Topic: The reasons why Bitcoin securities can’t be regulated by the SEC (Read 5841 times)

$60 Visa gift card = substitute for currency
1 BTC = not a substitute for currency

Oh yeah, I'm mostly posting for others benefit.  I discuss with lawyerly types on a regular basis. 

Sooner or later you will have to take this up with a lawyer, foruming only goes so far.

I like the "substitutes for currency" part.  Leaves it nice and wide open.  Doesn't any commodity "substitute for currency"?

They who transmit Bitcoin as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency will conceivably have to get registered. There's a reason bitcoin-central.net is pretty much the only functioning exchange at the present time.

So what's the legal interpretation of this?


What are the implications of being an exchanger and money transmitter?

Hey, guess what! MP was actually right.

Strategic superiority, a saga.

Bitcoin already is the only world currency. "Overtaken" hmm, depends what you mean. If you mean the rich, influential and important will oust the 12yos with delusions of grandeur, then absolutely.

Guruvan: Posting these comments on the blog could actually get you a reply. I'm not qualified to discuss the matter.


Read more, opine less. You can start with the actual link (for instance, it includes a picture).

I see the beginnings of a remake...

A plucky, middle aged man of indeterminable foreign origin opens a fictional stock exchange. Follow him on this raucous adventure as he gets busted by the State's Attorney. He can't afford the $50,000 for his own attorney so he decides to go at it "Pro Se." Will his hail mary "It's all just a MMO" specious defense keep him out of the slammer or will he be doing hard time? Find out in
 
My Cousin Mircea

This is key, I think.  The courts have no problem dealing with abstract intangible things.  But bitcoin is a whole new meta-level of abstraction and intangibility.  Bitcoins don't exist in the real world like paper dollars, but they also don't exist electronically, like abstract bank account dollars.

While there are some interesting points in the article, there seem to be errors.

Though the 5th Circuit Court opinion you cited used the word "money" IMO, this word was used to mean Money - not Legal Tender Your argument suggests that you've equated the two terms. Historically, anything from grain, to gold, to banknotes, to fiat banknotes, and beyond has served as "money" Therefore, anything of value that one might invest might qualify under

true, IANAL, and don't have an extensive law library to search case law for the definition of "money" bit AFAICT, that is a very vague term, not necessarily defined legally, whereas there are much more explicit, well defined terms that could be used if the Court's desire was to limit the scope of the definition of money, and thus the scope of the opinion.

Furthermore,


A contract (in the US) is considered valid if there is an offer, acceptance of the offer, and consideration paid for the offer. There is no requirement in the UCC for that consideration to be made in "money" - just value transferred in consideration for the offer. It, therefore, only need be established that bitcoin has value in order for it to be accepted as consideration for an offer.

That you make the above argument, that a contract with consideration paid in bitcoin is invalid, because bitcoin doesn't qualify as consideration is problematic. It would seem that MPEx has made offers, and accepted bitcoin as payment of consideration by the acceptor(s) of those offers. This cannot go both ways. Either the contracts you've presented are invalid, or a contract with consideration paid in bitcoin is valid. IMO, I'd rather your argument break down here than your contracts  

So, while bitcoin may not actually "care" about the SEC, and may be able to be used to circumvent legal restrictions in any jurisdiction, primarily by obfuscating issuer identities, that doesn't actually mean that the SEC is outside of its (self proclaimed) jurisdiction of "all companies that serve US citizens and deal in or with securities of any sort".

The one part of the argument which may have some merit is the establishment of "ownership" or "legal title to" a/some bitcoin. If one could establish that no one can own, or posess, or have title to, an amount of bitcoin, then it could indeed fail the test for valid consideration payment. However, I believe that one can establish that one has irrefutable control over, and therefore, what is tantamount to ownership of, bitcoin.

It remains to be tested whether or not the ability to sign a message with an address, or to send a specified payment to a specified address is enough to establish "ownership" or "title" or and other sort of legal control that may be necessary for it to be valid consideration paid for an offer made.

But, I'll have to go back to - The Offeror requested consideration in bitcoin, the Acceptor paid consideration in bitcoin, and the bitcoin paid as consideration was accepted, and the goods or services were delivered by the Offeror. After the goods are delivered, unless there is some  move made by the Acceptor to forcibly withdraw the consideration, and the Offeror has accepted, and redeemed in some way, the consideration - the contract is in force. The longer that the Offeror fails to seek remedy after the goods or services are delivered, the more the validity of the consideration is established.

