I saw your analogy got downvoted because people didn't like it.
But I've talked with prominent lawyers about this distinction and securities laws are flexible enough to include practically any product in their purview.
The Howey Test isn't the only test that courts and regulators have created.
There are several tests floating amongst the states and various federal circuits, which can and have deemed otherwise benign products and services as things that should be registered as securities with the most onerous costs and distinctions.
A California country club's member fees were deemed securities under one framework.
And every kickstarter and centrally issued product can under other frameworks.
There is nothing wrong with your analogy. The securities regulators generally don't try to stifle all commerce so far.
The idea that all ICOs will experience this form of securities discrimination - just for the mere fact they are using cryptographic hashes and get a lot of revenue/capital - is just as logically unsound.
But they could. Just like almost every product or service could. When they do it will quickly evolve securities law towards a more apt framework. Its not about "securities or not" its about consumer and investor protection, and this is currently the tool available.
I agree, many things which could be deemed securities are not. The SEC's mandate is to protect small investors and public faith in investment markets, and they will hopefully focus their power on instruments where that faith is being challenged.
If they do, the best strategy for an organization raising money through an ICO is to use that money in as transparent and ethical a manner as possible.
When you turn PLEX -> USD using official means, can you withdraw that USD from Eve Online? Or can that USD only be spent on subscriptions/in-game items?
If it's the former, Eve Online is at minimum, a money transferrer. If it's the latter, it's just a store that accepts gift cards.
Officially, PLEX can only be redeemed for subscriptions, but it can also be traded as an in game item for ISK (standard in game currency). The only real difference between it and a cryptocoin is that selling PLEX on a secondary market is against the ToS. You will get flagged if you're trading away PLEX ingame for nothing in return, because they assume you're selling it.
> You will get flagged if you're trading away PLEX ingame for nothing in return, because they assume you're selling it.
I'm pretty sure that is enough to avoid it being deemed a security under the SEC's jurisdiction. There needs to be an expectation of future profit. (Not a lawyer.)
First, the Howey Test is the only test from the Supreme Court.
Second, that is a multipronged test, a product/service which wasn't registered as a security but still passes or fails one prong isn't enough to say it is or isn't a security.
THIRD, there are multiple other tests in various federal circuits.
Fourth, there are tests created by states relevant at the state level.
Fifth, most people are just lucky that securities frameworks haven't been applied haphazardly to everything under the sun.
> There needs to be an expectation of future profit.
I hear this statement repeated a lot, but that seems unlikely to be an absolute requirement. That is, even if every instrument sold for future profit is a security, that doesn't mean everything else isn't. Do you have a source for that statement?
> The test of whether there is an "investment contract" under the Securities Act is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others; and, if that test be satisfied, it is immaterial whether the enterprise is speculative or nonspeculative, or whether there is a sale of property with or without intrinsic value.
That decision defines, in that very part you quote, an investment contract (where basically one expects profit directly without working for it) as a security. That is not surprising really, as it is perhaps the most trivial form of it.
But that was not my question. You, and others have also in conversation, stated that has a requirement for something to be legally regarded as a security. That is what seems unlikely to me.
The very decision you quoted starts out with:
> the Securities Act of 1933 defining "security" as including any "investment contract,"
Note the word "including". That A is B does not mean that B is A. There are other forms of securities, and this document alone should not lead anyone to believe that if they only append to their contractual terms that tokens are to be regarded without use or value, that they somehow would not legally be selling securities anymore.
Note, however, that “investment contract” is one of very many things that are securities (see the recursive definition at 15 USC Sec. 77b(A)(1)), so anything that is an investment contract by the Howey test is a security, but so are lots of things that are not investment contracts.
