Iconomi apparently understands ICOs are not legal if sold to USA citizens and residents:


Perhaps they secretly realize the following is true:


See the discussion above this post between Come-from-Beyond and myself, which provides more details on the above red highlighted hypothesis.

Carrying on from that above quoted point I made upthread...


The bolded logic is what ICOs are using to justify selling software tokens:


But that legal position seems to meet (i.e. be regulated by) the Howey test in the case where the ICO investors are clearly buying tokens with the expectations that the developers are going to deliver certain actions with certain timelines as reinforced by the concept of escrow agents, published timelines, and perhaps even an oversight foundation:


Note the Howey test was discussed in great detail upthread, so I won't repeat that.

So I am not backtracking from the revelation that I had in the summer of 2016 wherein I sort of disowned this thread, because I still agree that if the users buy tokens without any prospectus and have access to the open source software, then they are each individually in control of their ownership of the token and the blockchain which runs it. They can fork whenever they want. No centralized entity has made any commitments to them.

But ICOs seem to entirely violate this concept and thus seem fall under the purview of the Howey test.

I noted (from one of his videos) that Charles Hoskinson apparently also tried to warn Ethereum about this and about not selling to unqualified USA investors because of this. But he was pushed out of Ethereum because he wanted to do issuance and governance correctly. Since that time, the EU has been getting more organized on federalizing their legal system and unifying on every kind of regulation including presumably securities law.

Ethereum might be a trap and one day it could be like another MtGox where all the ETH on the exchanges is confiscated or frozen. Ditto other ICO projects.

I wonder if the Bitcoin received in the ICO could also be frozen, but this wouldn't affect all Bitcoin investors thus probably wouldn't harm Bitcoin as much as it would devastate Ethereum.

I think it will come one day where ICO projects become locked and frozen on the Western exchanges. And with the global collapse of Europe accelerating after the French and German national elections this year, the EU may need to confiscate more funds. So they may cooperate on opportunities to do so. They will become desperate and look for every excuse to take funds.

ICO looks very risky to me. I am considering not doing one with my project. I welcome fair-minded discussion in response to this post. I would like to know of any strong counter-arguments.

Even if the SEC would not confiscate the tokens on Western exchanges, they could still send developers and promoters within their legal reach to jail and file for their extradition from cooperating Western countries.


Note I also think projects that are receiving funding under the guise of decentralized governance which is an obfuscation of actual insider whales centralized control (even if obscured by a sneaky scheme) may also fail the Howey test and/or FinCEN regulations. Examples of these might be Dash and Steem. Dash has the masternode obfuscation. And Steem has the witnesses and curation rewards which skew income to whales.

In short, if there is centralized control of the flow of money from investors to the activities that token investors base their investment expectations on, then the Howey test seems to be met.


Disclaimer: I am not a professional adviser on this topic. Consult your own professional adviser.