Kaal claims by topic: securities-law, page 2

308 atomic, individually citable claims from the published work of Wulf A. Kaal tagged securities-law.

The utility token model dominates the top 100 tokens, but the utility category as coded includes tokens that behave like a security, and no Howey test was performed in this research. 2018
Initial Coin Offerings provide unprecedented liquidity and efficiency for capital formation while minimizing transaction cost. 2018
Unlike other means of capital formation, ICOs allow promoters to raise funds without sacrificing equity, so proceeds can be used exclusively for product development. 2018
ICOs lower barriers to entry for a diverse body of investors and thereby increase the diversity and heterogeneity of start-up funding. 2018
ICOs enable borderless online sales with fewer points of friction, letting promoters bypass typical legal, jurisdictional, and business hurdles by marketing directly to a worldwide investor pool. 2018
The absence of mandatory disclosure requirements for ICOs leads many promoters to make irregular or no disclosures about the platform over time, producing a significant lack of transparency in the ICO market. 2018
The top 25 ICO jurisdictions in this study are identified from ICO WatchList data, which ranks countries by the number of ICOs launched and reports how much was raised through those ICO projects. 2018
Switzerland leads the world in total ICO funds raised, followed by the United States. 2018
Switzerland ranks only fourth in the number of ICOs launched yet first in total funds raised, so the average Swiss ICO project raises a greater than average amount of funds. 2018
Although federal securities law is the main instrument countries use to regulate ICO technology, there is also concern about regulating exchanges, which may fall outside federal securities laws at least in part. 2018
The UK Financial Conduct Authority takes the position that ICOs may be regulated as securities depending on the aspects and rights the coin holder obtains through holding the coin, assessed case by case. 2018
In Singapore there is no direct regulation of digital tokens under the Securities and Futures Act unless the currency is linked to an ownership or security interest in the issuer's assets or property. 2018
Under German law the decisive factor in classifying a token is which rights are associated with it; labels such as participation token, utility token, or payment token give only initial guidance and cannot be relied upon outside a comprehensive and binding regulatory classification. 2018
The Canadian Securities Administrators apply a four-factor test to determine whether a cryptocurrency must be registered as a security. 2018
At the time of publication there were no registered marketplaces or alternative trading systems for cryptocurrency in Canada. 2018
In early Silicon Valley the contractual mechanisms lawyers designed, together with the lawyer dominated market for reputation, reduced information asymmetries between entrepreneurs and investors and were necessary to bring the demand and supply sides of venture capital together effectively. 2018
Because almost all other blockchains distribute perfectly fungible currency tokens through initial sales or mining, there is a clear, computable answer to how much it would cost to corrupt or destroy a chain running a proof of stake protocol on cryptocurrency stakes. 2018
The DAO raised more than 150 million dollars from approximately 10,000 investors through a crowdfunding campaign in May 2016, with DAO Tokens designed to be fully transferable and tradable on peer-to-peer exchanges like shares in a listed corporation. 2018
When multiple firms trade the same securities in legacy systems, each maintains its own ledger, and that duplication is itself the source of increased operational risk and cost. 2019
Legal certainty is a necessary condition for the maturation of blockchain securities trading; the technology alone will not carry it there. 2019
Overstock.com issued the first SEC registered digital securities using blockchain technology, and because the issuer was a public company conducting a shelf registration, the offering functions as a working model of blockchain benefits and as a map of the U.S. regulatory gaps. 2019
Instant settlement destroys an existing business practice: without the T+3 grace period, institutional investors can no longer lend idle shares to investors covering short positions. 2019
Digital securities are not recognized under any state's current commercial law, which matters because that recognition governs margining and the pledging of securities as collateral. 2019
The regulatory challenges of blockchain based offerings should be addressed by revising federal securities law provisions to recognize digital securities, to permit broad based trading of equity-equivalent digital securities, and to permit their margining. 2019
The SEC has developed neither blockchain-specific offering disclosure standards nor retail investor protection measures particular to blockchain based offerings, leaving issuers without guidance. 2019
Despite an early call for regulatory leadership from Commissioner Stein in 2015, the SEC has not addressed core recognition questions for blockchain in finance, including cryptocurrencies, tokens as securities, and DAOs as investment advisers. 2019
The SEC's rejection of the Winklevoss Bitcoin ETF, reasoned on Bitcoin's unregulated nature and susceptibility to fraud, reflects agency distrust of the crypto asset class as a whole rather than a narrow product objection. 2019
Self regulatory organizations occupy a distinctive position, holding some regulatory authority while remaining beholden to the SEC, which makes them the right actors to educate the SEC toward a more crypto friendly stance by demonstrating successful use cases. 2019
