Speaker 1: Hello, and welcome to another episode of the Odd Thoughts
Speaker 1: podcast on Tracy Alloway and I'm Joe. Wasn't so Joe?
Speaker 1: I got an interesting email earlier this week? Was this
Speaker 1: that thing you tweeted? Yes? It was. Well, you could
Speaker 1: say that about practically any email that I received, because
Speaker 1: we both just tweet all of everything that's in our inbox.
Speaker 1: That's that's really sad, isn't it Okay? But one thing
Speaker 1: in particular I tweeted about, and it was an advertisement
Speaker 1: for an upcoming I c O an initial coin offering. Right.
Speaker 1: I think anyone who's been on the Internet in recent months,
Speaker 1: particularly if they're into tech or finance, has been inundated
Speaker 1: with ads for initial coin offerings. I get them all
Speaker 1: the time. I used to get them on Facebook. I
Speaker 1: get them in my Gmail. I got it's like this
Speaker 1: new toe can and get a ten percent discount on
Speaker 1: this token that will give you access to WiFi or
Speaker 1: whatever it is. Actually, that's probably one of the more
Speaker 1: linear ones. But I don't think like anyone really has
Speaker 1: any idea of what these are, what what the deal is.
Speaker 1: It's also weird and new. This one in particular was
Speaker 1: illustrated with a little cartoon rocket. Uh. It also said
Speaker 1: the company had signed an agreement with the world's largest
Speaker 1: Nasdaq exchange, whatever that is. But the thing that got
Speaker 1: me the most about this particular ad was it said
Speaker 1: we received the approval of US Securities and Exchange Commission
Speaker 1: and U S Securities and Exchange Commission is in quotes.
Speaker 1: Everything about this is so beautiful. Look, I'm not going
Speaker 1: to judge this I c O but if I were
Speaker 1: an investor to be this would uh be some at
Speaker 1: least caution signs just from how you described it, all right,
Speaker 1: But the reference to Securities and Exchange Commission and I'm
Speaker 1: doing air quotes right now and you can't see me
Speaker 1: doing that for the phone, obviously, UM got me thinking
Speaker 1: about I c o s and regulation because obviously this
Speaker 1: is a perennial issue. How are I c o s
Speaker 1: regulated and are they actually securities in the eyes of
Speaker 1: the U S legal system? Right, Because the basic idea
Speaker 1: is companies are you could say, issuing their own de
Speaker 1: facto currencies, selling them and they want to do that
Speaker 1: as freely as possible, or many of them would like
Speaker 1: to sell for any amount to anyone in the world.
Speaker 1: But they and they would say Okay, they're not. We're
Speaker 1: not really selling securities. These are tokens that give access
Speaker 1: to a network or something. But if they are securities,
Speaker 1: then from a regulation standpoint, that would impose upon them
Speaker 1: a lot of obligations in terms of disclosure and who
Speaker 1: can buy. And so the question of whether these are
Speaker 1: actually securities and the law governing whether these are securities
Speaker 1: or not is of a pretty big stakes for a
Speaker 1: lot of people, huge stakes, and it actually gets to
Speaker 1: some really interesting legal theory which we are now going
Speaker 1: to go on to discuss. And I think you have
Speaker 1: you have the guest with you, right, Yes, I'm very
Speaker 1: excited to bring in Peter van Walkenberg. He's the head
Speaker 1: of research at Coin Center, which is a cryptocurrency think
Speaker 1: tank in Washington, d C. He's going to help us
Speaker 1: wade through the thicket of regulations which may or may
Speaker 1: not apply to I C O S. So, Peter, thank
Speaker 1: you very much for joining us. Hey, thanks for having me, guys.
Speaker 1: I've been chuckling this whole time listening to you guys.
Speaker 1: I also work with the SEC in quotation marks. Do
Speaker 1: you work with the SEC not in quotation marks as well?
