[lojack]

I don’t understand why being premined makes any difference? A company could easily create an equity pool and a new mineable currency, and make that currency worth a proportional amount of equity. That would very clearly fall under the umbrella of security. Similarly someone could create a premined currency and evenly distribute it to anyone who asked for it, in exchange for nothing with no guarantees about it being redeemable for anything. That may not be considered a security.

The lines become much more blurred when you’re talking about a staked currency where an ICO is necessary to help evenly distribute the coins which are then mined. Honestly, as annoying as this is, the definition is security is so broad that I find it hard to picture any cryptocurrency not being defined as a security.

[derefr]

If anyone can mine a thing for themselves (i.e. create more supply of it), then that thing is a commodity. (Gold, for example, is a commodity.) By definition, no one entity can really restrict the supply or trade of a commodity; and thus the government can't really make useful laws about what any one entity does with their holdings of a commodity.

Any valuable thing that isn't a commodity, is a security. Every fiat currency is a security. Stocks and bonds are securities. Etc. The government can regulate securities (or rather, regulate their issuers, because there is a clear issuer), and so they do.

The definition of security isn't really vague; it's just a definition of exclusion. Replace security with "non-commidty" whenever it comes up and things might be clearer.

[sah2ed]

Not disagreeing with your observation, but to extract gold, you need a mining license which is typically required by law, so in a way governments can still make useful laws that regulate the scarcity or abundance of gold as a commodity by pricing mining licenses accordingly.

Gold ownership was outlawed in the US in 1933 by FDR.

[moreless]

> Gold ownership was outlawed in the US in 1933 by FDR.

https://en.wikipedia.org/wiki/Executive_Order_6102

EDIT: "The limitation on gold ownership in the U.S. was repealed after President Gerald Ford signed a bill to "permit United States citizens to purchase, hold, sell, or otherwise deal with gold in the United States or abroad" with an act of Congress codified in Pub.L. 93–373,[19][20][21] which went into effect December 31, 1974."

[YuriNiyazov]

That's a very interesting way to distinguish the two, and the first time I am seeing it presented this way. Did you come up with this? Are there references?

[Frogolocalypse]

That's a really interesting insight. Thanks.

[Alex3917]

> I don’t understand why being premined makes any difference?

The issue is when A) people buying the token are doing so because they expect the value to increase, and/or B) the value of the network comes from a central party or promoter rather than from the network participants. If a currency is pre-mined, then it's more likely to be a security because the network participants aren't helping to secure the network. Similarly, if the product doesn't yet exist, then it's more likely to be a security because the network participants are unlikely to be creating value.

The fact that the token may be pre-mined or the product may not yet exist doesn't inherently matter except to the extent that they make it much more likely the token fails conditions A and B.

Similarly, if Ethereum goes to proof-of-stake then it's more likely to be considered a security, but there isn't a specific law saying that proof-of-stake tokens are illegal.

[stale2002]

Well, it is not about pre-mining specifically that makes it a security.

You could, for example clone Bitcoin exactly, but make a change where you recieve a billion free coins. It would be dumb, but that wouldn't be a security.

The problem is when ICOs premine and sell you a token for something that doesn't already exist yet. The token represents a future promise, as opposed to something that exist right NOW.

[jcoffland]

Who's premining and then handing out all the premined tokens at random?

[wbl]

If you buy bitcoin you aren't buying it from the author of the bitcoin client to fund further development. I'm going to say not a security transaction.

[ojr]

the founder of bitcoin gave himself/herself a mining headstart with low difficulty, this can be seen as a founder reward

[xorcist]

Not only is that not true. The founder of Bitcoin even took the additional steps of proving in the genesis block that he did not give him/herself a headstart. In fact, even that block containing the proof itself was made inspendable on purpose.

[ojr]

did they make the first million bitcoins they mined unable to spend? No founder reward means no mining so it is very true, there was an advantage, the crytokitties creators are not allowed to breed kitties, but take a cut from every sale which is more fair

[Frogolocalypse]

What's funny in bitcoin, of course, is that none of those coins were sold, nor were they offered for sale.