[Cshelton]

All these ICO's have been avoiding any SEC regulation regarding private security sales by claiming the tokens are just a method to use/exchange services on their platform, not as an investment.

However, when ICO's like this one keep happening where only 100 "accounts" own 99% of the ICO offering, you pretty much lose that argument of the tokens only being there for use of the platform. It's a private security sale, and I only see one way this will end. The SEC will make a case out of one of the ICO's 100%. They do not take advertising to unaccredited investors lightly.

My only suggestion, if you are involved in any way with an ICO (developer, investor on the team pre-ICO, etc.), either get out of the U.S. now and/or make sure all operations are happening outside the U.S. I was almost involved with a company doing essentially what these ICO's are doing (not blockchain/crypto currencies), and fortunately I figured it out before being involved, but it did not end pretty for them. Like the IRS, the SEC/others will come down hard, not a matter of if at this point, it's when and who gets the beating first. They love making cases out of someone to set precedent.

With the general public playing into an overbought token market fueled by Asian countries for the most part, the regulators/SEC will come down extremely hard on this.

I think investing in Ethereum/Bitcoin is fine, just know what you're doing, record your cost basis for when you bought it. And seeing first hand what the IRS does to people who avoid paying taxes, just make your life easy, when you exchange back to a currency that is considered a currency by the IRS, just pay your capital gains on it and move on with life. The IRS will catch up and many people will go to jail for tax evasion. Don't be one of them. Obviously, all this only pertains to the U.S..

Also for fun, if you really want to see the hysteria around the Ethereum price right now, check out r/ethtrader/ or even the Ethereum FB group. People are throwing their entire savings into this while not knowing anything about it besides everyone in the group hyping it up amongst themselves. It's really sad. Ethereum is now actively pumped heavily on MLM sites/blogs. It's beyond gross. I believe Ethereum is an amazing project and am worried that this hype fueled hysteria, once it collapses on itself, will give Ethereum a bad reputation. It is a great protocol.

[hal9000xp]

I think the notion of accredited investor is very discriminatory to small investors. It's basically says - if you already wealthy then you have an access to attractive investment opportunities with huge upside (and of course, huge risk), if you are just a middle class man then stay where you are (since your investment options with huge upside are severely limited and you don't have enough capital to make sense from investing in index).

The better version of requirements for accredited investors would be some sort of exam (hard enough to make sure you have solid knowledge about financial markets, financial instruments and risk/return relationship).

[Cshelton]

The effect of missing out on an upside is a lot less than taking a huge hit on the downside. It isn't discriminatory, it's protective.

It is sad but many people would put their entire savings and next months rent into a risky investment that is not publicly traded on a regulated market and basically lose their money most of the time because they invest on hype and because their buddy told them.

If an accredited investor loses his money, the nobody feels bad because they had the money in the first place and the means to either hire somebody who knows what they're doing or be responsible themselves.

I'd be fine with zero regulation on it all together, as long as I, as a tax payer, don't have to bail out all the idiots will fall for ponzi scheme after ponzi scheme. But do we let them dye on the streets because they lost everything? Hence why the regulation is in place.

You are also assuming that being an accredited investor gives you access to better investments, which is not entirely true. Many accredited investors lose their lunch on investments. Look at the number of hedge funds that beat a market index fund, it's like 10%. Or look at VC firms where 1 investment makes up for the loss of 10 others. Many never do get that return and just lose money until they're out. The best investment definition varies widely, and in actuality, most accredited investors would be better off just investing in an index fund because believe it or not, they don't know what they are doing most of the time either. Which is why many investments are high risk. So a test would not help either.

[kolinko]

There other ways to protect small investors - education being one example.

If someone doesn't know how to manage miney they will lose it one way or another - be it forex, or or penny stocks. ICOs cannot possibly be worse than these legal things.

[mtgx]

Yes, but you could make the same argument for companies using toxic substances in their food, too.

"We don't need the government to tell us what is toxic and what isn't. Let's people make their own decision about what they eat!"

Which I know sounds very attractive, but then 90% of the population will end up ingesting food with lead in it from China, or whatever.

[nunez]

well education is supposed to be an answer to people having unprotected sex without consequence, but here we are, millions of STDs and unwanted pregnancies later

if people want to throw in everything they have into speculative currency, then they will. someone's gotta put down the law to at least try and protect damage to the economy when everyone loses their shirts

[jerguismi]

> It isn't discriminatory, it's protective.

I think it is both. The regulation is removing the upside risk as well as the downside risk. Many professional investors are investing to real stupid things and losing their money, it is not that difficult to find examples.

[sanswork]

Is it easy to find examples of ones who have lost so much that they are literally poor?

[mikeyouse]

That's why these rules exist in the first place.. People like "The Jackal of Wall St.":

http://www.thedailybeast.com/articles/2015/10/31/the-best-co...

Or the boiler rooms & microcap fraud in the 1980s/1990s:

https://en.wikipedia.org/wiki/Microcap_stock_fraud

And yep, it was still happening even before the accredited investor criteria was relaxed;

https://www.justice.gov/usao-sdfl/pr/five-defendants-charged...

[sanswork]

Which of those left accredited investors poor and not just down?

[microtherion]

Some people lost a lot of money on prosper.com, and at least in some cases, it was known that it was money they couldn't really afford to lose. See e.g. this (and be sure to read the last comment): http://www.bloggingawaydebt.com/2007/01/would-you-lend-75000...