Speaker 1: Hopefully I can only imagine Peter that for as many
Speaker 1: ads as Tracy and I get on social networks and
Speaker 1: in our email, you must see like ten times as
Speaker 1: many of these pitches for I c o s than
Speaker 1: basically anyone else in the world. I tell you ad
Speaker 1: blocking software is important when you have my job in
Speaker 1: my Google search history, it's really it's it's critical. It's
Speaker 1: not just a luxury. And I don't mean to starve
Speaker 1: the media companies that our revenue, but I just can't
Speaker 1: look at this stuff all day. So before we dive
Speaker 1: into securities law and how these decisions are actually made, Peter,
Speaker 1: maybe you can just give us an overview of where
Speaker 1: we stand right now when it comes to the legal
Speaker 1: definition of I c o S. Yeah, okay, so there
Speaker 1: there just isn't one. And that makes sense, and it's
Speaker 1: not too surprising because it's a brand new thing and
Speaker 1: it's sort of an informal term that the community came
Speaker 1: up with. I don't know who in the community, somebody
Speaker 1: who I really would love to have a stern talking
Speaker 1: to about two years ago because it sounds like I
Speaker 1: p O and somebody said, oh, well, we're going to
Speaker 1: create an initial batch of these new tokens or coins,
Speaker 1: and we're going to release them to the public and
Speaker 1: have an offering, and so we'll call it an initial
Speaker 1: coin offering and it won't confuse anybody, and people will
Speaker 1: be excited about it, which I think really is terrible branding,
Speaker 1: because if you have a good ah argument that your
Speaker 1: thing is in a security, and some people do, and
Speaker 1: I think some people don't. But if you have a
Speaker 1: good faith argument that your thing is in a security,
Speaker 1: why the hell would you use the term or you know,
Speaker 1: a head nod to the term for the thing that
Speaker 1: the SEC regulates as securities I p O s. It
Speaker 1: just makes no sense. So there's no legal definition of
Speaker 1: I c O because it's just this emergent term. It's
Speaker 1: like slang in our space. There's varying treatment of what
Speaker 1: an I c O is or might be or should
Speaker 1: be under the law, and that's because we have flexible
Speaker 1: standards for a lot of things in US law, and
Speaker 1: sometimes new things that seem like they were unregulated actually
Speaker 1: fit into an existing flexible standard and then are actually regulated.
Speaker 1: And one of these flexible standards and we're you know,
Speaker 1: we've been dancing around it, and this this talk so
Speaker 1: far is the standard for when something is a security
Speaker 1: and then therefore regulated like a security in the US.
Speaker 1: So in Europe, just just as quick background, they have
Speaker 1: a much more black letter test. They have a civil
Speaker 1: law background instead of a common law background, and they
Speaker 1: basically have a statute that enumerates these things are securities
Speaker 1: and it's you know, equity shares, its pensions, etcetera. In
Speaker 1: the US, we have that black letter list in the
Speaker 1: Securities Law Securities Act rather, but we also have an
Speaker 1: undefined term in that in that list called investment contract.
Speaker 1: And that undefined terms like you know, Joe Tracy, what's
Speaker 1: an investment contract to you? What's an investment contract to me?
Speaker 1: You know, it's it doesn't have a really definitive common meaning.
Speaker 1: So that term had to be defined by courts to be,
Speaker 1: you know, narrow enough not to cover all things that
Speaker 1: people invest in, but broad enough to cover the sort
Speaker 1: of things that we want to make sure investors are
Speaker 1: protected from, the things that really look kind of like
Speaker 1: schemes where you rely on somebody else to make profits.
Speaker 1: And so that term was defined in a ninety six
Speaker 1: i think is forty six case. It was about a
Speaker 1: guy who was selling tracks of and in an orange
Speaker 1: grove to suckers in New England and promising them that
Speaker 1: he'd maintain the fruit and sell it at market and
Speaker 1: give them the profits of the fruit that grew on
Speaker 1: the track of land in the orange grove that the
Speaker 1: New England investor purchased. Just to pause here, because I
Speaker 1: think this is sort of the critical case that people
Speaker 1: will be talked about today when they try to gauge
Speaker 1: whether something is a security or not. We are talking
Speaker 1: about the theoretical regulation of I C O s. And
Speaker 1: it all stems from someone selling tracts of oranges in Florida. Yeah,
Speaker 1: tracks of an orange grove. So how he would invite
Speaker 1: people down to his Florida hotel and take them on
Speaker 1: a tour of the groves, and people would say, oh,
Speaker 1: these orange groves are beautiful, and how he would say,
Speaker 1: it's funny you should say that these orange groves are
Speaker 1: for sale. And then he'd sell you a tract of
Speaker 1: land in the orange grove. And he'd also have you
Speaker 1: sign a contract where you say, I appoint how he
Speaker 1: and his staff to go pick the fruit and sell
Speaker 1: it at and give me the profits, and how he's
Speaker 1: obligated to give me the profits. And this combination of
Speaker 1: the nominal interest in property and the agreement to maintain
Speaker 1: the property and sell the oranges for profit, at least
Speaker 1: in the eyes of the Supreme Court and in the
Speaker 1: sec who brought the case of the Supreme Court, looked
Speaker 1: like an investment contract of the type that we'd normally
Speaker 1: regulate as a security. It fit this test, and it
Speaker 1: makes sense because you're not really just buying land in Florida.
