Quote from: smooth on October 23, 2015, 08:20:18 PM

Quote from: TPTB_need_war on October 23, 2015, 08:10:33 PM

Quote from: smooth on October 23, 2015, 07:53:31 PM

Quote from: TPTB_need_war on October 23, 2015, 07:37:39 PM

It appears that whether the users think it is an investment or not, has nothing to do with the classification as a security.

No.

One and only one link on this thread. I'm getting back to work now.

"According to the Howey test, an instrument is only a security if it involves an investment of money or other tangible or definable consideration used in a common enterprise with a reasonable expectation of profits to be derived primarily from the entrepreneurial or managerial efforts of others."

http://www.legalandcompliance.com/securities-resources/securities-glossary/howey-test-to-determine-if-an-investment-is-a-security/

That is why crowdfunding a movie does not violate securities law, or even a toy, watch, etc. where you get the item as a reward. Coins not so much.

The red bolded phrases are the salient part of the test I am referring to. To be an investment security requires an ongoing "common enterprise" where the buyer "reasonably expects profits" due to the ongoing "entrepreneurial or managerial efforts of others" in that enterprise. When the developer sells some software and tokens encoded in a genesis block of the protocol of that software, there is no enterprise. The users take that and decide whether to make it an enterprise. For example, they could throw away the genesis block if they wanted to and were able to organize themselves to do so.

"Ongoing enterprise" is not part of the definition. Selling interest in a time- or scope-iimited project still counts. That's still a common enterprise.

I inherited this ability from my very gifted attorney father I think.

The sentence requires the money to be used in a common enterprise with an expectation of profits to be derived primarily from the entrepreneurial or managerial efforts of others. The money from the crowdfunding is not used in any common enterprise. The pre-crowdfund development work is a sole enterprise of the developer until the time it is sold (think about who owns what, the devs owns his work and the investors own their money, until the exchange takes place). The developer takes the money and the money is never used in the common enterprise. The Howe Test requires the invested money to be managed in a common enterprise and the investors to expect profits from the management of those funds invested in the common enterprise.

You are entirely misreading it because ostensibly you did not pay attention to how the word 'used' interacts with the fact that in a crowdfund, the seller is not in a common enterprise (with the buyers of the crowdsale) until he sells and per the Howe test the funds must then be used in that common enterprise formed. But if the developer leaves any managerial role at the point-of-sale and takes the funds raised with him, then he is not subject to the Howe test as specifically worded.

Quote from: smooth on October 23, 2015, 08:20:18 PM

If someone privately finances development and then sells it when compete, with no further efforts, then that could possibly work. But realistically what buyers are going to buy that? At best, they will do so only at a very discounted price.

The developer can pledge to be available for ongoing work for donations as desired by any investors that wish to donate to him. He would not violate the Howe test.

I believe also now reading the Howe test more carefully, that Monero may not be culpable, because Monero is not using the money that was invested in the common enterprise. And Bitcoin may fall into the same category. But just to be safe, if it were my coin I would remove things from the protocol that force users to rely on the managerial control of the core devs, such as that forced hard fork every 6 months.

Note Bitshares, Ethereum, and Dash all appear to be very culpable. Exchanges trading those coins should consult with their attorneys about criminal and civil liability for trading unregistered securities.

Quote from: smooth on October 23, 2015, 08:20:18 PM

As far as users voting to tell the developer what to do (during ongoing maintenance), seems like a very gray area to me. Giving general guidance is probably not good enough as success depends "primarily" on the decisions made by developer. As a practical matter, making all the important design, development, and delivery decisions by voting of generally unskilled users seems unworkable (and possibly even voting by skilled experts). You may comply with securities law but you will violate the laws of successful software development.

A developer can make a proposal to do some work. Users can vote by making donations on that specification and other proposals if there are any from any others contractors that wish to do some work. Not all the users have to agree. If the contractor has enough donations to meet his desired remuneration, then he proceeds. The users later decide whether to adopt that work in the common enterprise which only they manage.

A developer can also volunteer work, as he might be a holder of the coin too who wants to exert some of his control over his investment.

You are correctly pointing out that making a coin that is not yet mostly finished doesn't fit well this model. And the market really needs finished coins, not coins still being experimented on. Sell a new coin if you want to radically change the features.

I would endeavor to produce a coin where the major features were set and done.

And the things that need to change are orthogonal to the protocol which no longer needs to change. Separation-of-concerns is a very important design principle for computer science and programming.