosity. The early investors mined and bought something that was basically worthless. They deserve a lot more Bitcoin than a guy that comes years later when it's stablished and very promising technology.

I thus argue that Bitcoin significantly avoids being an investment security. There is a bit of concern around newly created tokens since Bitcoin became an investment speculation, but classifying only some of Bitcoin's tokens as securities would destroy fungibility and the tokens may be quite tangled by now. It appears Bitcoin is too large of a phenomenon now for the government to attack it on such dubious technicalities, as a popular outrage would likely ensue.

I argue that most if not all Altcoins have failed to achieve the above two exceptions and thus are illegal unregisted investment securities. Whether you buy or sell them is dependent on your appraisal of risk, timing, and whether you think they will still appreciate in value regardless. In particular I would tend to avoid Altcoins which have had prominent community members spouting off about the size of their HODLings, their "holding forever" pledges, their "only buyers, no sellers", "buy the dip", and other forms of inciting an expectation of appreciation of value. IANAL so readers should consult their own attorney.

So considering the three Supreme Court Howey test criteria explained in detail in my prior post:

A. Investment of money
B. Common enterprise
C. Expectation of profits "significantly" due to efforts of others.

A. Investment of money

Nearly all crypto-tokens today require an investment of money, except perhaps for Dogecoin if the mined coins were donated away and certainly for those who mined in the early days of Bitcoin where you could obtain coins just by letting a miner run in the idle cycles of your laptop with inappreciable electrical cost. The only chance a new altcoin could have to avoid this specific criteria of the Howey test would be either give away all the tokens for no "specific consideration" that is an appreciable cost cost for the recipient. If all the users were able to obtain all the tokens they needed for the typical use case via mining on their home computer with idle cycle and inappreciable electric cost, then there would not be any investment of money. This is because the investor must be capable of sustaining a loss in order for an financial instrument to classified as a security:

https://scholar.google.com/scholar_case?case=4524095741732962732&hl=en&as_sdt=6,33&as_vis=1&kqfp=10330650611816444522&kql=132&kqpfp=14710406364156655404#kq

An "investment of money" under Howey means the investor must have committed his assets to the enterprise in such a manner as to subject himself to financial loss. SEC v. Pinckney, 923 F.Supp. 76, 80 (E.D.N.C.1996).

B. Common enterprise

All crypto-tokens where the tokens have been otherwise classified as securities via the Howey test, are also common enterprises due the least restrictive horizontal commonality test, because all participants' gains on their token values are common since tokens are fungible. There does not appear to be any way for any crypto-token to avoid this criteria of the Howey test.

The following is an erroneous argument (from a law professor!) because the horizontal commonality violated—by the orthogonality of the success of the platform(s), applications that use tokens, and the appreciation of value of the tokens themselves—hinges on the violation of the third criteria "C. Expectation of profits "significantly" due to efforts of others". Meaning that if all those obtaining tokens are interested primarily only in the platform and value created from applications that use the tokens, and not significantly from any appreciation of value of the tokens themselves, then the third criteria is not fulfilled thus being irrelevant that then the horizontal commonality is also lost:

http://lawbitrage.typepad.com/blog/2014/11/cryptoequity-regulation.html

Cryptoequity may not meet the common enterprise requirement, either. Courts have interpreted a common enterprise to exist when an investor's gain is tied directly to the success of the promoter (or a third party), or at least generally dependent on the promoter's efforts. Applying this "vertical commonality" requirement to cryptoequities, however, indicates they are not securities due to the potentially massive gap between the success of a platform (i.e., the promoter) and an individual token holder.

Individual developers and entrepreneurs may fail using an otherwise successful platform. The converse may be true as well. Tokens may be interoperable so that holders can use them on multiple platforms, or export their underlying applications or projects to other platforms. The fact that Ethereum's platform was recreated on the Bitcoin platform suggests that very little intrinsic relationship exists between the success of a token holder and any particular platform, and certainly not something like a passive investor's relationship to a single company's management. And depending on how they develop their applications, individual token holders may find their purchase to be worthwhile or a waste of money. This potentially different payoff undermines the common enterprise in the "horizontal" sense (i.e., among token holders).