Widespread retail investor trading of digital securities, including the ability to margin them, is the linchpin of survivability for blockchain based securities offerings; without retail access the technology may remain marginalized in the offering process. 2019
Validating blockchain as a cost effective means of supporting securities offerings does not by itself increase capital raising for private companies, because outside of unicorns there is unlikely to be broad retail interest in privately placed digital securities or in securities trading on a single non-scalable ATS. 2019
Using blockchain as a more efficient public offering medium will almost certainly require modifying the regulations governing the offering process, the processes for offering, settling, and administering securities, and the roles of market participants built up over decades. 2019
The ICO share of total blockchain startup fundraising collapsed from about 80% to roughly 35% by August 2018, recovered only marginally to 40% to 50% through February 2019, and then fell to 20% in March 2019. 2019
ICOs changed the venture funding market because they provide investors liquidity far faster than the traditional venture capital path to a late IPO or acquisition, letting venture funds capitalize on profits early. 2019
During the ICO boom years the venture capital market in the decentralized technology sector ground to a halt, and the later demise of the ICO market reversed the trend back toward venture funding. 2019
The 2018 ICO boom exposed a core limitation of blockchain technology: ICOs sold investors decentralized infrastructure products on the assumption that a baseline infrastructure already existed, and that assumption proved false. 2019
The shift of the digital asset market back from the ICO model to the venture model since late 2017 has reduced, not increased, diversification for investors. 2019
ICO funding collapsed as a share of blockchain startup fundraising, falling from 80% to around 35% by August 2018, recovering only marginally to 40% to 50% between September 2018 and February 2019, and dropping to 20% in March 2019. 2019
The legacy private investment fund model delays liquidity: the investment process is long, complex and time intensive and leads up to a very late liquidity event in the form of an IPO or acquisition, which is why funds seek the early liquidity cryptocurrencies provide. 2019
Recording all transactions in the public blockchain is what lets LendingRobot comply with its best execution obligations, making the public ledger a compliance instrument and not only an investment record. 2019
Regulatory concerns and lack of market confidence were the cited reasons for postponing the token sale of GiftCoin, a charitable donation tracking project that launched in 2017 and shut down in June 2018. 2020
Under current securities laws, DAOs governed solely by smart contracts are restricted in their ability to pool assets and generate profit, because those laws limit their ability to fund ecosystem development and deploy capital efficiently. 2020
Equity funding and token funding are substitutes: because equity investment in a blockchain startup makes issuing a digital currency both less likely and less necessary as a funding source, a market shift back toward equity funding should shrink the total volume of digital currencies issued. 2020
The funding sources for digital asset and blockchain startups cycled through four stages since 2016 and 2017: equity funding, then initial coin offerings, then equity offerings, then initial exchange offerings, and back to equity funding by the early 2020s. 2020
The assumption by ICO issuers that token sales let them circumvent securities registration and disclosure requirements proved to be a fallacy for many U.S. issuers, who faced increased SEC enforcement actions in late 2019. 2020
By 2019 the ICO market had lost its defining advantage over venture capital: because most ICOs between 2018 and 2019 imposed one to three year lockups, neither market offered early liquidity to investors or issuers, making the two substantively similar. 2020
Once the staggered private sale discounts of up to fifty percent are counted as a cost of capital, the cost structure of an ICO is arguably significantly higher than that of an IPO, notwithstanding the ICO's lower legal and offering expenses. 2020
ICO issuance exceeded venture capital financing of startups for the first time in the second quarter of 2017, with $210 million invested through ICOs against $180 million invested through traditional venture capital funds. 2020
Initial exchange offerings emerged as a market response to the near disappearance of the ICO market in January 2019, driven by the cryptocurrency exchanges that were most affected by the collapse. 2020
The IEO reinserts an intermediary into token offerings: the exchange screens the offering and the issuer no longer interacts with investors directly, reversing the direct issuer to investor structure of the ICO. 2020
Capped ICO raises, adopted by the crypto community to reduce investor uncertainty about platform valuation in uncapped raises, backfire because the cap creates strong incentives for investors to get in first, raising the likelihood of retail investor frenzy. 2020
The absence of mandatory disclosure obligations for ICOs leads promoters to make irregular disclosures or none at all as time passes, producing a significant lack of transparency in the ICO market. 2020
ICO sale terms are not fixed at launch: promoters can alter the smart contract to change the sales rules mid course during an offering, a risk factor for retail investors that has no analogue in a registered offering. 2020
Under current securities laws, DAOs governed solely by smart contracts are restricted in pooling assets and generating profit, because those laws limit their ability to fund ecosystem development and deploy capital efficiently. 2021
