SEC Chair Says a Lot of Crypto Tokens Are Securities

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Quote from: DooMAD on June 04, 2021, 07:19:54 AM

Getting some distinct deja vu here. Didn't we basically have this same topic three or four years ago? I'm sure I remember someone saying the same thing a while back.

Will do some digging...

//EDIT:

Yeah, I'm just remembering it was Gensler that said it in 2018, but it's behind a paywall now: https://www.nytimes.com/2018/04/22/technology/gensler-mit-blockchain.html

So same opinion, but the difference now is he's in a position to act on it.

It wasn't really a secret neither, I mean who didn't know about this anyway? Think about it, there is a company called Ripple that created a coin called XRP and they are just using that to get richer, how is that not securities? How in the hell would anyone think that it is totally independent crypto thing that had nothing to do with Ripple.

If it is a company behind a token or a coin and it is not totally decentralized, it is basically a securities, there is nothing else to go on about that. They may not be using it like securities, but it is still a securities and that's the end of it. We all knew this, he knew it way before he gained any power, I think he has been in favor of crypto but against these centralized versions for more than 3 years now, and I think it would still not be really that shocking to see him not do anything about it anyway.

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Quote from: DooMAD on June 04, 2021, 07:19:54 AM

Getting some distinct deja vu here. Didn't we basically have this same topic three or four years ago? I'm sure I remember someone saying the same thing a while back.

Will do some digging...

//EDIT:

Yeah, I'm just remembering it was Gensler that said it in 2018, but it's behind a paywall now: https://www.nytimes.com/2018/04/22/technology/gensler-mit-blockchain.html

So same opinion, but the difference now is he's in a position to act on it.

What's interesting is Jay Clayton while the chair of the SEC turned down every application for a bitcoin ETF. Now that's he's left the SEC, he's accepted a role as an adviser to a company that is - get this- submitting an application for a bitcoin ETF. Either he suddenly believes there should be a bitcoin ETF, or he'll do anything for money. Just like all those republicans who oppose marijuana legalization while they're in Congress, and then when they're voted out they take board seats on companies pushing for legalization. From the playbook of use the government to obstruct progress until you can personally profit from it.

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Getting some distinct deja vu here. Didn't we basically have this same topic three or four years ago? I'm sure I remember someone saying the same thing a while back.

Will do some digging...

//EDIT:

Yeah, I'm just remembering it was Gensler that said it in 2018, but it's behind a paywall now: https://www.nytimes.com/2018/04/22/technology/gensler-mit-blockchain.html

So same opinion, but the difference now is he's in a position to act on it.

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Quote from: jaysabi on June 03, 2021, 10:18:31 PM

I think you just haven't known where to look for them. Here's a list of 70+ "cyber" related enforcement actions just recently. Some of these actions are related to cyber issues other than crypto, but most of the entries in this list are crypto fines: https://www.sec.gov/spotlight/cybersecurity-enforcement-actions

This was the missing bit for my side. I stand corrected. And thank you.

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Quote from: NeuroticFish on May 24, 2021, 09:30:20 AM

Quote from: jaysabi on May 22, 2021, 07:56:21 AM

but more importantly protect investors from those not following the laws.

This is the sensitive point. I didn't see much more than just telling that this or that is not OK. No fines, no nothing.

There have been plenty of fines, I think you just haven't known where to look for them. Here's a list of 70+ "cyber" related enforcement actions just recently. Some of these actions are related to cyber issues other than crypto, but most of the entries in this list are crypto fines: https://www.sec.gov/spotlight/cybersecurity-enforcement-actions

Quote from: NeuroticFish on May 24, 2021, 09:30:20 AM

Quote from: jaysabi on May 22, 2021, 07:56:21 AM

2. No, the SEC doesn't lose it's mandate to protect investors because technology moves fast.

Nice answer, but far from the topic. Ethereum came live in 2015. SEC was telling about it in 2018. "technology moves fast"... but 3 years is a lot.

No, the answer is directly on point. You break the securities laws in a highly visible manner and the SEC will eventually get around to you. The republicans slash the enforcement arms of the government to the bone whenever they're in power, so sometimes it takes awhile. Three years is not a long time for highly complex securities cases, which crypto clearly is because it's so new. It took a long time for the SEC to determine that ICOs fit the definition of securities offerings, and so now you're seeing the deluge of enforcement actions because of that, as evidenced by the link posted in the first response above.

Quote from: NeuroticFish on May 24, 2021, 09:30:20 AM

Quote from: jaysabi on May 22, 2021, 07:56:21 AM

In short, the onus is on anyone issuing a token to follow the securities laws. Anyone selling tokens to the public to raise money to finance a project is selling unregistered securities.