C. Expectation of profits "significantly" due to efforts of others.

When tokens are created and issued (whether it be an ICO or tokens created+assigned during mining), if they are acquired primarily for investment and not primarily for use (in what ever ways a token can be used other than for holding for appreciation of value), then there is an expectation of profits due to appreciation of value.

The fact that no investor is in control of the decentralized collective "common enterprise" qualifies for the "due to efforts of others" clause of this criteria of the Howey test:

https://scholar.google.com/scholar_case?case=4524095741732962732&hl=en&as_sdt=6,33&as_vis=1&kqfp=10330650611816444522&kql=132&kqpfp=14710406364156655404#kq

investment contracts may be found where the investor has duties that are nominal and insignificant or where the investor lacks any real control over the operation of the enterprise

So the only way a crypto-token can potentially avoid qualifying for this criteria is for there to be no expectation of profits, either because the tokens are never obtained for investment or always the primarily consideration is the use value and not the appreciation of value. As documented in my prior post and here in another example, if the primary consideration is the use value, then there is no expectation of value appreciation:

http://law.justia.com/cases/oregon/court-of-appeals/1975/535-p-2d-109-2.html

Jet Set is a nonprofit corporation, organized under the laws of Washington in 1970 for the purpose of owning and operating an airplane in order to provide vacation travel for its members. The club scheduled flights to fixed destinations. Members were permitted to reserve space on any flight on a first-come, first-served basis; however, scheduled flights were often canceled if there were insufficient reservations. Members, in addition to membership fees, paid approximately one-half the cost of commercial airline fares for their flights. Flights were limited to particular dates and destinations. Membership also included participation in certain social activities sponsored by the club, including parties, ground accommodation packages and social activities at some destinations. Memberships in Jet Set were transferable.

After Jet Set was incorporated in 1970 "select memberships" were sold for a price of $1,000. The proceeds from the sale of these memberships were placed in escrow until Jet Set secured the use of an airplane. Approximately $70,000 was raised from the sale of these memberships, which were lifetime and nontransferable in nature, and entitled the holder to fly on any Jet Set flight for $20. These memberships were also subject to monthly dues.

One might argue that proof-of-work miners sell tokens for profit margins (not gains) and thus the tokens are not initially obtained for investment. But I think the court has made it clear that no obfuscation gimicks will outweigh the actual economic substance, which is that miners are essentially issuers who transfer the created tokens to recipients in exchange for specific consideration and if those recipients are obtaining them with an expectation of appreciation of value, then this Howey criteria is fulfilled.

The following correct argument (from a law professor) is basically stating that if the primary reason for obtaining tokens is for use cases and/or developing an Inverse Commons ("the platform") and not significantly for appreciation of the tokens' value, then there is no expectation of profit due predominantly from the efforts of others, but rather an expectation of benefits of a common ecosystem. The key is that all those obtaining the tokens must have this expectation. In the case of Ethereum, it is obvious that buyers of their ICO were expecting gains from appreciation which meant they were depending on the efforts of others. That can be probably be documented from threads in this forum Bitcointalk.org.