Self-custody of securities declined in prevalence after the Stock Market Crash of 1929 because investors recognized how inherently risky the bearer certificate system was. 2021
The paper certificate system failed at scale: trust companies and intermediaries were overwhelmed by changing ownership records, and from 1967 to 1970 a reported $400 million in securities was lost or stolen. 2021
The inefficiencies of paperwork based custodial requirements are what produced the first central securities depository, which substituted electronic book entry records for the physical exchange of certificates. 2021
The ICO share of blockchain startup fundraising collapsed from 80 percent to around 35 percent by August 2018, recovered only marginally to 40 to 50 percent between September 2018 and February 2019, and then fell to 20 percent in March 2019. 2021
Government controlled regulation of the evolving digital asset space was perhaps the leading decentralization neutralizer of the early 2020s, as regulators sought to fit decentralized solutions into existing regulatory infrastructure and discussed but did not seriously consider carve outs and safe harbors. 2021
Expanded patentability chills open source contribution because developers fear inadvertent infringement yet typically lack the knowledge and skills to determine whether their contribution infringes an existing software patent. 2021
Centralized securities bureaucracies are slow to update their regulations, so those regulations often hurt the very people they were designed to help. 2021
Regulatory approaches of the early 2020s largely undermined the evolution of decentralized technology, because decentralized solutions at their core negate external control, censorship, and oversight while the legal initiatives treated government control as indispensable. 2021
CRDAO code review insurance is funded from the CRDAO Code Review Pool, which consists of the assets raised during the CRDAO token offering plus ten percent of any incoming code review job revenue. 2021
Although the Shasper Network itself is permissionless, the SDAO deliberately imposes a prior registration requirement in order to push validator candidates to educate themselves about network requirements and to attend to the documentation. 2021
Traditional VCs often cannot effectively compete with the ever increasing array of decentralized token offering avenues. 2021
Alternative early round funding methods matter because they get entrepreneurs over the VC investment threshold or help them bypass the VC model completely. 2021
At its peak in the 2019 cycle the volume of initial coin offerings surpassed venture capital firms and business angels as a fundraising method for startups. 2021
A DAO token sale can be drained at the moment of closing: in the Anubis DAO sale 13597 ETH was removed from the token sale pool and sent to another address as the sale was about to close, and because the launch platform had not been compromised the loss was attributed to an inside rug pull. 2022
Stocks and cryptocurrencies look similar enough, both traded on markets at fluctuating prices, to invite similar regulation, but they diverge in their potential for abuse, their nature, their acceptance, and their use. 2022
Legal uncertainty about crypto exchanges exerts a chilling effect on the market, and increased liquidity may follow once the market gains greater clarity on the legal issues surrounding this asset class. 2022
Even after the ICO boom of 2017 and 2018, many digital asset projects and token launches are designed with the primary focus on benefiting the founding group, which often finds creative ways to cash out of the project after a successful run. 2022
The foundation model for token issuance is a core form of centralized top-down governance, and most ICO projects were governed by a small group of individuals rather than by the community at large or a DAO. 2022
ICOs that allowed their token to trade before the underlying product existed, at least in beta, created significant risk for investors because the product might never go live and the token could lose its value entirely. 2022
The lack of a clearly delineated nomenclature for the term securities token has produced divergent uses and interpretations of that term, especially in relation to the term utility token. 2022
Securities tokens are typically investment contracts while utility tokens typically provide their users with access to a product or service, even though the lines between the different token types are blurred regularly. 2022
The boundaries between the different types of tokens are regularly blurred, so the securities token versus utility token distinction functions as a typical case distinction rather than a clean partition. 2022
Securities tokens involve an underlying interest or function of the token to replace actual financial securities such as shares or equity in legacy businesses. 2022
A key commonality that permits delineating securities tokens from other token designs is that securities tokens derive their value from an external tradeable asset. 2022
The underlying assets of securities tokens, such as corporations, earning streams, or entitlements to interest payments or dividends, are identical to the underlying assets of equities, bonds, and derivatives. 2022
The literature on securities tokens converges on two commonalities: that a securities token functions as or is synonymous with traditional security assets, and that securities tokens are subject to traditional securities regulation. 2022
Under the Howey framework the U.S. Supreme Court supplies the investment contract analysis that determines whether a digital asset carries the characteristics of a typical security. 2022
For digital assets the decisive element of the Howey analysis is whether the purchaser of the token has a reasonable expectation of profits derived from the efforts of others, which the SEC divides into reliance on the efforts of others and reasonable expectation of profits. 2022
