This is Huge! I find recent remarks by Chairman Clayton softening his black and white view of blockchain tokens as "Every ICO I've seen is a Security" to be very encouraging. Sanity may be beginning to prevail.
A Coindesk article quoted the Chairman several times on the subject:
"One of the issues with token sales is the attempt to classify them as so-called 'utility tokens,' which would ostensibly free them from any kind of designation as a security. As such, he reiterated his view that almost all token sales purport to sell such products, despite the fact that they are actually securities."
If a startup is "offering something that depends on the efforts of others, it should be regulated as a security."
"If I have a laundry token for washing my clothes, that's not a security. But if I have a set of 10 laundry tokens and the laundromats are to be developed and those are offered to me as something I can use for the future and I'm buying them because I can sell them to next year's incoming class, that's a security,"
"What we find in the regulatory world [is that] the use of a laundry token evolves over time," he continued. "The use can evolve toward or away from a security."
"Just because it's a security today doesn't mean it'll be a security tomorrow, and vice-versa."
Bravo! Bravo! I actually agree with the Chairman on all of these.
(I'm sure he will appreciate this highly coveted endorsement.)
One nit to pick though. The Howey test does require more than just "depends on the efforts of others" however, but he was speaking off the cuff so I'll cut him the same slack I hope to be granted by his heartless enforcers when I'm speaking off the cuff.)
Nevertheless, what a breath of fresh air!
You see, if we can stop using a broad brush where different agencies try to classify "all tokens" as securities, commodities, property, or legal tender and recognize that
How a token is classified depends only on
what it is used for
and the promises someone makes about it.
And it matters who makes those claims! Can I turn Bitcoin into a security by promising to pay holders of Bitcoin a share in the returns of my enterprise? Can I turn it into a commodity by offering to redeem a bitcoin for an ounce of gold? Can I then turn it into a utility token by accepting them in my laundry machines?
If I offer a token to use as a poker chip in my casino and people start speculating on their future value and hoarding them because someone at Coindesk claimed they might have other uses at an upcoming rock concert, am I suddenly in trouble? What if its a digital poker chip you can buy at a crypto exchange. Does that suddenly change its classification?
And the admission that a token can change in time almost brings tears to my eyes! Yes!
So can we please not terrorize an entire industry by issuing blanket rulings and mass corporate executions? Can we please not send SWAT teams into seize the assets of a company before intelligent people have debated in a civilized forum about whether that company's token offering is a security or a commodity or a poker chip?
On or about February 2nd, the SEC quietly revised its accusations without the same fanfare they gave to the original false claims. All the most outrageous criminal accusations in the SEC v Arise Bank case have been refuted. The real criminal has confessed in deposition to fraudulently selling Arise Bank a bank - meaning that Arise was the victim not the perpetrator. The only charges that might stick are four counts of what amounted to disagreeing with the SEC about the definition of a token and whether smart phone piggy-bank manufactures can use the word "bank" like ceramic piggy-bank sellers are allowed to do.
So, if the SEC Chairman admits that token definitions can vary over time and from token to token, then shouldn't we have a civilized process for classifying tokens that doesn't involve midnight SWAT team raids and presumptions of guilt leading to the total and permanent a-priori destruction of a promising young company and disenfranchisement of its stakeholders without due process?
Just sayin'...
