I guess I'd ask this question:
Is it ethical to want to bring in unaccredited investors to a market that's known for being scammy and overhyped?
Is it ethical to want to bring in unaccredited investors to a market that's known for being scammy and overhyped?
It's to protect the middle class of course, though one can only wonder why the blatant double standard. I have no idea!
The "accredited investor" regulations are a sham, an unfair and artificial barrier to entry that ought to be removed. Yes, some people will get abused. This might even create local instability. But, that is clearly the long-term optima. Those who lose money to scams can leave it to law enforcement to do their job. Others who invest more they can afford to lose into bad apples will learn that you should always hedge risk. As a whole, society gets smarter when it is allowed to make mistakes, even costly ones. Smarter and less fragile.
Isn't gambling heavily regulated in the US to the point of being barely legal in many states? Isn't that basically how many Indian tribes make money - by being outside this regulation?
ICOs, on the other hand, is like entering a street shell game. Something non-regulated, where you are sure to get skinned.
Gambling is up front about the odds and the fact that they are stacked against you.
ICOs and scam investments are not.
The issue is not about allowing people to lose their money.
The issue is about Fraud, and people lying about what they are selling, as well as promising false returns.
Casinos don't promise you anything false, and transparently offer you provable odds.
After all, if someone is willing to violate the law, chances are they won't respect limitations regarding the eligibility of investors - which is, in fact, what we're seeing with ICOs.
Seems like just another example of the known results of Prohibition - prevent legal markets and you'll just have dark markets in which people get poisoned.
Regulating a company that may or may not believe their pitch about making their investors rich and whose probable failure may or may not be the result of them failing to even attempt to execute on it and/or their pitch deck being a pack of lies is incredibly complicated.
So it's left to investors that have the resources to do what would otherwise be the extremely laborious regulator's job of doing due diligence, sitting on boards to see what's going on and litigating malfeasance. Who also happen to have sufficient funds not to suffer if they don't.
Prohibition isn't really an appropriate comparison since there's an abundance of alternative places for the general public to speculate, and no reason to assume that the investment opportunities investment professionals won't touch would start offering consumers better returns than a casino if everyone could advertise an SEC stamp on their ICO after filling in a few forms.
Law enforcement rarely resolves securities disputes. It requires lawyers teeing up the evidence for courts and regulators.
Disclaimer: I am not a lawyer. Don’t do mean things with securities.
In practice, I'm seeing teams doing ICOs do shady things like change the terms halfway through raising capital, leaving early contributors with a diluted stake or teams that straight up don't deliver with no way for share(token?)holders to hold the team accountable - basically this kind of behavior seems a whole lot easier when you took small sums from thousands of nobodies instead of millions from a handful of deep-pocketed somebodies.
I question whether those risk-reward blends are appropriate for those without substantial excess capital. The current limits are somewhat arbitrarily placed, I agree, but someone with $50,000 in savings probably shouldn't be investing in start-ups.
I don't think it is easy to answer, clearly not allowing people to take risks is also taking away there freedom and chances for making a better living. Not allowing people to take risks (and consequently, start businesses) ultimately leads towards a communist worlds were people can only pick from a selection of government ordained jobs.