And what are the consequences for selling them unregistered? Because that's the bit I feel like it's missing. I've basically seen none... Roll Eyes

See the first response, there may be more besides what's listed there, but that list in the first response is extensive.

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Quote from: hatshepsut93 on May 18, 2021, 03:53:12 PM

Quote from: wxa7115 on May 18, 2021, 01:12:25 PM

ETH, XRP and almost any coin in existence did not followed this model and instead sold their coins, this makes it a security and while the SEC has not taken action against all icos they do not have to, they are not going to waste their time with coins that are so small, they will go against the big coins and since many of those coins are centralized then they can easily destroy them if they want.

If all ICOs are securities by definition, SEC should have just banned ICO. Tell all exchanges that operate in the US to delist ICO tokens, prohibit running ICOs in the US, etc. You can't run a small unregistered IPO and not face the consequences, doesn't matter if you raise $1,000 or $1,000,000 - a scam is a scam. So why should ICO get a free pass? The law should be consistent and clear.

Being an unregistered securities offering doesn't automatically make it a scam, it just makes it an unregistered securities offering. It's not illegal because it's a scam, it's illegal because it was not complying with the laws. The laws were made to protect people from scams, but also from idiots who don't really know what they're doing.

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Quote from: hatshepsut93 on May 18, 2021, 03:53:12 PM

Quote from: wxa7115 on May 18, 2021, 01:12:25 PM

ETH, XRP and almost any coin in existence did not followed this model and instead sold their coins, this makes it a security and while the SEC has not taken action against all icos they do not have to, they are not going to waste their time with coins that are so small, they will go against the big coins and since many of those coins are centralized then they can easily destroy them if they want.

If all ICOs are securities by definition, SEC should have just banned ICO. Tell all exchanges that operate in the US to delist ICO tokens, prohibit running ICOs in the US, etc. You can't run a small unregistered IPO and not face the consequences, doesn't matter if you raise $1,000 or $1,000,000 - a scam is a scam. So why should ICO get a free pass? The law should be consistent and clear.

Because you and I know that things are never that simple, in a perfect world the police will investigate a robbery even if only one dollar was stolen, but in the real world the police is not going to bother with such a small robbery and the same principle applies here.

This market is decentralized so the SEC cannot go against every single scammer or coin that is created as they simply do not have the resources to do so, but once they decide to take action then they will go against the big coins as those coins are an easier target than small icos.

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For the ones that do not understand, think of it like this : is there someone at the top of the coin you support?
If there is one that means it is most likely a security and not a crypto currency.

For example, if BCH is managed by Roger Ver and Jihan Wu (which it is) that is a security, if XRP is managed by a whole company that means it is a security, if USDT is run by tether company that is security, if Tron is managed by Justin sun that is security.

All of these are securities and not just a crypto and that is why there are different laws for each of them or there should be anyway, if there is one person at the head of a coin that coin becomes a company or a product of a company and that is why it should be legally different than stuff like bitcoin. Hell BNB is so centralized that even the validators are all binance owned, so it is purely security and not even a crypto currency at that point, how could it be legally same as bitcoin? Impossible.

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Quote from: jaysabi on May 22, 2021, 07:56:21 AM

but more importantly protect investors from those not following the laws.

This is the sensitive point. I didn't see much more than just telling that this or that is not OK. No fines, no nothing.

Quote from: jaysabi on May 22, 2021, 07:56:21 AM

2. No, the SEC doesn't lose it's mandate to protect investors because technology moves fast.

Nice answer, but far from the topic. Ethereum came live in 2015. SEC was telling about it in 2018. "technology moves fast"... but 3 years is a lot.

Quote from: jaysabi on May 22, 2021, 07:56:21 AM

In short, the onus is on anyone issuing a token to follow the securities laws. Anyone selling tokens to the public to raise money to finance a project is selling unregistered securities.

And what are the consequences for selling them unregistered? Because that's the bit I feel like it's missing. I've basically seen none... Roll Eyes

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Quote from: so98nn on May 22, 2021, 09:31:11 AM

Okay good, Bitcoin is not a sceurities, and they spared it for us. Thats enough for us to work with.
Even if rest of the crypto is declared as security and went under control of SEC then everyone will move into BTC and then it will bloom like saga on the beach!

Lets wish for the same. No more tweet confusions and no more hassle of asking what should be added into my basket?

But I hope this chair guy don't cheat us afterwards when he sees the BTC becoming lord of the fiat too.

The angle the SEC is taking here is not the only bullet authorities could fire against cryptocurrencies. They could also forbid merchants and banks to process cryptocurrency related transactions, but that should be more complicated for them to achieve and especially get confirmed in front of a court. What speaks in favor of any argument against cryptocurrencies is that they pose a threat to unexperienced retail traders who may lose a fortune during a situation like this. I think they will bring this up shortly.

