> How FTX wins the crypto space is by bribing American politicians to get their way and do what they want. The founder has said he's gunna spend $1 billion on lobbying.
He's doing it. He's become a huge political contributor.
He's pushing something called the "Responsible Financial Innovation Act".[2] The proponents of this want to remove the SEC's authority over crypto things that look like securities, and be regulated by the Commodity Futures Trading Commission, which doesn't look that hard at offerings. From the bill text:
"Notwithstanding any other provision of law, if an issuer issues a security through an arrangement or scheme that constitutes an investment contract, ... and is in compliance with the periodic disclosure requirements under subsection (c), an ancillary asset provided directly or indirectly by the issuer shall be presumed ... to be a commodity"
So far, the bill hasn't gotten beyond introduction. There's considerable opposition. Since the massive collapse in crypto markets, and bankrupcies all over the place, it's less likely to go anywhere.
However, the political pressure has been successful in discouraging the SEC from bringing the hammer down on everything in crypto that looks like an unregistered security. They've been going after about two blatant scams a month. But the SEC hasn't been telling the entire industry, file an S-1 signed under penalty of perjury and get SEC approval, like every stock offering. (It's not that the paperwork is the problem. It's that lying on the paperwork is a felony.)
U.S. securities regulation uses something called the "Howey test" to determine if something is a security. (The name comes from a 1946 case where someone got creative and tried to securitize orange-picking rights in Florida.) The Howey test requires all four of the following:
1. Money is invested. ("Money" means anything of value here.)
2. There is an expected profit ("To the moon!")
3. The money investment is a common enterprise.
4. Profit comes from the third-party or promoter’s efforts.
Many crypto schemes have been devised to get around this. #1 was back around 2015-2017, when claims were made that crypto coins were not "money". That's been settled; they're assets for tax and regulatory purposes. #2, the "expected profit" thing usually isn't hard to prove.
Non-fungible tokens are an attempt to get around #3 by claiming that each NFT is its own collectable, so there is no common enterprise. But the marketing around NFTs ("floor price", "collections") tend to make that an iffy defense. Attempts to get around #4 involve turning control, or the illusion of it, over to a DAO, so the DAO, owned by the investors, takes the heat, while their subcontractor, the promoter, rakes in money. I don't think that one has been litigated yet.
Once you understand this, how crypto schemes are organized starts to make sense. The crypto industry lost on #1. #3 is the reason ICOs are dead and NFTs are in. #4 is the motivator behind DAOs.
[1] https://theintercept.com/2022/08/05/crypto-lobby-ftx-pacs-sa...
[2] https://www.congress.gov/bill/117th-congress/senate-bill/435...