Is Ethereum an unregistered security or not?
This week's SEC complaint is interesting precedent, it shows how the SEC argues that some tokens listed on Coinbase are securities. IMO Ethereum fails the last part of the Howey test, i.e. the expectation of profits derived from the efforts of others. Ethereum worked at launch, the money raised in the premine was not used to build the core functionality of Ethereum. Obviously the EF has tweaked Ethereum over the years, but Ethereum worked when it was launched. Thoughts?
SEC is political and because we have a democratic administration currently, they have to virtue signal
Did you use Ethereum when it launched? It barely worked and trying to keep a node running was a full-time job on its own. The Bitcoin raised via the crowdsale was spent to pay back the members of the EF who were working for free/financing everything on loans until launch, payback loans that were due at the time of the crowdsale, as well as fund the EF going forward. The EF used to play a much larger role in Ethereum, though it does very little now. Ether was never meant to be an appreciating asset, but a way to pay for execution on the blockchain. There werenโt any formal expectations set that the token would appreciate. EF members such as Vlad and Vitalik were often tweeting things that dropped the price, encouraging people to be cautious and not use Ethereum for any production workloads because it was still in development.
If the premine money is used to pay back founders for past efforts, then that supports the argument that Ethereum is NOT an unregistered security. If the premine money was used to improve the protocol, the question is whether that was a reasonable expectation when the token was sold, and whether that would result in a profit for token owners.
The communication was clear back then - Ether is a way to pay for execution, not an appreciating asset like Bitcoin. For anyone who wants more details on how Ethereum was funded through private loans before the crowdsale took place, and how the crowdsale was necessary to pay back those loans, โOut if the Etherโ is a fantastic book.
OP, are you arguing there should have been no charges or there should have been different charges?
That's a bit besides the point of my post, but a good question. There are two separate suits from different agencies. DOJ: Wire fraud charge SEC: Securities fraud There has obviously been insider trading based on the information that is available, and I guess that justifies the wire fraud charge from DOJ It also seems that some of the tokens may be unregistered securities, so security fraud is likely too. Whether or not Ethereum is an unregistered security hasn't been argued, but the SEC complaint is very relevant because it shows how the SEC applies the Howey test.