Speaker 1: You're kind of buying a fractional interest in how He's
Speaker 1: orange grove, literally a fraction of the land and the grove,
Speaker 1: but also a fraction of the profitable, hopefully profitable efforts
Speaker 1: of Howie in running in a successful orange grove. So
Speaker 1: this is like a flexible test that's there to reach
Speaker 1: things that aren't like stock certificates evidenced in papers kept
Speaker 1: in the basement of the DTCC in New York, but
Speaker 1: instead things that are basically similar in economic relationships between
Speaker 1: buyer and seller, but evidenced in other ways, more informal ways.
Speaker 1: And so it makes sense that when people start selling tokens,
Speaker 1: you have like a nominal interest in a property and
Speaker 1: sometimes where you don't just get the token, like it's
Speaker 1: not just bitcoin you don't just get a bitcoin. You
Speaker 1: also get a token and promises from somebody who says
Speaker 1: they're going to develop this thing into something as successful
Speaker 1: as bitcoin or as as awesome as ethereum or whatever.
Speaker 1: Between owning the token and relying on the person who
Speaker 1: who sold you the token to make the network that
Speaker 1: powers the token better, it starts to look like owning
Speaker 1: the land and the orange grove and relying on Howie
Speaker 1: to make the orange grove profitable. How much does a
Speaker 1: transferability of your interest in either an orange grove or
Speaker 1: a token play into whether or not those are classified
Speaker 1: as securities. It's a great question. It's not formally in
Speaker 1: the test. So the test is, was there an investment
Speaker 1: of money in a common enterprise with an expectation of
Speaker 1: profits derived from the efforts of a third party promoter.
Speaker 1: Notice nowhere in that test is it say transferability, even
Speaker 1: though what we come to expect is when something's highly
Speaker 1: liquid and highly transferable asset, you can sell it, and
Speaker 1: you can sell it with greater ease, and if demand
Speaker 1: rises for this thing, you might make profit from it.
Speaker 1: And the fact that it's liquid and easily sold or
Speaker 1: easily transferable might be in disha of people's feelings about
Speaker 1: how profitable they are. And to put some like less
Speaker 1: vague meat on those bones, just look at cryptocurrencies and
Speaker 1: tokens and I c o s, which are all you know,
Speaker 1: these transfer like extremely liquid transferable assets that anybody can
Speaker 1: sell and you can sell them on very easy to
Speaker 1: use exchanges that look a lot like you know, online
Speaker 1: stock trading. And because they're so easy to transfer, I
Speaker 1: think a lot of people think, oh, I could buy
Speaker 1: some of this and then just wait for the price
Speaker 1: to go up a little and sell high, you know.
Speaker 1: And so so maybe that transferability enters into this legal
Speaker 1: test because it it bolsters one's expectation of profits. Whereas
Speaker 1: if you buy something immobile that you'll have difficulties selling,
Speaker 1: maybe you really bought it because you just wanted to
Speaker 1: have it, not because you're expecting of making a quick profit.