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Okay good, Bitcoin is not a sceurities, and they spared it for us. Thats enough for us to work with.
Even if rest of the crypto is declared as security and went under control of SEC then everyone will move into BTC and then it will bloom like saga on the beach!

Lets wish for the same. No more tweet confusions and no more hassle of asking what should be added into my basket?

But I hope this chair guy don't cheat us afterwards when he sees the BTC becoming lord of the fiat too.

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Quote from: NeuroticFish on May 08, 2021, 04:44:23 AM

Quote from: Leviathan.007 on May 08, 2021, 04:33:05 AM

Gary Gensler, the newly appointed chairman of the US Securities and Exchange Commission, told Squawk Box on Friday that "many" cryptocurrencies are originally securities:
"As long as an asset class is classified as a security, the Securities and Exchange Commission (SEC) has a lot of authority over it. "A lot of cryptocurrencies, which I don't think should be called that, are actually securities."

I would not be surprised if this is indeed happening, however, I see some problems:
1. Why all this has to be as declarations instead of clearly helping out the "culprits" into doing it right or fine them? Because in the current way it's just cheap talk against crypto scene.
2. Isn't it a bit late to notice and handle this? And I'm back to cheap talk at TV.
3. Are there any proper guidelines to allow a coin/whatever get properly categorized? (I clearly don't know, but I somehow doubt it).

So.. yeah... politics...

1. Because the securities laws are the securities laws. It's all out there, it's up to the people issuing securities to follow them. The SEC's role is to educate (there is plenty of information available on their website about how to issue securities under the securities laws) but more importantly protect investors from those not following the laws.

2. No, the SEC doesn't lose it's mandate to protect investors because technology moves fast.

3. There are clearly defined criteria about what constitutes a "security" that has been established through laws and litigation, including precedents set by the Supreme Court on the matter.

In short, the onus is on anyone issuing a token to follow the securities laws. Anyone selling tokens to the public to raise money to finance a project is selling unregistered securities.

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In the United States, a security is a tradable financial asset of any kind. Securities are broadly categorized into:

~ debt securities (e.g., banknotes, bonds, and debentures)
~ equity securities (e.g., common stocks)
~ derivatives (e.g., forwards, futures, options, and swaps)

Source : https://en.wikipedia.org/wiki/Security_(finance)

Securities are the traditional way that commercial enterprises use to raise new capital. So the question is... Who is the issuer of tokens and did they create this to raise new capital for their company or business? Can Crypto currencies be defined as a debt securities and/or equities ... The answer is no.

Governments are looking for reasons to stop the trading of something that are not regulated and something that can be regulated, but quickly circumvented by simply pushing this underground. (Dark markets and P2P trades) Grin

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Quote from: paxmao on May 19, 2021, 05:29:01 PM

Quote from: fulcare on May 18, 2021, 11:52:12 PM

Quote from: magneto on May 18, 2021, 09:48:40 PM

Sure, a lot of cryptotokens are indeed securities now - but bitcoin is definitely not one of them.

Also you have to take into consideration that even though crypto tokens may be securities (based on the way the token is structured), they are generally decentralised in its distribution and its ledger is hosted on an immutable blockchain.

How in the world does the SEC plan on exerting their influence over this? They could regulate these tokens, but the unregulated ones will simply roam wild and there will be no enforceability for their rulings.

They will attack those guys who are responsible for the ICOs for example. In the case of Ethereum it would be pretty easy to nail down who is responsible. The whole team around Vitalik and whoever was actively involved in the token sale. And yes you are right, double standards are inevitable. Crack down on those who are known and when there is nobody known to be responsible, just leave it as it is. Sounds fair, doesn't it? Undecided

I am not so sure they would act retrospectively and not so sure that they would go for the major players. Ethereum may pass the Howey under certain opinions, tokens that are on the chain have three foot long disclaimers. Even on some cases that looked very clearly as fraud, the SEC did nothing. It is annoyingly surprising that they would want to intervene now that ICO have been going on for years. Is this kind of a preparation to start imposing a massive fine on the sector?

I believe it could also be a resource shortage. I don't think the SEC has hundreds of people sitting around doing nothing waiting for their next crack down of a crypto project. I think they pay attention to some of the major players and pick a project up for scrutinization here and there. If they wanted to check the whole space, we would be talking years I guess with everything that's part of the process. Lawyers involved, judges, back and forth communication and so on.

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Quote from: fulcare on May 18, 2021, 11:52:12 PM

Quote from: magneto on May 18, 2021, 09:48:40 PM

Sure, a lot of cryptotokens are indeed securities now - but bitcoin is definitely not one of them.

Also you have to take into consideration that even though crypto tokens may be securities (based on the way the token is structured), they are generally decentralised in its distribution and its ledger is hosted on an immutable blockchain.

