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Comment by jashkenas | Hacker News Reader

A little emphasis, focusing on the aftermath from the SEC's July report on the DAO:

> "Following the issuance of the 21(a) Report, certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities. Many of these assertions appear to elevate form over substance. Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security."

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He even flat out says that most of the ICOs he's seen should be considered securities:

> By and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved. I have asked the SEC’s Division of Enforcement to continue to police this area vigorously and recommend enforcement actions against those that conduct initial coin offerings in violation of the federal securities laws.

I think some of the other commenters are glossing over that statement and being rather over-optimistic about the SEC's stance toward tolerating ICOs.

They've been pretty clear in the past about the Howey test and ICOs running foul of it, so that part of his letter wasn't all that new. They're already taking action and should be - just today I saw an ad promising 60x returns on an internal market.

I didn't expect to see him acknowledging the positives of cryptocurrency and the ICO funding model overall.

I think people are viewing this as an attack on crypto, when its actually just common sense. People put too much faith the 'Contract' half of 'Ethereum/Smart Contract'

Basically. Today ICOs are selling tokens as shares of equity in their company, or similar. Which you can then sell on.

The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders.

Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them.

Otherwise how can the court help you, and who else is going to help you?

> I think people are viewing this as an attack on crypto, when its actually just common sense.

> […] The problem is these companies essentially reserve the right to disregard that contract and could then sell their company, domestically or overseas, for cash, without recompensating any token holders.

> Securities regulation and law stops that. But the tokens do need to be lawful securities in order for the court to recognize them.

This. IRS regards coins and tokens as capital gains taxable things regardless of whether they qualify as securities. SEC exists to protect investors from scams and unfair dealing. In order to protect investors, SEC regulates issuance of securities.

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