{"id":14303,"date":"2019-04-12T17:35:27","date_gmt":"2019-04-12T17:35:27","guid":{"rendered":"http:\/\/mediashower.com\/blog\/?p=14303"},"modified":"2019-04-12T17:35:44","modified_gmt":"2019-04-12T17:35:44","slug":"sec-regulation-on-crypto-tokens","status":"publish","type":"post","link":"https:\/\/www.mediashower.com\/blog\/sec-regulation-on-crypto-tokens\/","title":{"rendered":"SEC Regulation on Crypto Tokens, Explained With Cat Photos"},"content":{"rendered":"

The great irony of the blockchain space is that we\u2019re the decentralized<\/em> community, yet the industry has been paralyzed by a centralized<\/em> authority.<\/p>\n

I\u2019m talking, of course, about the U.S. Securities and Exchange Commission, which has been quiet on how it will regulate blockchain assets. This uncertainty has frozen innovation and created what we\u2019ve called \u201ccrypto winter.\u201d<\/p>\n

The SEC\u2019s long-awaited guidance on blockchain projects, the Framework for Digital Assets<\/a>, is relatively short (just eleven pages), and written in plain English to make it user-friendly and accessible. In this post, I\u2019ll make it even simpler.<\/p>\n

There is some bad news and some good news. We\u2019ll take them in that order.<\/p>\n

The Bad News: We Already Knew All This<\/h2>\n

You can skip the first nine pages.<\/p>\n

Over the past year, everyone in blockchain has become a securities expert, so everyone knows about the so-called Howey <\/em>test<\/a>, named after William Howey, who was sued by the SEC in 1946 and lost.<\/p>\n


\n\"Orange
\n<\/center><\/p>\n

Howey was a citrus magnate: he owned huge orange groves in Florida, as well as a resort hotel in the area where I\u2019m guessing the guests drank a lot of orange juice. When guests checked into the hotel, they got a glass of OJ. They also got a pitch for the opportunity to invest in a chunk of Howey\u2019s orange groves.<\/p>\n

If you bought a \u201cshare\u201d in his orange groves, Howey\u2019s laborers would tend to the orange trees, pick the oranges, and sell the produce. Because of the skyrocketing price of oranges, they claimed, the land would become increasingly valuable\u2014a great long-term investment.<\/p>\n

On one hand, this seemed reasonable. People invest in real estate all the time, with the expectation that it will appreciate in value. On the other hand, something seemed fishy\u2014the aggressive sales pitch, the promise of future profits, and the fact that they are serving us nothing but orange juice<\/em>.<\/p>\n

The SEC argued that this wasn\u2019t a real estate investment, but something more like a stock investment. It developed what we now call the Howey <\/em>test, which is not a test to see if your friend Howard is comfortable with a laid-back nickname.<\/p>\n

The Howey <\/em>test says that an \u201cinvestment contract\u201d exists if these conditions are met:<\/p>\n