Hacker News Reader

Comment by aey | Hacker News Reader

This isn’t a block on another telegram’s sale, but on their launch. Telegram filed an exemption for their original sale, and have been compliant with the SEC.

https://www.sec.gov/Archives/edgar/data/1729650/000095017218...

What this action threatens is the SAFT model. It’s not clear what steps TG needs to take to disassociate themselves from the launch such that TON is decentralized and no longer a security. Or if they need to file a reg-a or s-1 before launch.

[edit for clarity]

View on HN

The title states flatly that they're halting the offering. Is that inaccurate? What's the distinction here?

If the title is misleading, the practice on HN is to replace it with a better (i.e. accurate and neutral) one, as described at https://news.ycombinator.com/newsguidelines.html.

Offering is any time the token is issued, like on launch. The word is misleading since TG is not doing another sale. They actually complied with SEC during the sale. This is the launch which requires the tokens to be liquid for the network to function. My guess is that TG will file for a reg-a like blockstack.

> Offering is any time the token is issued, like on launch.

The Securities Act defines “offer” to include any attempt to dispose of a security for value.

In order for anyone - Telegram or Joe Schmoe Gram investor - to “offer” a security it needs to be either (1) registered or (2) exempt from registration. Since Telegram filed Form D and the SEC has brought charges alleging an unregistered offering it would seem the SEC does not agree that the ICO was exempt and so Telegram was not in compliance with federal securities laws.

But even if the ICO were by some miracle exempt, without a registration statement the securities can’t be offered for sale to the public - regardless of whether they were new issues directly from Telegram or existing securities being offered for sale in Telegram’s new marketplace by Telegram users.

Not being a crytocurrencer or securities analyst I am still confused by this distinction. What you're saying makes it sound like this isn't that big of a story—they just need to file some paperwork and then the thing will go ahead as planned. Is that right?

The legislation on the registration of securities clearly didn't anticipate cryptocurrencies so it's a bit of a legal gray area – the laws routinely discuss which states a broker is registered on, or has clients, or advertises the security, to name just a few examples of how crypto break expectations

So IMHO this is somewhat of a big story in the sense that these events continue to push the discussion forward

If you think filing for an IPO is just some paperwork, then yea :)

That doesn't help me understand what's going on here. Is this a big deal or just a formality?

It’s a big deal. A lot of projects followed a similar path so we will have to wait and see what objection the SEC had with telegrams specific offering. A reg-a/s-1 would likely take them a year if they started it today.

Ah ok. Thanks! In that case the title seems good.

This isn't a regulated security, so there's no 'official' name for what they're doing.

Basically, there was a private offering previously where large amounts were sold to selected parties. What is being blocked is the public 'offering' where these tokens can be publicly traded.

The SEC is saying that Telegram Group is clearly offering a security, and thus is subject to regulation. Indeed, what Telegram is doing is significantly different from 'classic' crypto issuance a la Bitcoin. There was no company or legal entity responsible for Bitcoin, let alone one that could control the network while profiting off of it. They have similar opportunities for the sort of financial malfeasance that the SEC is designed to mitigate.

Personally, I find it extremely difficult to argue with the SEC's position.

I strongly support cryptocurrencies, namely Bitcoin, but also recognize that these pre-mine coins are entirely different on many levels. They are hilariously vulnerable to abuse, only just rising beyond the level of an outright scam.

Except that ethereum and eos basically get a pass by the SEC.

> This isn't a regulated security

All securities are regulated under American law. Some just qualify for specific exemptions from specific requirements.

When someone uses the term “unregulated security,” it’s a reliable red flag to go the other way.

I think it is usually people trying to say 'unregistered security', but using the wrong word.

If it's fungible and negotiable, it is a security, if it is a security, it is regulated. If you try to move something that is fungible and negotiable, it is offered, therefore an offering, therefore regulated.

Not every security requires registration, though

The Howey Test[1] is the more precise definition of what a security is. For instance, physical metals are fungible and negotiable, but are not securities in themselves. Gold coin dealers are not regulated by the SEC if they sell you actual physical gold coins.

[1] https://consumer.findlaw.com/securities-law/what-is-the-howe...

>If it's fungible and negotiable, it is a security, if it is a security, it is regulated.

By this definition, Magic: the Gathering cards and beanie babies fall under SEC jurisdiction.

They are not fungible.

One mint condition card is exactly the same as any other. This is how marketplaces eork.

Can you edit for more clarity? Lots of jargon still there.

Reply on news.ycombinator.com