http://lawbitrage.typepad.com/blog/2014/11/cryptoequity-regulation.html

Likewise, what cryptoequity holders actually purchase with their funds may undermine the sale from being classified as a securities offering. The expectation of profits requirement does not exist when a buyer receives a good, service, or property. This is why crowdfunding platforms like Kickstarter are not subject to federal regulation. It is also why courts, including the U.S. Supreme Court, hold that shares in housing cooperatives or condos are not securities, even when they come with a reduction in rent or income from renting common areas. If cryptoequity is viewed as conferring a right to use "real estate" on a ledger, then, like housing shares, they may not qualify as regulated agreements.
The active involvement of cryptoequity holders--either as developers or entrepreneurs--may limit the applicability of federal law as well. Passive parties that rely on managers to generate a profit are the hallmark of securities investors. On the opposite extreme are partners that equally manage a business: the law presumes that partnership interests are not securities. This is because a partner, as opposed to a mere investor, does not rely on the efforts of others and does not need to be protected by the securities laws in doing so. (The same approach applies to LLCs managed by its members.) Buyers of Ethereum's tokens may be viewed as active participants because they promised their purchase was to use and develop on its software platform (and not as an investment). According to Howey, a purchase motivated to actively "develop" property is not a securities investment.

The following argument (by the same law professor) is a contrived, nonsense (loony), conflation of orthogonal categories (i.e. an ontological or category error). Too often I find people commit these sort of errors of logic. The Supreme Court decided that investments are not securities when they are notes paying an interest rate which were backed by commercial interests and thus not tied to the appreciation of value due to the efforts of others in an enterprise. Crypto-tokens do not pay an interest rate and their return on investment is not primarily due to facilitating short-term cash flow from commercial interests. Although it is true that crypto-tokens may be utilized in some cases for facilitating commercial interests, these are not the only thing backing the return on investment for those who hold the tokens.

http://lawbitrage.typepad.com/blog/2014/11/cryptoequity-regulation.html

Finally, based on the 1990 Supreme Court case of Reves v. Ernst & Young, cryptoequities may not be regulated because they closely resemble commercial contracts that are obviously not securities. The Reves court held that promissory notes secured by home mortgages or business assets were obviously not securities, and neither were agreements that resembled them. The commercial nature of cryptoequity tokens in providing access to software and fundraising platforms may lead a court to hold the same.

[TPTB_need_war]

I reset the poll and edited it to make it simpler to understand. If you've read my last several posts, then hopefully the poll makes sense.

Please vote again.

I voted for: 2 and 4 are illegal, unregistered "investment securities" as defined by USA securities regulation law.

Again I argue these definitions are useful only until the crypto platform of the tokens becomes a significant ecosystem on the order of where Bitcoin is now, after which point I think it is futile for the government to go against the popular activity on the technicality (pretense) of protecting the investor. In my opinion, the main risk is to small Altcoin communities that die leaving huge losses for investors. Prominent people involved with such failed crypto platforms might find themselves in legal trouble.

[pereira4]

I think as Bitcoin becomes bigger the "invest to get it" step will not be as needed because people will see benefits in getting paid for Bitcoin by services. For example I know a lot of coders doing freelance jobs for Bitcoin which allow them to get payments from anywhere in the world while also remaining anonymous and they trust a legit escrow more than paypal.

When this get bigger a real economy will flourish where people work for Bitcoin instead of having to buy it all the time. I know people who own 100% stacks of Bitcoin which are from jobs (and small extra of sig campaigns).

[TPTB_need_war]

Again I argue these definitions are useful only until the crypto platform of the tokens becomes a significant ecosystem on the order of where Bitcoin is now, after which point I think it is futile for the government to go against the popular activity on the technicality (pretense) of protecting the investor. In my opinion, the main risk is to small Altcoin communities that die leaving huge losses for investors. Prominent people involved with such failed crypto platforms might find themselves in legal trouble.

I think as Bitcoin becomes bigger the "invest to get it" step will not be as needed because people will see benefits in getting paid for Bitcoin by services. For example I know a lot of coders doing freelance jobs for Bitcoin which allow them to get payments from anywhere in the world while also remaining anonymous and they trust a legit escrow more than paypal.

When this get bigger a real economy will flourish where people work for Bitcoin instead of having to buy it all the time. I know people who own 100% stacks of Bitcoin which are from jobs (and small extra of sig campaigns).

