Some folks keep talking about how groundbreaking it is that judges in some of the SEC cases are saying crypto tokens aren’t securities “standing alone.” In my view, that’s a total nothingburger.
Here’s why 👇🏻
The SEC’s theory against the altcoins they’ve pursued has been, since 2017, that they constituted “investment contracts,” which the SEC has jurisdiction over thanks to several statutes passed by Congress, including this one: 15 USC § 77b)
An “investment contract” is defined by the courts (specifically, the Supreme Court in Howey). You probably know the now familiar 4-part test. But the preamble to that test is just as important. Before getting to the 4 factors, Howey also notes that “an investment contract” is first and foremost a “contract, transaction, or scheme…”
Each of these categories implies some sort of volition on the part of the issuer and an investor.
Thus, it would seem that no instrument, when considered in isolation, satisfies the definition of an “investment contract” standing alone. And the mere creation of a token (be it XRP, Luna, or any other), without more, is OF COURSE not an unregistered securities “offering.” It must first be offered and accepted by an investor to bring the transaction within the ambit of SEC authority. And it is the manner of that offering coupled with the surrounding facts and circumstances that turns any asset into a security under the investment contract theory that the SEC has put forth.
So if someone tells you how HUGE a deal it is that Judge Torres or some other judge said that XRP or any other token is “not a security” by itself, just know that they’re overplaying their hand.
Indeed, courts have been saying this since early 2020. Take the Telegram Blockchain case:
“[T]he security in this case is not simply the Gram [token], which is little more than alphanumeric cryptographic sequence… the Court finds that the appropriate point at which to evaluate this scheme to sell and distribute Grams is at the point at which the scheme's participants had a meeting of the minds, i.e. at the time of the 2018 Sales…” SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020)
See? Nothingburger
(Zap and/or share if you found this useful!)
BryanJ / Bryan Jacoutot
npub1yq…5ys35
2023-08-01 19:04:11
Author Public Key
npub1yq30qlvj0zgxgt6884avm07qdxuuk5d5xvce4md3rvlrf8rp62xqy5ys35Published at
2023-08-01 19:04:11Event JSON
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"content": "Some folks keep talking about how groundbreaking it is that judges in some of the SEC cases are saying crypto tokens aren’t securities “standing alone.” In my view, that’s a total nothingburger.\n\nHere’s why 👇🏻\n\nThe SEC’s theory against the altcoins they’ve pursued has been, since 2017, that they constituted “investment contracts,” which the SEC has jurisdiction over thanks to several statutes passed by Congress, including this one: 15 USC § 77b)\n\nAn “investment contract” is defined by the courts (specifically, the Supreme Court in Howey). You probably know the now familiar 4-part test. But the preamble to that test is just as important. Before getting to the 4 factors, Howey also notes that “an investment contract” is first and foremost a “contract, transaction, or scheme…” \n\nEach of these categories implies some sort of volition on the part of the issuer and an investor.\n\nThus, it would seem that no instrument, when considered in isolation, satisfies the definition of an “investment contract” standing alone. And the mere creation of a token (be it XRP, Luna, or any other), without more, is OF COURSE not an unregistered securities “offering.” It must first be offered and accepted by an investor to bring the transaction within the ambit of SEC authority. And it is the manner of that offering coupled with the surrounding facts and circumstances that turns any asset into a security under the investment contract theory that the SEC has put forth.\n\nSo if someone tells you how HUGE a deal it is that Judge Torres or some other judge said that XRP or any other token is “not a security” by itself, just know that they’re overplaying their hand. \n\nIndeed, courts have been saying this since early 2020. Take the Telegram Blockchain case:\n\n“[T]he security in this case is not simply the Gram [token], which is little more than alphanumeric cryptographic sequence… the Court finds that the appropriate point at which to evaluate this scheme to sell and distribute Grams is at the point at which the scheme's participants had a meeting of the minds, i.e. at the time of the 2018 Sales…” SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020)\n\nSee? Nothingburger\n\n(Zap and/or share if you found this useful!)",
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