SEC announces that ETH is not a security

[cellard]

In the early days of Pre-ICOs, such as the Ethereum ICO circa 2014, the offering to purchase rights to tokens were open to anyone.  This was a violation of US securities law.  It's only recently that the SEC has realized this, and now is enforcing the law.  Just ask the folks at Munchee.


The result is for Pre-ICOs organized under US law are no longer open to anyone.  This locks out a lot of savvy investors such as blockchain enthusiasts who aren't accredited investors.  These investors must wait until Network Launch.  At this stage, the ROI is typically dramatically less than early rounds during the Pre-ICO phase.  Of course, it's also dramatically less risky thus the lower return.

So like I said: If Ethereum came out today, it would be deemed an illegal security by US law.

I guess Ethereum holders lucked out with this one. I guess they did this to not screw up the current market, but I also think someone with SEC influence is bagholding ETH and this was in their interest.

At the end of the day they are screwing up the people that could get rich from investing in something very early to save the idiots that cannot do research. Once again government regulators screwing up those that put the work (to do the research) vs these that don't put the work and invest in obvious scams such as Bitconnect

[Pearls Before Swine]

News was just announced and prices have already skyrocketed. What are you thoughts on this?

Well, I don't participate in ICOs since I live in the US, but I do find this news interesting.  All of the financial press I follow have been mentioning crypto in the past year or so, so it has taken off.  I would not have predicted this level of popularity a couple of years ago, but here we are.

It's particularly interesting that they don't view ETH as a security.  Isn't bitcoin considered a security in the eyes of the IRS?  If I'm not mistaken, they don't view it as a currency since you have to pay capital gains taxes on it.  Anywho, it's just as well that I can't participate in ICOs.  I believe the vast majority of them are just useless cash grabs, and some are plain scams.

[emmaong12]

Good news, was obvious it's not a security anyway though.

[cryptoking33]

From The CryptoGraph

The SEC’s leader on cryptocurrencies and initial coin offerings (ICOs) says that Bitcoin and Ether are not securities but that many, not all, ICOs are securities and will come under the regulatory control of the SEC.

“Central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers,” William Hinman, head of the Division of Corporate Finance for the SEC.

Hinman noted that the central issue in determining whether cryptocurrencies and ICOs were securities was the expectation of a return by a third party, specifically whether there was a person or group that sponsored the creation and sale of the asset, and who played a significant role in its development and maintenance. If consumers are promised or are respecting an appreciation in value, and there is a centralized third party, then it can be classified as security according to Hinman.

Hinman specifically said that Bitcoin is not a security because it is decentralized: there is no central party whose efforts are a critical determining factor in the enterprise. Likewise, Ethereum cannot be considered a security because the Ethereum network is decentralized.

Mr. Hinman did not address the securities status of other cryptocurrencies, like Ripple (XRP), which is on the wrong end of a lawsuit alleging that it is a security. Additionally, a platform like EOS, which is controlled by Block.one, seems to be a likely contender for securities regulations. EOS’s system of validation, which delegates power to only 21 nodes, may not be enough decentralization in the eyes of the Securities and Exchange Commission.

Investors have eagerly been awaiting this decision, and we can all breathe a sigh of relief that the SEC continues to favor fair regulation and encourage innovation. Security regulations in the US are stringent and a securities label could remove many US investors from the global crypto market.

News was just announced and prices have already skyrocketed. What are you thoughts on this?

This is a welcome development for the cryptocurrency community because the news information is going to boost the price of altcoins in the market. Such major decisions are so fundamental to the demand and supply curves of the all altcoins in the crypto ecosystem.

[lmodric]

I am of the opinion that indeed blockcchain technology is not yet fully in use and there is still much better potential.
and now there are a lot of coins scattered in the market that makes investors split and again a lot of scams happen.
investors need more security and not just gambling speculation and I agree with the steps of the SEC.

[temilade200]

I feel the governments and SEC are trying everything possible to bring a crackdown on cryptocurrency in general, but which will all amount to futility. My question to them is that; what makes something a security and why should Ethereum that is seen as one of the most successfulaltcoin in the crypto space be seen a s a scam?

