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Comment by jMyles | Hacker News Reader

I'm disappointed in us, HackerNews. A thread about an ICO being shut down and most people in the thread are luke-warmly celebrating the SEC. Is this the compassion, sophisticated society we're working to build?

The SEC, like the rest of the state, is focused on keeping wealth in the hands of the wealthy. This action does not protect anyone's freedom or agency. Instead, it ensures that the only people who benefit from good ICOs (and none of us can now know if Munchee was going to be one) are "accredited investors". This is an insidious phrase which simply means "have a net worth of at least $1,000,000, excluding the value of one's primary residence."

This is just another action to divide-and-conquer by class. The internet will not tolerate these hijincks; it will simply shift economy and influence elsewhere. But will we?

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You can sell stock to anybody. My kids can (and have) bought stocks. The SEC is not trying to keep securities out of the hands of the little people.

Rather, what's happening here is that operators of ICOs would like to exempt themselves from the disclosure rules that apply to all other publicly traded companies. They don't want to register with the SEC. They don't want to spend $5k-$10k a quarter on publishing their financials (those financials would probably be on the cheaper end of the scale, since they'll be disclosing basically no meaningful revenue).

Congress and the SEC went out of its way to make streamlined public trading for new enterprises possible with the JOBS act and Title IV. Over a billion dollars of new issuances have apparently happened under Title IV's "mini-IPO" rules, which exclude the most financially onerous costs of IPO for issuances under $50MM (that is: for virtually all ICO-scale raises).

Tech startups haven't used Title IV because, by and large, they can get better deals from venture capitalists. That's not a conspiracy; it's simple statistical selection. The best companies have access to the most reliable capital. The flip side of that coin (no pun intended) is adverse selection, which is what you have when a trivial restaurant review application tries to raise $15MM on a new cryptocurrency dedicated to funding restaurant reviews.

ICO enthusiasts want to paint this as retail investors being excluded from "10000%" gains. They're betraying themselves right there, by arguing with a straight face that there are 10000% gains to realistically be had by retail investors. Really, what they're making is a special-pleading argument: the companies they back don't have their shit together enough to raise large amounts any other way, and they sure would like to be exempted from the rules that apply to everyone else.

GP writes specifically about how the SEC "does not protect anyone's freedom or agency", which is a typical libertarian viewpoint. I.e. that the gov't shouldn't regulate anything about disclosures, published financials, etc.

E.g. if a company wants to sell and promote a new radical weight loss drug, it should be up to each individual consumer to decide whether it's trustworthy, not the FDA.

Not agreeing or disagreeing with this line of thinking, but I think you're arguing from a different angle.

It says - right there in the SEC statement - that their top priority is essentially to protect Main Street.

Man, as usual, you make some good points but summarize your position with an out-and-out strawman:

> ICO enthusiasts want to paint this as retail investors being excluded from "10000%" gains.

If this is your best impression of the intentions of token developers, I really think that you need to engage in better listening.

Obviously our perspectives differ re: the role of the state in the information age. Over the past - what has it been, three years - I haven't yet convinced you that the state is subject to deprecation by dint of the connectivity of the internet. I may yet.

But even if I can't, I really think that you will benefit from realizing that much of the crypto-blockchain experimenting is about finding ways to replace functionality of the state, or to subvert its more violent and insidious tendencies.

To use the current example, I can imagine something like MUN eventually replacing the various regimes of inspection and regulation around food service. Perhaps you gasp, and say, "how can we do that?! The streets will run with the blood of the dead from e. coli!"

However, this both assumes that the state does a good job at regulating food (it doesn't) and that a decentralized solution won't (it can). The state exacts nothing short of brutality on our food supply, from effectively subsidizing factory farms to forcing farmers at gunpoint to destroy raw milk [0]. That last event happened down the road from my partner's family, by the way.

Now, I have no idea of the impact that MUN may have had - perhaps it wasn't going to do any of the good in the world that I'm imagining. But neither do you! Neither does anybody!

I don't want the same thing to happen for GRMD and cannabis, for SPANK and adult services, and so on. These are good ideas that deserve a chance to work in the world if they can.

It's no secret that I'm working on a blockchain-driven KMS, NuCypher. And I put a lot of heart into my work. I'm very excited about what it can mean for people who want to share secrets in a key-managed way but don't want to trust the likes of Amazon and Google.

When I put in the extra hours, I'm largely motivated by the thoughts of who might benefit: Chinese dissidents who need a safe place to chat online. Medical providers who want to share records in a trustless way. File-sharing applications who color outside the lines of the stone-age IP infrastructure present in much of the world.

This is exciting stuff, and I much prefer to bring it to life without needing to constantly be in a confrontational position re: three-letter agencies. It's seriously time to re-evaluate the role of the state and make sure that we focus on reducing the violence that it brings to our world.

0: https://www.theorganicprepper.com/michigan-dept-of-agri-forc...

This is all fine, but if you want to be persuasive outside of niche sites, you'll find arguments that make sense to people who aren't anarcho-capitalists.

