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> “Buying a founders key is [l]ike investing in Disney, Call of Duty, and YouTube all at once.”

The dissent even quotes Impact Theory's framing of the NFTs as an investment.

Given everything else, this is a pretty vanilla Howey test: they were selling shares with jpegs attached.

> Even if the NFT sales here fit squarely within Howey, is this set of facts one that warrants an enforcement action?

This dissent is really about the nature of enforcement, not whether these were unregistered securities.

You’re right, I agree, I’m more so glad that they are willing to use this as a place to point out other unanswered questions and incongruencies in SEC actions

I agree that the dissenters bring up a lot of good questions that need answering.

However, if you believe their fundamental argument that NFTs aren't really securities... what regulatory body should prevent this kind of behavior? Or should rug-pulls effectively be legal, and buyer beware?

If NFTs are not securities, then I believe it would fall on the FTC, like most other consumer protections.

But what law is being broken, if NFTs aren't securities?

crypto consumers should be far more discerning than they are

even the term “rug-pull” is not discerning enough, it refers to a dozen distinct behaviors, of which a few would still be illegal while the other many behaviors are just a misalignment of expectations

removing liquidity? thats not illegal under either consumer or securities framework and most commonly called a “rug pull”. communities can provide their own liquidity as a feature of the crypto space, and in no space do purchasers have an expectation for liquidity

ceasing to continue making press releases or taking down a website and community channels? also not illegal under the consumer or securities framework.

taking other people’s provided liquidity out of a staking contract without saying thats whats going to happen would be illegal under both frameworks. that kind of rug pull is theft.

collecting funds and promising to do X and then not even attempting it, thats prosecutable under both the consumer and securities frameworks, in more ways under a securities framework

The only way to be discerning with respect to most* crypto is not to participate.

Even "succeeding" at crypto just means you sold early enough to a greater fool.

* jury still out on the couple major cryptocurrencies, though I hope they follow the same path.

The SEC is not the arm of the government to help you feel validated, and I think thats the crux of your dissonance

I don't think NFTs as a whole are breaking any FTC related laws. However, the way that they are marketed or sold could break some laws if the communications are deceptive. For example, a rug pull might be considered illegal under US Law Title 16, Chapter 1, Subchapter B, Part 238.4 "Switch after Sale":

https://www.ecfr.gov/current/title-16/chapter-I/subchapter-B...

How do NFTs fail to meet the Howey Test?

Easy.

Let's start by looking at what typical tokens are.

A fungible token is simply a store of the following records:

(public key, amount)

There is a stored procedure that lets anyone with the private key to lower the "amount" value on their row and increase the "amount" value on another row by the same amount. There's no tracking of which part of the amount came from where, the "tokens" are fungible.

Now let's look at what a non-fungible token is.

It's a store of the following records:

(public key, id)

Whoever has the private key can change the public key field in the record.

That's... it.

You can add a table that has

(id, metadata, url), that's common and what you see with most shown NFTs. There's some helper functions but really that's the essence of it.

None of that necessitates it being sold as an investment in a common enterprise any more than selling bits of paper with a number and a signature on them does. Signed prints by an artist aren't securities, your place in the line in a queue isn't a security, a concert ticket isn't a security.

You can obviously however treat the above data structure as representing some kind of security. This is true with fungible tokens too, a list of shareholders is essentially the same structure. So it comes down to how it's sold.

Since this was downvoted, a simpler explanation.

Not all ownership denotes a security. If you own (and own can often be interpreted simply around having control over) a thing, you can sell it without that necessarily being a security. That's why the test is not "can it be sold".

The Federal Trade Commission is fully equipped to handle consumer fraud.

But if it's not a security, is it fraud?

If I sell you a hand drawn stick figure for $100, and you buy it because it's "art", then there's no rug to pull. You bought it, and it doesn't matter to the artist whether the resale value goes up or down. If it goes down, it's still not fraud.

But if I sell you a hand drawn stick figure for $100, and you buy it with the mutual expectation that it will eventually be worth more because of the value of the brand/project, and the effort I put in to grow that value... isn't that a security, by definition?

that's where we are:

its either go after all collections with this outstanding low hanging and untenable application of Howey, or show the exact distinction that asset creators can follow to act solely as a consumer product like the fine artists and watch collections

it is also accurate that if following a consumer protection framework, most activities and behaviors would not be fraud.

so for a creator or secondary market operator or promoter, not knowing which branch of theory to follow makes all of their behavior bifurcated and prosecutable under one framework, a securities framework, but not a consumer protection framework. and vice versa.

>But if I sell you a hand drawn stick figure for $100, and you buy it with the mutual expectation that it will eventually be worth more because of the value of the brand/project, and the effort I put in to grow that value... isn't that a security, by definition?

This seems equivalent to buying a baseball card of a specific player with the expectation that the player will put in effort into the game and thus increase the value of the card. People buy cards of specific players on the assumption that they can buy in cheap and sell when the value of the player's brand increases.

It's really not equivalent. The player does not issue the card.

perhaps the player isn’t the important bit really. It’s the card manufacturer in fact. If I print a Nolan Ryan card no one cares. If a name brand does, and also promises to grow their brand and that will make it more valuable, maybe that is more closely related?

The player does not issue the card. The player does not profit from any "appreciation" of the cards. The amount of player cards sold is nowhere near that of NFTs so the potential damage is limited and the history of player cards has always been for "collector" value and not a real investment. The history of NFTs has been since day one for Investment.

> The history of NFTs has been since day one for Investment.

I'd argue that there was a brief moment -- right at the start, when NFTs were a novelty and most of the ones being minted were one-offs which purportedly represented unique things created independently from the NFT, like a YouTube video or a tweet or a piece of art -- where one could conceivably argue that NFTs could be collector's items and not investments.

The moment that groups like Larva Labs started minting runs of thousands of NFTs with images stamped out from a template, though, that argument became much harder to support. Nowadays, it's thoroughly dead.

By that definition, anything purchased with the intent of reselling for a higher price in more favorable market conditions would be a security -- real estate, product inventory in a warehouse, etc.

are unending robocall frauds under their jurisdiction?

You're living in an alternate reality if you think the leadership of the SEC will move the needle on the election.

No, but he is hoping that people's distaste of the republican party be knee-jerky enough to allow him to continue hucking his magic beans.

Its nice to see that it won’t matter which party as more commissioners will stop getting in the way of magic beans

Here’s the dissent for anyone looking for it:

https://www.sec.gov/news/statement/peirce-uyeda-statement-nf...

> it requires a Republican President to make that nomination, as she is Republican

is that truly a requirement, or do you mean realistically it would not happen because of party politics?

just realistically. yes, the latter.

Are SEC commissioner assignments explicitly partisan as are, for example, FCC commissioners, or are the less so like the Federal Reserve governors?

The partisan assignments are explicitly partisan, but independents can be appointed too. There is a limit to how many commissioners can be from a single party.