[elemosho.crypto]

It is a good news for the industry. And I agreed with the statement and found market up. I agree that Bitcoin and ETH are not security. They are performing like securities but not exactly that. There are so many differences between stock and cryptos.

[phm]

It is a good news for the industry. And I agreed with the statement and found market up. I agree that Bitcoin and ETH are not security. They are performing like securities but not exactly that. There are so many differences between stock and cryptos.

Maybe it's a good news. But it didn't any influence on the market. Nothing. BTC and ETH prices did not change. I think people afraid any cryptocurrencies after such dumping. More than 3 times for some coins. And now only stable uptrend can help to be glad

[cellard]

News was just announced and prices have already skyrocketed. What are you thoughts on this?

Well, I don't participate in ICOs since I live in the US, but I do find this news interesting.  All of the financial press I follow have been mentioning crypto in the past year or so, so it has taken off.  I would not have predicted this level of popularity a couple of years ago, but here we are.

It's particularly interesting that they don't view ETH as a security.  Isn't bitcoin considered a security in the eyes of the IRS?  If I'm not mistaken, they don't view it as a currency since you have to pay capital gains taxes on it.  Anywho, it's just as well that I can't participate in ICOs.  I believe the vast majority of them are just useless cash grabs, and some are plain scams.

As far as I know the IRS can't have an independent opinion against what the SEC says. The SEC claimed Bitcoin isn't a security (it obviously never was), so the IRS task is to guarantee people pay taxes, not to argue about the SEC what Bitcoin or whatever else is. They just want your tax money and will follow guidelines set by SEC to determine what all these new things are.

But even if the SEC said Bitcoin was a security, it would just mean they are wrong. The government isn't infallible and can take stupid decisions, thankfully at least they didn't screw up with Bitcoin.

[SvonioneFromMangoCoinz]

I am very interested in what consequences this statement of the SEC can bring? Will this affect the ethereum in the negative or not?

This will likely affect the price of ETH. Now news is what determines the price of the market. But I do not believe that the SEC's statement on ETH is true. They may have misunderstood the features of ETH

[jatoman]

So like I said: If Ethereum came out today, it would be deemed an illegal security by US law.

I guess Ethereum holders lucked out with this one. I guess they did this to not screw up the current market, but I also think someone with SEC influence is bagholding ETH and this was in their interest.

At the end of the day they are screwing up the people that could get rich from investing in something very early to save the idiots that cannot do research. Once again government regulators screwing up those that put the work (to do the research) vs these that don't put the work and invest in obvious scams such as Bitconnect

I agree.

This is the unfortunate aspect of the law.

And, the unintended consequence is many of blockchain projects will move outside of the United States so that they can raise capital prior to Network Launch.

[coinmela]

ETH is the one of the successful coin in crypto market and this type of news seen on BTC also but still BTC running successfully same ETH also run future successfully still now more ICOS depended by EHT     

[jvper]

I believe his speech was not necessarily so positive because, on the other hand, the director stated everything you put money with intention to sell higher is a security, so everything else can be a security.

[pobeditelvezde]

I am not a specialist in the field of security so I am confused a little but I do not think that it is a tragedy because every complicated facility has defects and there is the reasonable question when developers will solve this problem.
Moreover I think that this trouble is not so awful because there are not news in mass media about this problem.

[oFFisovm]

As for me, this is a sign that the crypt is beginning to be recognized and perhaps at least somehow trying to make it more predictable.

[seyola89]

Does this mean good news for bitcoin and ethereum?. If ethereum is not a security, does it mean ethereum tokens should not be referred to as securiries too?

[jatoman]

I believe his speech was not necessarily so positive because, on the other hand, the director stated everything you put money with intention to sell higher is a security, so everything else can be a security.

There is a lot of nuance determining whether something is a security.

There are plenty of things you can buy with expectation it will go up in value that aren't securities.  This expectation is one of several criteria.

The emphasis in this ruling is whether after Network Launch the network is decentralized, where it isn't controlled by a "third party".  He said in the case of the Bitcoin and Ethereum networks these were adequately decentralized, and therefore, wasn't controlled by a third party thus making these not securities.

