[Aloha]

The whole regulatory infrastructure from the SEC expects a security to be backed by or representative of a physical asset of some sort - be it shares of a corporation with tangible assets, gold, or in the case of futures, a commodity. Even bonds are, they're securitized debts.

Crypto has no physical manifestation or nexus, there is no fungible good backing it, nor another which it can be directly (and implicitly) exchanged for, treating it as a security makes about as much sense to me as treating lottery tickets as one.

Edit - I just learned of the Howey test, but I got the fundamentals of it correct.

[lmm]

> The whole regulatory infrastructure from the SEC expects a security to be backed by or representative of a physical asset of some sort - be it shares of a corporation with tangible assets, gold, or in the case of futures, a commodity. Even bonds are, they're securitized debts.

No it doesn't. Corporations are very obviously unphysical, as are debts. Securitizing e.g. music royalties is completely normal.

[dataflow]

> Corporations are very obviously unphysical

I think that misses the parent's point. Corporations own physical assets (like buildings) and things with accepted intrinsic value (fiat currency). but they also indirectly own rights to other things that are indirectly backed by physical stuff in a similar manner (like shares of other corporations, etc.). That's in contrast to something like Bitcoin which doesn't come with a direct or indirect right to anything with intrinsic value.

[lmm]

> I think that misses the parent's point. Corporations own physical assets (like buildings) and things with accepted intrinsic value (fiat currency). but they also indirectly own rights to other things that are indirectly backed by physical stuff in a similar manner (like shares of other corporations, etc.).

Not necessarily. Sometimes a corporation's value is based on something purely speculative, like a drug patent that may or may not work out, or even something that's widely thought to be worthless, like hot tips on the search for Bigfoot. That's completely normal.

[dataflow]

Do you have any examples of this? A corporation that owns literally nothing, whose entire value is based on something speculative (like a drug patent), and who has a traded security?

[lmm]

Getting to exactly $0.00 in the company bank account probably requires an improbable level of fine-tuning (if only because you need enough to file your annual registration statement or whatever), but ISTR Retrophin was down to something like $3.15 + some valuable drug patents at one point in its penny-stock days.

[dataflow]

Again, the bank account balance is not the point of what I'm saying. See the sibling comment I replied to: https://news.ycombinator.com/item?id=35270550

[Aloha]

IP is a tangible asset, one that can even be given a value before proven.

[dataflow]

That has nothing to do with what I'm saying. If you invest in a company that "only" has IP, your invested cash itself is still part of the company's assets, so it's not like you're buying shares of vacuum. If the company liquidates itself - you get back your proportion of the company's assets. The situation is not the same with Bitcoin.

[peyton]

SPACs are just pieces of paper sitting in Delaware somewhere.

[dataflow]

Don't they raise money? Meaning that money is part of (or all of) their assets?

[danaris]

...Which is more or less what many of us have been citing all along as a reason why cryptocurrencies are bullshit that shouldn't even be allowed to exist.

[fnordpiglet]

No, you still are wrong. It has to be backed by an enterprise. Commodities are regulated by the CFTC. There’s no need for a security to be back by physical assets. A corporation can have no material asset backing (in fact some retailers have no assets at all, everything is rented or purchased on warehouse lines of credit with the expectation they can generate cash flow with minimal to zero capital investment; but their shares are still securities because they’re backed by an enterprise. I find it strange you learned of the Howey test but didn’t understand this, as it’s very clear in the description, a security must be:

An investment of money In a common enterprise With the expectation of profit To be derived from the efforts of others

[jfengel]

Nobody trades lottery tickets. If they did, it might draw regulatory scrutiny too.

[TylerE]

Terrible examples. Lottery syndicates are absolutely a thing.

I remember reading a syndicate that calculated a particular state lottery jackpot (I want to Virginia.) had grown to a point where it was well into th profitable zone so they sent hundreds of people to virtually every gas station in the state.

They literally bought every single possible combination (this was pre powerball, so this was merely millions of tickets and not billions.)

Obviously they won. This particular drawing was so rich that the only way they could lose was if 2 or more others bought the winning number also. Even if they had split it 50/50 it would still have been profitable.

[Aloha]

As it rightly should!

I think crypto is somewhere script and private fiat currencies but traded like a security, and probably not legal to be openly traded as they are, a legal terra nullius. Until there are court decisions or congressional action to firm up this situation, it will persist as a gray area.