Speaker 1: I'm kind of curious. You mentioned in the beginning that
Speaker 1: you think there are projects that have a good faith
Speaker 1: argument to not being securities. But the way you described
Speaker 1: how we test is like basically, any I c O
Speaker 1: I can think of seems to fall into this category,
Speaker 1: especially the aspect of the third party which promises to
Speaker 1: sort of develop the network. The projects that you think
Speaker 1: maybe don't or aren't categorized as securities. How are they different? Yeah,
Speaker 1: So you know, you wouldn't be alone if you thought
Speaker 1: that most I c o s are securities. And you know,
Speaker 1: Jay Clayton, Chairman of the SEC, said as much in
Speaker 1: his Senate Banking testimony about a month ago that every
Speaker 1: I c O I've seen as a security. But then
Speaker 1: you gotta ask, are we talking about the I c
Speaker 1: as we've seen this last year? Because two thousand seventeen
Speaker 1: was really like the top of the growth curve for
Speaker 1: I c o s I think, and I think we're
Speaker 1: seeing a retrenchment now. And it's when it really entered
Speaker 1: the public consciousness. We had token sales going all the
Speaker 1: way back to two thousand fourteen. I think the first
Speaker 1: was master coin. Ethereum had a token sale to sell
Speaker 1: ether back in two thousand. In those early days, there
Speaker 1: wasn't all the hype. You didn't have Floyd Mayweather sitting
Speaker 1: on his private plane with a table full of money
Speaker 1: saying and buy this, I c oh, it's gonna make
Speaker 1: me rich and it'll make you rich to You didn't
Speaker 1: have liquid secondary markets where you could instantly go. You know,
Speaker 1: you you have your marker of a token that in
Speaker 1: the future will be valuable like Bitcoin or Ether might
Speaker 1: be valuable. You know, Querry, whether that's true or not,
Speaker 1: but you have this marker. You wouldn't be able to
Speaker 1: transfer it or sell it easily if you bought Ether
Speaker 1: in the pre stale you were kind of just waiting
Speaker 1: for Ether to exist as a network for smart contracts.
Speaker 1: You weren't able to go onto an exchange and and
Speaker 1: fence it and sell it to somebody else. Today, when
Speaker 1: people do I c O s, there's almost always relatively
Speaker 1: soon after the initial coin offering a market where you
Speaker 1: can go trade it and you can do day trading.
Speaker 1: And this also means that people can do nasty things
Speaker 1: like pump and dump scams and all that sort of thing,
Speaker 1: all before there's even a product or any kind of
Speaker 1: real functionality behind the token. So on the on the
Speaker 1: side of like what I'd say, are the good guys
Speaker 1: here are first of all, and it's really important to
Speaker 1: point out anybody who didn't do an I c O
Speaker 1: but has a token, because there are plenty of projects
Speaker 1: that released cryptocurrencies or tokens and they're developed by open
Speaker 1: source developers, so there's no single company behind them, but
Speaker 1: they you know, a bunch of people work together to
Speaker 1: build a network that describes the scarce token, and they
Speaker 1: never sold them to anyone. They came into the world
Speaker 1: through mining, just like bitcoins come into the world through
Speaker 1: mining as a reward for people who were providing useful
Speaker 1: services to the network, who actually made this decentralized network function.
Speaker 1: So I think that doesn't look like a security at
Speaker 1: all to me. You'd have trouble making the investment of
Speaker 1: money pronged because people didn't actually buy the tokens. They
Speaker 1: got them as a reward for contributing to a network resource.
Speaker 1: And you'd have trouble making the expectation of profits prong
Speaker 1: because this is really a network that actually accomplishes some work,
Speaker 1: like you can actually use bitcoin to send money to
Speaker 1: you know, a foreign country at at a low fee
Speaker 1: compared to alternatives using the dollar of things like that.
Speaker 1: And so those two factors, the usefulness and the fact
Speaker 1: that it's you know, not something that people invested in
Speaker 1: in in a centralized way, and also the fact that
Speaker 1: it's backed up by a big network of participants, like
Speaker 1: a whole bunch of people around the world. Mind Bitcoin,
Speaker 1: they don't all work for the same company. They're like
Speaker 1: individuals who are unaffiliated and just enjoy the technology and
Speaker 1: just enjoy providing this network service. The Bitcoin network. It's
Speaker 1: very different than W. J. Howe who had an orange
Speaker 1: grove and was asking people to give him money for
Speaker 1: his orange grow It's more like the gold industry writ large.