In contrast, Ripple and EOS are controlled by a central authority, which means they may be considered securities.

[cellard]

So like I said: If Ethereum came out today, it would be deemed an illegal security by US law.

I guess Ethereum holders lucked out with this one. I guess they did this to not screw up the current market, but I also think someone with SEC influence is bagholding ETH and this was in their interest.

At the end of the day they are screwing up the people that could get rich from investing in something very early to save the idiots that cannot do research. Once again government regulators screwing up those that put the work (to do the research) vs these that don't put the work and invest in obvious scams such as Bitconnect

I agree.

This is the unfortunate aspect of the law.

And, the unintended consequence is many of blockchain projects will move outside of the United States so that they can raise capital prior to Network Launch.

The overall conclusion is that the SEC is losing money by missing on potentially the next big gem that happens through ICO means of raising capital. Who knows? Not 100% ICOs have to be scams, some are legit, and these few (which people here could find and invest in) are not going to take place in US as you said. As always regulations kicks out innovation.

It will avoid some idiot in investing on the next Bitconnect doing 0 research but said idiot will always find a way to invest in any other scam, just like the smart guy (that of course doesn't qualify as "qualified investor") will still find ways to invest even if they are US citizens.

The net result is the same, they are just annoying people that actually put work in research.

Im not sure if a VPN will be enough to invest on non US hosted ICOs as a US resident or they will also ask for ID+picture, but im sure they will find a workaround.

I believe his speech was not necessarily so positive because, on the other hand, the director stated everything you put money with intention to sell higher is a security, so everything else can be a security.

There is a lot of nuance determining whether something is a security.

There are plenty of things you can buy with expectation it will go up in value that aren't securities.  This expectation is one of several criteria.

The emphasis in this ruling is whether after Network Launch the network is decentralized, where it isn't controlled by a "third party".  He said in the case of the Bitcoin and Ethereum networks these were adequately decentralized, and therefore, wasn't controlled by a third party thus making these not securities.

In contrast, Ripple and EOS are controlled by a central authority, which means they may be considered securities.

Ethereum is decentralized? Vitalik has enough power in Ethereum that it appears centralized to me.

[flashbit]

I was about to post this. In my book, this proves two thing:

1) That someone within the government or at least enough influence to impact's the SEC decision on deciding if Ethereum is a security or not, is bagholding massive bags of Ethereum (maybe not proves, but definitely strengthens this conspiracy theory)

*They* are also bagholding bitcoin. I'm pretty sure banks invest in crypto meanwhile they said people to stay away from it // "invest in gold, silver, forex... cryptomarket is a dangerous snake"

2) That the altcoin bubble has just begun and will continue growing for a long time until something really bad happens technologically in any of the top 10 altcoins, when that happens a mass exodus into Bitcoin will ensue.

The altcoins just wait for the next generation, maybe TON will show the future with a real daily use.

[cellard]

I was about to post this. In my book, this proves two thing:

1) That someone within the government or at least enough influence to impact's the SEC decision on deciding if Ethereum is a security or not, is bagholding massive bags of Ethereum (maybe not proves, but definitely strengthens this conspiracy theory)

*They* are also bagholding bitcoin. I'm pretty sure banks invest in crypto meanwhile they said people to stay away from it // "invest in gold, silver, forex... cryptomarket is a dangerous snake"

2) That the altcoin bubble has just begun and will continue growing for a long time until something really bad happens technologically in any of the top 10 altcoins, when that happens a mass exodus into Bitcoin will ensue.

The altcoins just wait for the next generation, maybe TON will show the future with a real daily use.

But we all knew Bitcoin is not a security and it would look ridiculous if the claimed otherwise for whatever reason. Now with ETH you have to make an exercise in stretching out law interpretation in order to not classify it as a security ("it was a security in t0, then in t1 it was not a security..."). Im not sure about that but it is what it is and that's what they've decided.

I don't know what TON is but upon a fast research looks like Telegram devs jumping on the blockchain bandwagon. I don't know if they can deliver a solid product but I don't see an obvious reason for governments wanting to cold storage that token nonetheless, unless they see something exploitable by being 51%+ whales.