[sanswork]

I've tried to find more up to date information on him since that post is over 7 years old now and can't. Do you have anything more current or more details on the user pensioner?

ericscc.com appears to be gone as well as any of the other prosper forums I've found links to. Not really familiar with the site so is it basically dead or moved out of p2p or something?

[nunez]

So he basically wanted to get into niche payday loans without considering the fact that the interest rates are really high for a really good reason...

[Veratyr]

I think something that makes even less sense is that in theory this is to protect people from making high risk investments yet there's nothing stopping any random person who cares to do so from opening an account with a brokerage and spending their life's savings on far out of the money call options.

[sanswork]

The idea isn't to stop people from doing something stupid but to stop people from trying to get people who aren't in a position to weather risk to do something risky to increase their own likelihood of profiting.

[kolinko]

Forex does exactly that and it's completely legal. Somdoes gambling.

[sanswork]

Forex has regulations for unsophisticated investors in the US.

Gambling is different in that the user goes into it knowing that they have a negative EV. Lots of people lose everything gambling no doubt but while they may hope to win they know the likelihood is that they will lose.

[wmf]

Equity crowdfunding by non-accredited investors is recently legal in the US due to the JOBS Act, yet none of these ICOs use it.

[DennisP]

To raise from the public under the JOBS Act, you have to do your ICO through a regulated platform. As far as I know, none of those support blockchain projects, so it's not actually an option yet.

Plus you can't raise more than a million dollars or so that way. And there's a limit per person, so instead of just sending ETH, everybody would have to go through the platform's KYC, and declare how much income/assets they have.

In the meantime, people in countries with more economic freedom than the U.S. can just deploy a couple pages of code, make some basic efforts to block U.S. investors, and be done with it.

[Cshelton]

Also, to raise under the JOBS act, you pretty much have to do a full accounting audi to the same level as a publically traded company. And I think there is a limit of $50k for each person you raise from with a certain max in total raised. All in all, half of the money raised would go to paying for the funding to begin with, making it very very seldom used.

[seibelj]

But if you own a token, you own nothing in the company, no equity, no promises, no contract signed, you don't have any right to any profits and Brave can say tomorrow that all the tokens are worthless. It's not so straight-forward that they raised investment, really they sold $35mil of a product. But IANAL, and you could easily be right, I'm just saying it isn't so cut and dry.

[DennisP]

Depends on the token. In some cases, there's deployed code that enforces various rights...perhaps a share of fee revenue, or access rights to the platform.

Whether the code is already deployed, or depends on further development effort by the team, is one aspect of the Howey Test, according to Coinbase which released the results of some legal research on the subject: https://blog.coinbase.com/2016-12-07-blockchain-token-securi...

[seibelj]

From the FAQ:

> What do BATs represent?

> BATs are tokens in a new Blockchain and attention-based digital advertising platform. They are not refundable, nor are they securities or for speculation. There is no promise of future performance. There is no suggestion or promise that BAT has or will hold a particular value. BATs give no rights in the company and do not represent participation in the company. BATs are sold as a functional good. Any value received by company may be spent without conditions. BATs are meant only for experts in cryptographic tokens and blockchain-based software systems.

[Spivak]

Which is a fine attempt by their legal team to wash themselves of all liability by declaring that their coins are basically nothing, but words wont matter in the eyes of judges and regulators when a speculative market appears.

[maksimum]

> People are throwing their entire savings into this while not knowing anything about it besides everyone in the group hyping it up amongst themselves.

Yeah reading /r/ethtrader it's 95% hype and 5% caution. I keep feeling conflicted for not buying in at ~$120-$130, and every day I think about whether I should buy in. But then I try to answer the question "what about Ethereum makes me believe it will be worth more than $(today's price) a year from now?" and I can't come up with anything other than speculation... Any advice?

[nunez]

My go to gut feeling is that if EVERYONE is doing it, where it is something that's speculative, then that's when you avoid

[sanswork]

Realize that sometimes you miss out on high returning investments and sometimes you miss out on BreX.

[brianwawok]

That is a clear sign not to buy.

[ThrustVectoring]

>an overbought token market fueled by Asian countries for the most part

Chinese capital controls has a huge amount of blame here. Because the Chinese government prevents the foreign exchange market from clearing at a lower price, there's tons of unmet demand for converting Renminbi to anything that isn't subject to such restraints. Similarly, on the demand side - there's folks that would be induced to sell their foreign assets at a higher price if it was allowed.

So essentially, there's a "you can use this to avoid capital controls on your Renminbi" premium on all sorts of things. Real estate in Vancouver. Cryptocurrencies. Chinese companies acquiring foreign subsidiaries with no real business purpose behind it.

[solotronics]

so doesn't this validate the usefulness of cryptocurrency? if people are using it to store and move value around the world in spite of government controls and fiat manipulations that is exactly why it was invented.

[ThrustVectoring]

Move? Yes. Store? As little as possible. Chinese capital controls just means that the USD/Renminbi trade gets split into USD/BTC and BTC/Renminbi with an "arbitrage opportunity" against the official exchange rate that fairly compensates people for eluding capital controls.

With this process, it doesn't matter if BTC is trading at $1 or $1000. Chinese citizens can convert the maximum allowed from Renminbi to USD, buy bitcoins in USD, sell those bitcoins for Renminbi, and pocket the spread.

[jszymborski]

Made me think of the OneCoin story The Atlantic just put out:

https://www.theatlantic.com/technology/archive/2017/05/crypt...