Why no ICO is offering to exchange of tokens for real company shares?

[poutintsev]

Why no ICO is offering to exchange of tokens for real company shares?

All they offer is some useless crap that has no value.

Offering company shares would raise confidence, as then the creators could not pump&dump their token as easily.

I know that we are doing an ICO like that, but there are not many (if any) similar ones.

Here you can check our ICO: https://www.immortality.foundation

[rextab]

The token would be seen as a financial security and regulators in most (all?) jurisdictions will certainly prevent this type of ICOs

[CryptoAlphaStar]

Because they will be under the laws for securities. This means complying with hundreds of requirements and investing a huge amount of money to do so. This is not what these companies want. If they want to do that, they won't be here. They will make an IPO on the stock market.

[yura_878]

Why no ICO is offering to exchange of tokens for real company shares?

All they offer is some useless crap that has no value.

Offering company shares would raise confidence, as then the creators could not pump&dump their token as easily.

I think it is because there is no regulation on the market and because of this there are a lot of useless and unsuccessful bad projects

[poutintsev]

The token would be seen as a financial security and regulators in most (all?) jurisdictions will certainly prevent these type of ICOs

I don't think regulations are an issue here.

1. Sell tokens in ICO fundraising = Legal
2. Exchange shares for tokens = Legal

Where is the problem?

[Xio]

As the previous posts already suggested, it is for legal and regulatory reasons.

Anyone remotely serious about an ICO will not directly accept or trade in for fiat. There might be exceptions were a company is [already] supervised under a regulatory body that would allow them to actually offer or integrate exchange for fiat. Example for this, while not being a classical ICO but backed by "old economy" venture capital: Bitbond p2p lending platform, which is regulated in Germany.

The bottom line of the events that lead to the increased focus to avoid being treated as a security is basically this:

1.) The DAO crowdsale on the Ethereum blockchain raised more than $100 million.
2.) Due to security vulnerabilities, ther worth about $50 million were stolen. This raised public interest and especially increased attention of regulatory bodys.
3.) The SEC (United States Securities and Exchange Commission) started to investigate and concluded that essentially tokens are securities under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”). Making it unlawful to issue, sell or buy those (if you are a US citizen).

There are a few aspects that make a token equal to a security, summarized in The Howey test.

TL;DR: If e.g. a token is used only as an in-game currency to buy items and not exchanged to fiat by the operator, this is most likely completely legal even in the United States. If a token is sold for fiat, then it is treated just like a security and subject to regulatory laws.

[teddyelwyn]

I found an ico that is doing something to what you're looking for, however they're building a platform for companies to launch their own legally compliant security tokens where they can distribute dividends.

https://polymath.network/

[poutintsev]

If a token is sold for fiat, then it is treated just like a security and subject to regulatory laws.

But shares are not FIAT, they are like property.

[Xio]

If a token is sold for fiat, then it is treated just like a security and subject to regulatory laws.

But shares are not FIAT, they are like property.

Not sure what you mean. Shares or stock options in the "classic" sense are securities de jure aka by law, they are bought and sold for fiat alias "real money". It doesn't really matter what you or I or the community thinks it is. Have a look at the article I've linked to.

[poutintsev]

If a token is sold for fiat, then it is treated just like a security and subject to regulatory laws.

But shares are not FIAT, they are like property.

Not sure what you mean. Shares or stock options in the "classic" sense are securities de jure aka by law, they are bought and sold for fiat alias "real money". It doesn't really matter what you or I or the community thinks it is.

I mean that shares are not FIAT. They are only bought and sold for FIAT, like you said yourself. But they are not FIAT themselves.

Is it then also illegal to allow to exchange tokens for any other goods that can be sold and bought for FIAT?

[bandar]

There is, and it's called neufund.  Check my signature. German based, backed by enough noncrypto investors and it aims for true equity tokens.  Platform will be online in spring.

[rextab]

There is, and it's called neufund.  Check my signature. German based, backed by enough noncrypto investors and it aims for true equity tokens.  Platform will be online in spring.

Interesting project and definitely going in the right direction in terms of development of equity markets. However, I am still concerned that BaFin (the German regulator) will go after you as far as you operate under the German law. I will read in detail your whitepaper and join the ANN discussion.

My general comment on this is that there should be more pressure on governments to change laws. I am pretty sure that as blockchain matures the governments will allow things like this. But I see it rather as a step-by-step approach over time and not a "big bang" approach.

[bandar]

There is, and it's called neufund.  Check my signature. German based, backed by enough noncrypto investors and it aims for true equity tokens.  Platform will be online in spring.

Interesting project and definitely going in the right direction in terms of development of equity markets. However, I am still concerned that BaFin (the German regulator) will go after you as far as you operate under the German law. I will read in detail your whitepaper and join the ANN discussion.

My general comment on this is that there should be more pressure on governments to change laws. I am pretty sure that as blockchain matures the governments will allow things like this. But I see it rather as a step-by-step approach over time and not a "big bang" approach.

If I understand correctly, they have been discussing this issue with Bafin for over a year to get things straight and legal.  This is BY FAR the most legit ico I have ever seen (that's why it is the first ever (and that is more than 3 years on BCT) I did a bounty campaign for)

And yes, I agree: governments should take this serious and start working on a legal frame.  I expect we're going to see some serious scam-ico blood and scandals first.  After that storm it will be all over the news, and then the serious work can begin.  I also expect that blockchain startup/pennystock-markets will become the standard more than stock exchanges now.   NEUFUND really is a pioneer on this matter.  I don't think it will be a p&d ico with much speculation, just a very normal, legal and easy way of investing in small startups.

[overnightmillionaire]

Why no ICO is offering to exchange of tokens for real company shares?

All they offer is some useless crap that has no value.

Offering company shares would raise confidence, as then the creators could not pump&dump their token as easily.

I guess you haven't heard of the stamps platform? It's exactly what you're looking for.

https://www.stampsplatform.com

[jhanson]

I would look into what Polymath is doing. They're building a platform for companies to launch their own legal security tokens where then they can have dividends and such. https://polymath.network/

[bandar]

I would look into what Polymath is doing. They're building a platform for companies to launch their own legal security tokens where then they can have dividends and such. https://polymath.network/

hmm.. Allthough the idea looks good I can see no whitepaper.  They used a pre-ico which automatically raises red flags to me.  Neufund did an ICBM in which you can actually USE the eth you invested to invest in companies.  They don't use the eth themselves (like all other ico's).

[Xio]

Totally agree. Neufund is taking things very serious. Whereas the rest of the world hides in unregulated jurisdictions and for the most part makes claims nobody is able to verify. There are a few exceptions, but those are rare.

Everyone and his dog can run it's own ICO. For a lot of people this is only the newest get-rich-quick scheme - which makes it harder for serious entrepreneurs.

That's a shame because IMHO blockchain based businesses and the power to create assets controlled with smart contracts totally has the potential to change the world for good (and it does already, though it will take time until the dust settles).