It might really help if all the coins are anonymous so that downstream graphs for coins issued (or sold) during the period where the coin was predominately an illegal, unregistered investment security can't be identified or traced with block chain analysis. So thus once the platform ecosystem has reached the stage where the SEC can't attack all the coins as being an illegal, unregistered investment securities, then it has lost the ability to attack any of the coins. Note this might not be a defense though for those who want to report their taxable capital gains.

Referring to the currency itself (i.e. even physical cash notes have this property):

anonymous ⊂ fungible
fungible ⇒ anonymous

Bitcoin has no built-in on-chain anonymity. I invented the best on-chain anonymity currently known to exist.

[TPTB_need_war]

I see this very long thread just got moved from the Bitcoin Discussion forum to the Altcoin Discussion forum. Moving an established thread is very disruptive.

The moderators are really paranoid. This thread discusses how Bitcoin relates to securities law. The mods have deprived the Bitcoin Discussion readers the information about Bitcoin's legality.

Any way no problem. More motivation.

[smooth]

I see this very long thread just got moved from the Bitcoin Discussion forum to the Altcoin Discussion forum. Moving an established thread is very disruptive.

The moderators are really paranoid. This thread discusses how Bitcoin relatives to securities law. The mods have deprived the Bitcoin Discussion readers the information about Bitcoin's legality.

Any way no problem. More motivation.

More likely the reason they moved it is your prominent reference to "Which crypto-tokens" meaning you are discussing various coins, not just Bitcoin specifically.

A thread about the legality of Bitcoin specifically would probably stay there, or in the Legal subform. However, there are probably existing threads that cover this, so you might just reply to one of those and reduce duplication.

[TPTB_need_war]

I see this very long thread just got moved from the Bitcoin Discussion forum to the Altcoin Discussion forum. Moving an established thread is very disruptive.

The moderators are really paranoid. This thread discusses how Bitcoin relatives to securities law. The mods have deprived the Bitcoin Discussion readers the information about Bitcoin's legality.

Any way no problem. More motivation.

More likely the reason they moved it is your prominent reference to "Which crypto-tokens" meaning you are discussing various coins, not just Bitcoin specifically.

Logic fail (maybe not yours unless you are agreeing with the logic of what you wrote). Bitcoin is a subset of crypto-tokens. Bitcoin is not an element of set altcoins.

A thread about the legality of Bitcoin specifically would probably stay there, or in the Legal subform. However, there are probably existing threads that cover this, so you might just reply to one of those and reduce duplication.

They did not move it to the Legal subforum. If had done that and that is the correct place to discuss legality of crypto, then that would be fine by me. But moving to altcoin discussion is not consistent with logic[1].

Your somewhat slanderous implication of a redundant thread in the Legal subforum requires a citation on your part, otherwise it can be taken as veiled slander.

I don't believe there is such a thread, as I googled this entire site (site:bitcointalk.org securities) before I started my thread.  

[1]

If the mods have decided that threads that discuss both Bitcoin and all tokens, can't go in Bitcoin Discussion nor in Legal, then if they dump that into Altcoin Discussion, then they are hiding Bitcoin information from Bitcoin focused readers. Bitcoin is not an Altcoin. Since that is a logical quagmire they may have created by forming a conjunction of sets which is not universal, then they are in a dilemma. I suggest just move it to Legal (if they are really paranoid about what goes into Bitcoin Discussion), as legality is the most relevant theme of this thread, not the fact that it discusses all tokens as well as specifically discussing Bitcoin. I suppose one might take the stance from my conclusion of my interpretation that since altcoins may be more implicated legally then it is not very strongly information relevant to Bitcoin. I disagree because only the reader can interpret legality as IANAL. Also the lack of on-chain anonymity for Bitcoin was raised as a factor.

Edit:

This thread discusses the legality of all crypto-tokens (including and specifically Bitcoin is discussed) w.r.t. securities regulation (with a focus on USA law but some mentions of EU law).

