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Comment by toufka | Hacker News Reader

>What is the legal status of the investments promoted by your platform? How will they be treated by the Securities and Exchange Commission?

>Just like bitcoin, we’re launching it entirely outside the system.

That's very naive. The government doesn't regulate 'The Dollar', and it doesn't regulate 'The Stock Market' - it regulates transactions, exchanges & financial instruments. Just because you don't play within existing infrastructure doesn't mean you can play without any rules. As an idea this is really clever - but I don't think one should intentionally disregard the (often useful) existing boundaries. Nor say so in an interview.

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Swarm founder here. We have a very unusual organizational model that allows people to represent the Swarm without having an "official" status within the organization, which means that we are always at risk of some degree of misrepresentation. After this specific interview I issued a "Legal Action Plan" that specifies the particulars of our near and long-term legal strategy, such that no one makes faux pas like "we’re launching it entirely outside the system."

That said, a lot of these subtleties are lost on non-native English speakers, which at the moment is probably the majority of the Swarm.

The full letter can be read here: https://docs.google.com/document/d/1b6krYF6rMECtTwmTjbcZWZ0l...

I feel like you've likely come across this regulation-related op-ed penned by Skype's previous COO, but just in case: http://www.coindesk.com/bitcoin-regulation-lessons-early-day...

> To put it bluntly – every bitcoin actor should be reading the law very carefully and finding the loopholes. You should all invest a great deal of time in this – it is hugely important. For example, are you really moving ‘currency’ or are you simply exchanging some sort of token?

> Companies need to just carry on doing what they are doing, if they can make a case for themselves that they don’t need regulation, they shouldn’t even go near it. ... [They] should read the rules, argue why they are not covered by the rules and use that analysis as a defence, but they should only ask for permission if they are sure it is necessary.

Regardless, great positions.

Yes, one of our legal counsels actually recommended that we read that article once. And then again. And again until it sank in.

It sank in. ;)

Are you familiar with the history of Bitcoin-denominated stocks? The history of various bitcoin stock exchanges which have been shut down by the SEC? Do you know exactly what the regulations are? Are you aware of how they've actually been applied to Bitcoin in the past?

Are you aware of the extensive fraud that has been perpetrated in the this space?

This is not a new field, it's got a couple years of history, and very little of it is pretty.

What are you doing that makes you think you'll be different?

As listed in the above document, cryptoequity is not simply a cryptotoken that ostensibly represents a stock, it encompasses all types of programmable rights that can potentially apply to a project. There are many potential applications of cryptoequity that fall into the realm of securities and equally many that do not.

Fundamentally what we are trying to do is stay on the right side of what is a very fuzzy line between what we can and can't do, while offering something that is incrementally but substantially better than all previous funding platforms. I think this is eminently possible because even a relatively simple feature like the distributed voting we are doing (http://www.cryptocoinsnews.com/news/swarmcoin-holders-vote-c...) provides a rather significant amount of benefits relative to existing offerings.

Of course, people hear "cryptoequity" and they immediately think "stock." The reality is far more complex... and interesting.

Any economic unit of value that moves, in any way shape or form, within the United States - and sometimes as an extension outside of it - the US Government claims dominion over. Period. It is exceptionally naive and will come back to bite them.

According to a Swarm founder comments above, their legal counsel may have advised that there are potential loopholes to exploit that may not make this a black and white case. Wondering how far they are willing to test this in court.

US courts don't look fondly on loopholes. For example, the Supreme Court just ruled against Aereo and stated that the legislature didn't even need to close the loophole, that the courts would do it for them.

It seems a business plan built atop loopholes is not, perhaps, the best long-term strategy. Particularly when then calling attention to this fact...

The government definitely regulates the dollar, even under the definition you're using.

Also doesn't the US view bitcoin like property, and so is liable for gains tax?

Hey, this is 2014, they're supposed to be 'disruptive.'

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