Speaker 1: So so that's that that's what I think really doesn't
Speaker 1: look like a security And then there's some middle ground
Speaker 1: where things now function a lot like Bitcoin on the network,
Speaker 1: but in the early days they had a sale and
Speaker 1: just to be totally frank and open. That's Ethereum. I
Speaker 1: think Ethereum is as decentralized as Bitcoin. You know, generally speaking,
Speaker 1: there's there's places we can argue about whether it's a
Speaker 1: functioning decentralized network in the same way as Bitcoin, or
Speaker 1: whether there's some liabilities or benefits that they have over Bitcoin.
Speaker 1: But the long and short of it is it's decentralized.
Speaker 1: It's a bunch of people around the world running the
Speaker 1: Ethereum open source software, and that's what makes Ether scarce,
Speaker 1: and that what makes it valuable as a as a
Speaker 1: tool for running smart contracts. But go back to the
Speaker 1: early days of ethereum, and they did have a sale,
Speaker 1: and you did in the very early days of ethereum
Speaker 1: rely on the efforts of those sellers to deliver the
Speaker 1: tokens to you once the network was live, so there
Speaker 1: was that moment of trust. But again I think it
Speaker 1: was really early with ethereum. Most people were buying them
Speaker 1: to use because they were excited about the idea of
Speaker 1: a global virtual machine, which is one way of thinking
Speaker 1: of Ethereum. And then once they got them, they actually
Speaker 1: used them to write smart contracts, and we're seeing tons
Speaker 1: of smart contracts and ethereum. You can't usually use a
Speaker 1: stock certificate to do anything. It's just there as a
Speaker 1: marker of your investment. So this looks like something I
Speaker 1: think radically different. And then at the far far end
Speaker 1: of the spectrum, I think, very far away from Ethereum
Speaker 1: and from Bitcoin are things where there is no product,
Speaker 1: there is no service or functionality that the token gives you.
Speaker 1: There is rapid and I think somewhat disgusting promotion of
Speaker 1: the thing as an investment, sometimes from celebrities, sometimes from
Speaker 1: you know, market watchers, sometimes from people who are pumping
Speaker 1: and dumping, and you really are relying on just this
Speaker 1: promoter to make good on their promises of building something
Speaker 1: that's going to be valuable in the future, and maybe
Speaker 1: you don't even know what it's supposed to do. You've
Speaker 1: just been told that it's going to be valuable. Those
Speaker 1: things on the far end, I think totally your securities,
Speaker 1: and I worry about the reputational risk of those things
Speaker 1: looking like obvious securities that haven't complied with US laws
Speaker 1: harming the real innovations because it could trigger overbearing regulation
Speaker 1: with respect to things like ethereum and bitcoin. Well, so Peter,
Speaker 1: A lot of people think that there hasn't been enough
Speaker 1: regulation so far, and they're sort of scratching their heads
Speaker 1: as to why the sec has, you know, in some cases,
Speaker 1: been dragging its feet on this issue. So are you
Speaker 1: saying that it's definitely not a blanket case that all
Speaker 1: I c o s are securities, that it's more nuanced
Speaker 1: than that. Yeah. I do think it's more nuanced than that,
Speaker 1: And I think some people are confused about the difference
Speaker 1: between I c o s and cryptocurrencies. So just to
Speaker 1: be clear, I don't think any of the running cryptocurrencies
Speaker 1: like bitcoin and ethereum should fall under SEC jurisdiction. I
Speaker 1: think they actually fall under CFTC jurisdiction, which we can
Speaker 1: talk about at another time, within the realm of I
Speaker 1: c O s where people have actually sold an initial
Speaker 1: distribution of tokens to the public. I think a lot
Speaker 1: of them qualify as securities, and I disagree. I think
Speaker 1: the SEC has actually done a lot of work going
Speaker 1: after these things. They came out with a report last
Speaker 1: summer where they were sort of like, hey, everyone, pay attention,
Speaker 1: We're about to do some stuff here because a lot