How in the world does the SEC plan on exerting their influence over this? They could regulate these tokens, but the unregulated ones will simply roam wild and there will be no enforceability for their rulings.

They will attack those guys who are responsible for the ICOs for example. In the case of Ethereum it would be pretty easy to nail down who is responsible. The whole team around Vitalik and whoever was actively involved in the token sale. And yes you are right, double standards are inevitable. Crack down on those who are known and when there is nobody known to be responsible, just leave it as it is. Sounds fair, doesn't it? Undecided

I am not so sure they would act retrospectively and not so sure that they would go for the major players. Ethereum may pass the Howey under certain opinions, tokens that are on the chain have three foot long disclaimers. Even on some cases that looked very clearly as fraud, the SEC did nothing. It is annoyingly surprising that they would want to intervene now that ICO have been going on for years. Is this kind of a preparation to start imposing a massive fine on the sector?

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Quote from: magneto on May 18, 2021, 09:48:40 PM

Sure, a lot of cryptotokens are indeed securities now - but bitcoin is definitely not one of them.

Also you have to take into consideration that even though crypto tokens may be securities (based on the way the token is structured), they are generally decentralised in its distribution and its ledger is hosted on an immutable blockchain.

How in the world does the SEC plan on exerting their influence over this? They could regulate these tokens, but the unregulated ones will simply roam wild and there will be no enforceability for their rulings.

They will attack those guys who are responsible for the ICOs for example. In the case of Ethereum it would be pretty easy to nail down who is responsible. The whole team around Vitalik and whoever was actively involved in the token sale. And yes you are right, double standards are inevitable. Crack down on those who are known and when there is nobody known to be responsible, just leave it as it is. Sounds fair, doesn't it? Undecided

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Sure, a lot of cryptotokens are indeed securities now - but bitcoin is definitely not one of them.

Also you have to take into consideration that even though crypto tokens may be securities (based on the way the token is structured), they are generally decentralised in its distribution and its ledger is hosted on an immutable blockchain.

How in the world does the SEC plan on exerting their influence over this? They could regulate these tokens, but the unregulated ones will simply roam wild and there will be no enforceability for their rulings.

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Quote from: wxa7115 on May 18, 2021, 01:12:25 PM

ETH, XRP and almost any coin in existence did not followed this model and instead sold their coins, this makes it a security and while the SEC has not taken action against all icos they do not have to, they are not going to waste their time with coins that are so small, they will go against the big coins and since many of those coins are centralized then they can easily destroy them if they want.

If all ICOs are securities by definition, SEC should have just banned ICO. Tell all exchanges that operate in the US to delist ICO tokens, prohibit running ICOs in the US, etc. You can't run a small unregistered IPO and not face the consequences, doesn't matter if you raise $1,000 or $1,000,000 - a scam is a scam. So why should ICO get a free pass? The law should be consistent and clear.

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Quote from: hatshepsut93 on May 10, 2021, 05:33:01 PM

How can ETH or XRP be securities, if they don't grant any sort of ownership over anything, like shares do, and don't represent any debt? Is the argument that they are securities based on the fact that they were used to gather capital by centralized entities? If so, then every single ICO is a security, but we've seen from the past that SEC only went after a small number of ICOs and not all of them.

That is pretty much their argument and to me that is more than enough, bitcoin is not a security because satoshi never asked for a monetary compensation for bitcoin, people on their own decided to begin to trade this new coin out of their own volition.

ETH, XRP and almost any coin in existence did not followed this model and instead sold their coins, this makes it a security and while the SEC has not taken action against all icos they do not have to, they are not going to waste their time with coins that are so small, they will go against the big coins and since many of those coins are centralized then they can easily destroy them if they want.

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Quote from: paxmao on May 13, 2021, 04:37:20 AM

Yep, anyone can basically run a howey test and for most tokens the result will be at minimum, quite close to a yes. If you promise any right or have any contract attached to the sale of tokens or coins, the chairman is right.

It is a fact that most crypto project have been in denial of this rule, since it makes much more expensive to launch a token or a coin and requires a level of regulation that would not be achievable for may of the smaller initiatives that are relatively poorly funded.

Sure but denying a rule doesn't make that rule not apply to you. Wink

It's a fact that most projects operate their coin or token as a security. The Howey test is one thing, but the way we see the world of finance and want it to be in the future is very different. It should be possible to launch a business ultra quickly and the same counts for raising money. Maybe the better approach is to force everyone through a standardized educational course (just two hours) where you provide examples of typical scam projects and what to watch for. Name clear indicators of a scam. That way you make sure everybody has the chance to participate in the market within a shortest amount of time. Right now it s just not equal if you look at their requirements in order to qualify as a legit participant for an ICO or crypto trading.

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