Frankly, man, I'm already "persuasive outside of niche sites," my comment was meant specifically to engage you personally.

For me it’s much simpler and more fundamental than that. I think people can make their own choices and it’s not the state’s place to meddle in those choices. If someone wants to get a second mortgage on their house to buy an ICO, I say more power to them. Why shouldn’t people be able to take risks they’re comfortable with? Some of those risks might pay off. Regardless, even if it was the equivalent of flushing money down the toilet, I don’t see it as anyone’s right to interfere with that personal sovereignty.

Why can't people make their own choices and purchase any cancer drugs they choose, regardless of whether the FDA has vetted them at ludicrous expense?

Why can't people make their own choices and buy poultry off the back of a van rather than from an FDA-inspected distribution chain?

Why can't people make their own choices and dine at restaurants that can offer lower prices in exchange for not undergoing inspections, or, for that matter, city building code inspections? Believe it or not: having invested in more than one local food venture, those expenses are intimidating and a blocking issue.

You can believe all regulations are pointless and that the market would handle those issues better than the state. I don't agree, but you'll have an intellectually coherent argument.

Otherwise, you should find an argument specific to the particular regulation that's troubling you today.

I would make all of those arguments so I guess I’m intellectually coherent:)

That's totally fine. I do not even a little bit agree with you, but it's fine to be a hard libertarian or an ancap. But most people aren't ancaps, so a persuasive argument against ICO regulation is probably one that doesn't depend on your audience themselves being ancaps.

I think you’re greatly overestimating the popularity of your opinion. If a ton of people didn’t agree with me the SEC wouldn’t need to step in and put a stop to it. It’s that so many people want to do this that they are now meddling.

I absolutely agree that lots of non-ancaps think the SEC should stay out of ICO regulation. But so far as I can tell, they haven't these arguments through. I've seen only two forms of pro-free-ICO argument on this thread:

(1) Special pleading arguments that suggest that despite the fact that tech startups have little to no inventory, trivially simple expenses, no financing obligations outside their equity raises, and, for the forseeable future, no significant revenue --- that is, despite the fact that tech startups have virtually none of the attributes that make producing audited financials expensive --- they should be exempt from SEC disclosure rules.

(2) Arguments suggesting that adults should be free to enter into contracts without protections because regulations have been obsoleted by the Internet.

Argument (2) I get, and acknowledge. I do not agree with it, but fine.

Argument (1) though makes no sense, and if someone would take the time to pursue it carefully, I'd be thankful.

I agree with you. Argument 1 makes no sense.

How does your argument handle the issue that it's not possible to ask every single person in the country to understand how cancer drug safety works, how food safety for poultry works, what makes a restaurant kitchen safe, and how to properly construct a building that won't fall on your head? All those in addition to the hundreds of thousands of other things I'd have to deeply understand in order to keep myself safe?

It is not possible or reasonable to expect people to have enough information on all of these topics in their heads at every moment they might make a decision.

Not only that, the people who want to open a restaurant in an unsafe building or sell you tainted meat have a clear incentive to hide that information from you and from everyone else.

In this world, how could anybody make a good decision on the thousands of things we buy or use during daily life? Even with perfect information, which is strongly disincentivized?

Regulations solve this issue by hiring the government to figure out and enforce the best way to prevent these issues so that every time we go out to dinner we don't have to ask the waiter "Which of these walls is load-bearing?".

Reputation and expert advice cover this. Check Yelp to see if anyone got crushed to death before you dine and you should be fine. Snark aside, there’s a lot more transparency now than when these laws were designed. A lot more competition too. The market will weed out truly bad actors.

> Why shouldn’t people be able to [invest in pyramid schemes]

https://en.wikipedia.org/wiki/Albanian_Civil_War

"The Albanian Civil War, also known as the Albanian rebellion, Albanian unrest or the Pyramid crisis, was a period of civil disorder in Albania in 1997, sparked by Ponzi scheme failures. The government was toppled and more than 2,000 people were killed."

All meaningful progress comes with some risk. You can argue that the status quo is worth preserving but some of us will never agree with that.

> Why shouldn’t people be able to take risks they’re comfortable with?

Because when enough of these nimrods makes the wrong decision at the same time, you get catastrophic failure and the rest of society is left holding the bag.

They then go whining to the government which, in turn, enacts regulations to keep these things from happening again.

If we're just recapitulating the statism-vs-anarcho-capitalism argument, we can probably put a bow on this part of the thread and everyone agree to disagree.

I don't think I'm arguing against rugged individualism as an ideology, moreso the belief that the choices we make as individuals don't affect the people around us, which seems to be the repeating mantra from anarcho-capitalists.

You can go to Vegas right now and blow your life savings. Should that be illegal too? We need to stop the mollycoddling and let people make their own decisions (and yes not bail them out if those decisions turn out to be wrong).

You can indeed do that. But very few people do, because when you try to mortgage your house to bet your life's savings at a craps table, your spouse refuses to sign the paperwork, because everyone knows that for a working class family, spending $10,000 at a casino means you have a problem.