Speaker 1: of these token sales are securities issuance. And after that
Speaker 1: so they didn't they didn't police anything retroactively. They didn't
Speaker 1: go after anyone who's sold tokens before that report, which
Speaker 1: I think is it's not something that the SEC has
Speaker 1: to do. If they wanted to, they could go after
Speaker 1: people retroactively, but I think it's it's a prudent thing
Speaker 1: to do. Look like, announced your position as an agency,
Speaker 1: some of these things are securities, and then if people
Speaker 1: continue to not follow securities laws when they are making
Speaker 1: something that looks like what you just wrote a report about,
Speaker 1: then go after them. And that's what we've seen. We
Speaker 1: saw several I think thoughtful and well placed enforcement actions
Speaker 1: against first obvious scams, and then some people who were
Speaker 1: maybe a little too naive and didn't realize that what
Speaker 1: they were doing was issuing the security. Peter, Let's say
Speaker 1: Tracy and I decided to do an I c O
Speaker 1: for the Odd Lots podcast, and maybe it was something
Speaker 1: like coin holders got some share of the profits, and
Speaker 1: maybe you had to pay, or you had to subscribe
Speaker 1: to the podcast, you had to use the coins. Is
Speaker 1: odd Lots profitable? We'll address that later. But let's say
Speaker 1: we're like spoken like a true lawyer. Let's say like,
Speaker 1: obviously this is a security. We're not even gonna pretend
Speaker 1: otherwise this is a security. Are the rules in place
Speaker 1: clear enough such that even if we totally wanted to
Speaker 1: abide by securities law, we knew which side of the
Speaker 1: Howie test we were on, that there's a clear path
Speaker 1: for us to do it. Or is it still vague
Speaker 1: such that even if you want to be on the
Speaker 1: right side of the law, there's still some ambiguity. No, yeah,
Speaker 1: at that point, it's seperate clear. If if you're transparently
Speaker 1: saying you know, we're selling odd lots profits come get
Speaker 1: them they're hot, then you're obviously selling the secure already,
Speaker 1: and if you admit to that, then you just comply
Speaker 1: with securities laws. It doesn't matter that the evidence of
Speaker 1: the fractional ownership interest i e. The security or the
Speaker 1: share is something that exists on a blockchain as a token,
Speaker 1: or is something that is a bearer certificate like in
Speaker 1: the what is it the Second die Hard movie where
Speaker 1: they're like stealing bearer bonds, or is a registered instrument
Speaker 1: that trades on NASDAC and there's a copy of the
Speaker 1: certificate kept in the basement of the dt c C.
Speaker 1: These are just different technologies for recording that fractional ownership interest.
Speaker 1: It doesn't matter what technology you use. That doesn't I
Speaker 1: mean it's gonna matter for maybe efficiency purposes or other things.
Speaker 1: It's not going to impact your legal calculus. Your legal
Speaker 1: calculus is the same in all cases you're selling securities.
Speaker 1: You need to file with the SEC to have a registration,
Speaker 1: a public filing, or you can take advantage of some
Speaker 1: of the other alternatives to public filings public registration, which
Speaker 1: are things like reg D Rule five oh six, where
Speaker 1: you say I'm only gonna I'm only going to sell
Speaker 1: this to accredited investors in a kind of private placement,
Speaker 1: so I don't need to do a full registration or
Speaker 1: maybe reg a plus where you can sell to the
Speaker 1: general public and not do a full registration and full disclosures,
Speaker 1: but you can only raise up to fifty million dollars
Speaker 1: selling your fractional interests in odd lots profits. Those are
Speaker 1: all really standard ways of complying, and we have seen
Speaker 1: some token sellers go down this route. Some people have said, look,
Speaker 1: the thing I'm trying to build long term is decentralized
Speaker 1: like bitcoin and ethereum. I don't think it will be
Speaker 1: a security, but as I'm trying to build it, I
Speaker 1: want to raise money and the people who invest in
Speaker 1: it are going to rely on me to build it well.