None of the SEC's listed characteristics bearing on reliance on the efforts of others is individually determinative; the element becomes more likely to be met the stronger the presence of those characteristics. 2022
Rather than replacing legacy financial services as securities tokens do, utility tokens are designed to give users future access to a product or service that may or may not exist at the time of the utility token issuance. 2022
Utility tokens are not investment contracts and not investments because they are meant for a good or service, and they are typically exempted from federal securities laws if they are properly set up. 2022
Merely calling a token a utility token, or structuring it so that it provides some utility, does not prevent the token from being characterized as a security. 2022
Under SEC guidance a token sold for use or consumption by purchasers may fall outside classification as a security, and the SEC lists characteristics whose stronger presence makes a token less likely to be considered a security. 2022
Utility tokens can be distinguished from securities tokens along several core factors: the purpose of the token, associated valuation, associated rights, user expectations, and regulatory status. 2022
A utility token's value depends on its functions and therefore correlates with actual demand for the token, so a scaled up project with a high number of users usually yields increased utility token value, whereas a securities token's value correlates with the value of the issuing company. 2022
Securities token users typically expect the value of the issuing company to be directly tied to token value, while utility token users typically expect no relation between the issuer's current valuation and the value of the utility token. 2022
The regulatory status of securities tokens is rather well established, whereas the regulatory status of utility tokens remains unclear. 2022
The Howey test operates as the practical sorting device between the two categories: a token that passes the Howey test is deemed a security token, while a token that does not qualify under Howey is often classified as a utility token. 2022
The term securities token is fairly well defined as of 2022, and additional regulatory guidance will continue to delineate its central features and distinguishing characteristics. 2022
The absence of clear regulatory direction from the SEC and state governments helps explain why many DAOs take minimal action to establish regulatory compliance within their organizations. 2023
The 2017 ICO wave democratized access to investment and spurred blockchain innovation, but the absence of regulatory oversight produced numerous fraudulent projects, which exposed the need for robust economic models and regulatory frameworks inside token ecosystems. 2024
The collapse of the metaverse boom forced Silicon Valley firms with metaverse exposure to pivot toward stablecoins and crypto-based rewards, replacing speculative virtual worlds with regulated, utility-centric fintech rails. 2025
Making LER rewards utility-only and non-transferable, in the manner of soulbound tokens, is what keeps them functioning as loyalty incentives rather than speculative assets and is what aligns them with MiCA and SEC exemptions. 2025
The absence of fiat par-redemption combined with limited acceptance inside merchant ecosystems makes LER rewards closed-loop utilities, which is what removes their classification as electronic money tokens or securities. 2025
LER can be engineered outside the Howey test by keeping reward units consumptive as discounts or credits, non-yielding, unmarketed for appreciation, and by disabling secondary trading. 2025
LER must maintain a visible separation between equity tenure verification and reward attribution, so that vouchers operate as loyalty entitlements and do not represent equities, dividends, or profit shares. 2025
Because Landreth holds that instruments carrying equity attributes such as dividends or voting rights are securities, LER rewards cannot include any such features and must function as independent loyalty perks. 2025
Regulatory uncertainty, in particular the timeline for SEC approval of the NASDAQ and Dinari tokenization frameworks, could delay LER implementation. 2025
LER airdrops fall outside SEC proxy solicitation rules because a neutral pro rata distribution to all verified long-term holders, not conditioned on voting conduct, is not an inducement to vote. 2025
LER units are not securities because they fail the third and fourth Howey prongs: they carry no expectation of speculative profit and their accrual does not depend on the entrepreneurial efforts of others. 2025
Non-transferability is what defeats the expectation of profits prong: because LER vouchers cannot be listed, traded, or resold, no capital appreciation is possible and their value comes from merchant redemption rather than issuer performance. 2025
The fourth Howey prong fails because LER accrual is automated by smart contract and driven by the shareholder's own decision to keep holding, leaving the issuer's role ministerial rather than entrepreneurial. 2025
The common enterprise prong is the unresolved part of the analysis: vertical commonality may well be present through the merchant network, and inconsistent district court precedent leaves LER's status under this prong uncertain. 2025
The REP token system deliberately replaces vague, appointment-based categories of registered legal expert and stakeholder used in other proposals with a transparent, incentive-compatible, self-policing credentialing system. 2025
When foundational work earns no downstream credit, the contributor's optimal strategy shifts to hoarding knowledge or publishing only when full value can be captured personally. 2026