The same is not true of investments, which can be very persuasively marketed to normal people without gambling problems. Which is why the SEC cares so much about how securities are marketed and promoted, and why you can sell stock in virtually anything as long as you (1) register and (2) publish audited financials documenting how crazy your business idea is.

If the “problem” is marketing then the solution is counter-marketing, not regulation. Ideas should compete against each other and not be forced with the threat of violence (the state).

You’re right in that we fundamentally disagree so won’t go anywhere here. I appreciate you arguing in good (enough) faith though.

> you get catastrophic failure and the rest of society is left holding the bag.

You didn't respond to what I said. When enough people make a large mistake, the effects go beyond just the individuals. At that point, it's no longer a "personal choice," it's damaging to the whole.

I did: “and yes not bail them out if those decisions turn out to be wrong”

Of course any action at scale will have impact beyond the individual. I do not believe the state (or anyone else) can determine what’s best for everyone. Such a thing is not possible and instead is used as cover to remove personal freedom.

Ah, I'm sorry, I missed that part of your response. In that case, your point is taken (I disagree, but that's fine).

The state isn't meddling in those choices. The state is simply saying that if you're going to offer a security, you have to disclose things about it. Thus, enabling people to make those choices.

The state getting to classify whatever it feels like as a “security” (with all the attached legal restrictions) is meddling.

Instead, it ensures that the only people who benefit from good ICOs are accredited investors

It also ensures that the only people who lose money from bad ICOs (the vast, vast majority of them) are accredited investors.

The SEC is one of the US's best institutions. It was created in 1933/34 as a reaction to investment/banking scams that led to the Great Depression.

The Securities Exchange Act of 1934 [1] IS the best thing that ever happened to US markets being trustworthy, looking out for smaller investors and the meteoric rise of our markets since 1934.

Yes it is a layer or wall for innovation at times, and have failed to catch all fraud/scams at times, but overall people should be glad the SEC is there to make sure people aren't being taken left and right on investments. The only people that are usually dealt a blow from the SEC are scammers/sketchy investments. Even if some financial innovation is delayed or harder it is always better to be trustworthy than not. The SEC makes US investments trustworthy.

[1] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...

Thank you. I really get the feeling that the people pleading a special case for ICOs are really lacking historical knowledge and perspective. They ask questions like "why can't the market decide what a trustworthy investment is" like we didn't already have a period where that was the case.

That an agency was necessary when it was created - and that it has done good in the intervening time - is not in itself a sufficiently compelling reason for it to continue to exist.

In this particular case, I think it's clear that the SEC (as well as the FDA, to which it is being compared throughout this thread) will be decreasingly necessary as our species moves into the information age.

The big question is: Would YOU put your wealth and life savings in an investment environment that isn't regulated by the SEC? All of it not just a portion that is risky?

Everyone's retirement and wealth depends on a trustworthy market and securities.

Why do you think people put money in the market today as opposed to holding cash during the Great Depression due to lack of trust in the markets and banks?

Was the Great Recession not another warning that even robust banks might go too far with leveraged assets and thus investments would be even more sketchy?

I think the SEC is needed more than ever today. However some financial regulations like SOX were a knee-jerk reaction that caused some issues, iteration and refinement is necessary. ICOs and cryptocurrency I invest in pretty heavily but I wouldn't trust my life savings there yet. It is more like cash/gold today that can be lost. SEC coming out and shutting down shady ICOs is a GOOD THING (tm). I attribute the fast turn around of the Great Depression largely to the SEC and market regulations that instilled trust. It was probably even a better reaction than the TARP after the Great Recession as that was a longer drawn out bounce back and still might not even be fully back. Trust was gone for quite a while and it may have even led to cryptocurrencies out of it (Bitcoin 2008/2009).

The FDA has been bought and is regulatory capture in many ways but they still provide more good than bad at the current situation.

I generally agree that the information age makes people more aware but there still should at least be oversight and regulation on areas where things get sketchy. If anything it will make the agencies better or they will evolve, they won't go away. Some agencies like the DEA have too much enforcement/regulation power and over time these will be ground down. But even the money in Wall Street still hasn't done that to the SEC because it is a great institution and was setup well, and all Americans have benefitted from it.

There is a major difference in what people say and what people do. It is easy to say "I don't mind losing $10k" when you believe that there's a non-negligible chance you will come out with $10M. When that $10k gets lost and the $10M never shows up, the tune is different. Humans will always deflect blame.

When this happens to a substantial number of people, the discontent is palpable enough to threaten social stability and the civil order. The SEC was formed specifically to prevent, mitigate, and respond to such incidents before they have the opportunity to escalate.

Call this what you will and take offense if you must, but the consequences of anarchy are not at all as rosy as most "anarcho-capitalists" imagine in their thought experiments.

I don't quite understand, how is allowing people to invest in ICOS any different to allowing them to play the lottery?

I am not trying to be rude, I honestly am just trying to understand your concerns.

The US doesn't allow people to play in unregulated lotteries. Those are super illegal.

In fact the only lottery you can usually play in is one specifically run by the state you're in, which has made an exception to the law for itself, for bad reasons.

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