Speaker 1: So in that period where I'm selling this future token,
Speaker 1: I'm gonna sell it as a security nakedly, and let
Speaker 1: me say, look, you're relying on me to deliver something
Speaker 1: that's going to be profitable to you, this future network,
Speaker 1: with this decentralized token, and in the meantime until the
Speaker 1: network is decentralized, I'm going to comply with all securities
Speaker 1: laws because I have to because I don't want to
Speaker 1: break the law. And we've seen people sell tokens like
Speaker 1: file coin, sold tokens for decentralized file storage network that
Speaker 1: will exist in the future through regg D Rule five
Speaker 1: or six filing where they only sold to accredited investors. Now,
Speaker 1: some people don't like that because it means that only
Speaker 1: rich people get to buy a future interest in what
Speaker 1: could be transformational technology. And I'm sympathetic to that viewpoint
Speaker 1: that that's maybe not healthy and it's kind of in egalitarian,
Speaker 1: But that's just a problem that you're having, you know,
Speaker 1: anybody who has a problem with this, With the way
Speaker 1: we do investor protection almost all speculative but also you know,
Speaker 1: high risk, high return investments are restricted to accredited investors
Speaker 1: these days, whether their tokens or not, and you know
Speaker 1: that does have problems, but it's also a way of
Speaker 1: protecting mom and pop. Peter van Velkenberg, thank you for
Speaker 1: your insight on this and well we look forward to
Speaker 1: having you on our advisor page. Bed I CEO, really
Speaker 1: appreciate your intent only with my consent. Peter van Valkenberg,
Speaker 1: head of Research at their Points, thanks for having me
Speaker 1: guess so Joe I don't know whether to be horrified
Speaker 1: or impressed that basically a seventy year old legal precedent
Speaker 1: is now applicable to all sorts of new types of things,
Speaker 1: including initial coin offerings, you know, these things that basically
Speaker 1: rely on this brand new technology that no one who
Speaker 1: is thinking about Orange Groves in Florida was considering back then.
Speaker 1: I think I'm impressed. I like the idea that there's
Speaker 1: just sort of these general principles that we can apply. Mean, sure,
Speaker 1: at some point they are going to be completely different
Speaker 1: types of organizations maybe, and we'll have to come up
Speaker 1: with something more specific. And I'm sure obviously regulators are
Speaker 1: going to keep refining things. But I like the Howie test.
Speaker 1: It's sort of simple, the idea of a third party
Speaker 1: endeavoring on behalf of the partners for profit. I think
Speaker 1: it's a pretty good rule that probably not much reason
Speaker 1: to upgrade it. Well, I guess we'll get to find out,
Speaker 1: um just how applicable it is too. I c O
Speaker 1: s right, because the SEC has talked about sent well,
Speaker 1: it has actually sent a bunch of letters to various
Speaker 1: I c O operators asking for more information, so they're
Speaker 1: clearly taking an interest in all of this. So I
Speaker 1: imagine we'll be hearing a lot more about how relevant
Speaker 1: the Howie test is to the current period very soon. Yeah,
Speaker 1: I think there's gonna be a lot in Also, you
Speaker 1: have to figure that market conditions end up having a
Speaker 1: sort of forcing effect on these things. So right now,
Speaker 1: Q one was a pretty brutal year for all things crypto,
Speaker 1: and if that continues, you're gonna have a lot more
Speaker 1: people who have lost more money, and I imagine you'll
Speaker 1: live lawsuits and people saying, oh, I bought into this.
Speaker 1: I didn't realize I was security and I shouldn't all
Speaker 1: kinds of things. So I think it's going to be
Speaker 1: a pretty interesting year on the legal front. And I
Speaker 1: just want to make one more point that I love
Speaker 1: how it always comes back to Florida. Yeah, we have
Speaker 1: a long and rich history of covering a Florida financial
Speaker 1: market developments. It's just so perfect that these sort of
Speaker 1: questions about what is a legitimate investment offering comes back
Speaker 1: to this weird Florida orange grove where other people came
Speaker 1: down and they're like, oh, yeah, buy some oragines and
Speaker 1: we'll we'll we'll sell the oranges for you and give
Speaker 1: you money. It's just it's perfect. It's very Florida. Yeah, absolutely,
Speaker 1: all right, Well this has been another episode of the
Speaker 1: Odd Thoughts Podcast. I'm Tracy Alloway. You can find me
Speaker 1: on Twitter at Tracy Alloway and I'm Joe wi Isn't all.
Speaker 1: You could follow me on Twitter at the Stalwart and
Speaker 1: you should follow our producer tofur Foreheads add four HEAs
Speaker 1: t as well as the Bloomberg head of podcast, Francesco
Speaker 1: Levie at Francis Good Today. Thanks for listening.