If bitcoin were to be found to be "illegal" itself - then there might be another argument to invalidate any contract based on it as consideration - provisions in contracts that are illegal are generally not upheld in court - if that is the consideration itself, it would stand to reason the contract would be null and void. (if I replace "bitcoin" with "heroin" the contract will not be enforced by any court in the US )

But, all in all.....BTC doesn't care about the SEC. MPEx rules.

It's my opinion that the failures on Wall St. over the last several years have shown that business has grown beyond the government's ability to regulate (ah, here, it certainly is mostly the other way 'round...business regulates government) In the cases where the government fails in its sworn duty to protect its citizens, then the citizens must protect themselves. You may laugh, especially given the GLBSE and other securities scandals in bitcoin, but, it takes time for people to learn, and for the needs to be assessed, and tools developed to support that need for the people to protect themselves.

MPEx currently is the some of best protection we have from overzealous governments who would quash innovation like bitcoin, and more specifically, utilizing the Bitcoin network and bitcoin derived technologies to improve things like transparency in public financial reporting, and reduce opportunities for fraud. Again, with as much fraud as we've seen, this may seem laughable now, but as I look through proposals like this, on decentralized bond markets I'm encouraged that in the long term, we can achieve those goals.

With as much fraud, and crime as we've seen on Wall St, I'm quite sure we need to achieve those goals.

One last thing. While I might pass the test for "sophisticated investor" - I'm sure as hell not going to pass most of the "accredited investor" tests necessary to invest in certain kinds of instruments. This is one of my primary reasons for investing via bitcoin instead of vi USD in traditional markets. With small sums of money, there are extremely limited opportunities in the traditional marketplace. I don't think that it's the governments job to protect me so much that I am unable to participate in the market, and unable to earn. I've had some pretty significant (to me) losses, due to negligence, fraud, and outright theft, but these were risks I clearly understood, and accepted. I invested no more than I can afford to lose. Even with my losses, I've done better than I could with a job in the small town I live in, and that, IMO, is not something the government should be in the business of stopping....there are no jobs in the small town I live in, and that's a significant problem for the government.

So. For all you government employees reading this: take that back to the bosses. Bitcoin is young, and a few scandals like these recent one will necessitate improved processes that protect investors much more than any law will ever be able to - becoming overly involved will crush that innovation, which will, in the end, greatly assist you (if you're still needed, and if you're not needed, provide you new, more exciting and lucrative opportunities!)  [/rant]

To wit:   Distributed Bonds, Colored Coins, Atomic Coin Swapping, Contracts, SmartProperty, and Software Agents] - This would literally diminish the potential scope of any regulatory body. Though one could attempt to police & prosecute human actors in this model, it wouldn't be possible to prevent issuance or exchange of securities, of really any sort.

The promotion and advertising of securities through the means of interstate communication is a large part of what the SEC regulates in the U.S.

Establishing that a Bitcoin security is a pooled venture which is expected to generate profit by relying on the actions of a third party seems to be straightforward.  The only missing piece is an exhibit showing that Bitcoin exchanges for money. 

During discovery, the prosecution could just bring out BitInstant's FinREC registration as a money exchanger.  Or get expert witness testimony from MtGox.  Or both.  Everything else is already in place (profit motive and third party). Expecting a judge to advocate for Bitcoin at this point in the proceedings would probably be a strategic mistake.  The courts don't care how you dress it up.  Precedence in U.S. law makes that very clear.

After that, you are defending against wire fraud.  Which has nothing to do with what constitutes a security.

The funny part is that selling securities isn't illegal in the U.S.,  it's just highly regulated.  Form D gets you private share sales up to $1 million dollars without a full registration.  You just can't advertise or promote them.  And you have to declare and comply with every state law you declare as well.

IANAL.  But I find this discussion fascinating.

How about a TOR hidden service exchange.

Can certainly appreciate that position.

I really and truly hope you're, right, MPOE.

But I would give 4-to-1 odds that the US justice system will disagree, and my advice to anybody thinking of raising funds via an unregulated IPO would be "don't do it unless you want to do it as a protest against our broken system and are willing to face the likely consequences."

I'll cheer you from the sidelines, but I'm either not stupid enough or not brave enough to go up against the SEC.

Nope, grow a reading comprehension. You know, that thing where words have meanings and shit.

Well, "company". Global Scam Exchange.

What company ? I dunno what youre talking about 

You're citing a single case involving Romanian immigration law as a "provable track record" relating to US securities law?  bwahahaha.


Absolutely confidence inspiring.

Hmm, came across "persons that operate or control electronic or other platforms to trade securities;"

at http://www.sec.gov/divisions/marketreg/bdguide.htm

-MarkM-