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Comment by neilv | Hacker News Reader

Can anyone summarize in layperson's terms any standards that these securities must meet?

For example, is there a standard saying that the thing invested in must being legal? (No ETF based on illegal crack cocaine manufacturing, nor a fund based on illegal human-trafficking?)

Is it OK if the thing is imaginary, but everyone just pretends it has value? (Even if Gold is sometimes treated as imaginary convenience, at least it's based on a physical commodity with industrial application.) (Edit: Other than fiat currencies backed by states.)

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>Is it OK if the thing is imaginary, but everyone just pretends it has value?

Yes it's okay. When people pretend something imaginary has a value then it has a value. That's how money, bonds, deeds, loans, contracts, equity, etc work.

Something being illegal means you can’t trade it legally.. so that doesn’t make sense.

It’s like saying what age can you legally smoke? OK there’s a legal age for smoking and cigarettes aren’t banned. Then you’re asking what age can you take illegal drugs? You can’t, they’re illegal.

ETFs usually consist of legal equities, bonds, currencies, real estate, commodities.

>Can anyone summarize in layperson's terms any standards that these securities must meet?

No, not even the SEC & that's the cause of major court cases currently.

In normal security offerings, there's disclosures coming from the issuing company about financials/profitability etc but btc/eth are peer to peer networks so there's no-one in the middle to do these things & it is very different to normal securities.

> No, not even the SEC & that's the cause of major court cases currently.

That's the spin of all the PR the crypto exchanges have put out.

However, when it's time to put their money where their mouths are, they don't mention that there's no specific standards (because there is - the Howey Test).

Coinbase, for example, has been very loud about this. "We're desperately asking the SEC to help us do this right and they won't!"

Except their lawsuit says that they absolutely know how to "do this right", but...

> for many tokens, registering is not possible due to effort involved, or not economically viable.

i.e. Coinbase doesn't like the cost of having to register securities for the shitcoin du jour - there's no money to be made.

But the SEC isn't obligated to make a profitable business model for Coinbase.

SEC just a few days ago lost most of its case against XRP where it’s strict definition of the Howey test was decided by the judge to be incorrect regarding crypto tokens. The judge did rule for the SEC regarding investment contracts concerning tokens. Most likely the SEC will lose the case against coinbase as well for similar reasons.

Just because the SEC says something doesn’t mean it’s true.

Just because a judge says something doesn’t make it true either. I’m sure the case will be appealed and, until a final verdict is given, nothing has been settled.

The Howey test isn't an SEC construct, it's that of the Supreme Court.

As it is, the SEC has been implementing the Howey test as a result of that precedent.

Now, you can certainly argue that the Howey test is flawed or incomplete or... but that's separate to arguing that the SEC is misapplying the test.

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