How can we put discussion of Bitcoin into the Altcoin Discussion thread when Bitcoin is not an altcoin?

Even though all crypto-tokens are discussed, for as long as Bitcoin is also prominently discussed, then it can't fit into the Altcoin subset.

How do we unconflate a general legal discussion that affects Bitcoin and altcoins and which prominently mentions issues that are specific to Bitcoin?

Seems to me the thread must go in either Bitcoin Discussion or Legal.

I had made another thread in the altcoin discussion forum to reference this thread, to be more specific to altcoin readers and posters. This thread was moved from Bitcoin Discussion to Altcoin Discussion thus creates a duplicate thread in the Altcoin Discussion forum. And I was trying to be somewhat careful to keep the thread at Bitcoin Discussion more general and also with specific interpretations for Bitcoin.

It makes me look silly (as if I was trying to create multiple threads in the same forum but I didn't) with two threads on similar issue both in the Altcoin Discussion forum.

[smooth]

I see this very long thread just got moved from the Bitcoin Discussion forum to the Altcoin Discussion forum. Moving an established thread is very disruptive.

The moderators are really paranoid. This thread discusses how Bitcoin relatives to securities law. The mods have deprived the Bitcoin Discussion readers the information about Bitcoin's legality.

Any way no problem. More motivation.

More likely the reason they moved it is your prominent reference to "Which crypto-tokens" meaning you are discussing various coins, not just Bitcoin specifically.

Logic fail. Bitcoin is a subset of crypto-tokens. Bitcoin is not an element of set altcoins.

Correct. Discussing the larger set in the Bitcoin section of the forum is obviously seen as off topic, as opposed to discussing Bitcoin specifically. There is no forum for discussing both together, but the topic of alts is barely tolerated at all by the forum mods and operator; they certainly don't want this in the Bitcoin section, and never have.

Your somewhat slanderous implication of a redundant thread in the Legal subforum requires a citation on your part, otherwise it can be taken as veiled slander.

I don't believe there is such a thread, as I googled this entire site (site:bitcointalk.org securities) before I started my thread. 

I'm surprised if there are no threads that discussion Bitcoin and securities law as this is certainly not the first time the topic has come up in the greater Bitcoin community, but if that is the case then perhaps you want to start one. But you should limit (or at least focus) the discussion there to the properties of Bitcoin itself.

[TPTB_need_war]

There is no forum for discussing both together, but the topic of alts is barely tolerated at all by the forum mods and operator; they certainly don't want this in the Bitcoin section, and never have.

Good luck to them when the most popular forum for crypto no longer begins with "bitcoin___".  

But you should limit (or at least focus) the discussion there to the properties of Bitcoin itself.

It would be very unwise of me to handicap my research and discussion thus wasting time conforming to the priorities of those who think it is wise to put all their eggs in one basket.

They could just throw this thread in "Other" then at least it wouldn't be a failure of set logic.

[Crestington]

In terms of legalities, I would consider it illegal if you were selling an ICO and then promptly dumping all ICO coins, releasing firmware with wallet stealing virus's.

I wouldn't consider the Bitshares2.0 upgrade as anything illegal as investors receive the same thing they initially paid for and understand how the system works before taking part in it.

Sadly, until regulations can clearly define what is illegal and why, nothing is illegal but would be best to try to stay away from anything that could be defined as selling an unregistered security (such as cloudmining shares).

[anon_giraffe]

I did not read the entire thread.
Thought I'd post this link to the WhyCoin reddit post

"Please read this and understand why the PREMINED COINS are protected by US LAW!"
https://www.reddit.com/r/whycoin/comments/3pw3z0/please_read_this_and_understand_why_the_premined/

[The Sceptical Chymist]

Oh yeah I remember this crazy ass topic.  All altcoins and btc itself are speculative tools but I wouldn't call them securities as they're not equit or debt.