Understand why The DAO is the simplest way to belong to securities


nnnOn Tuesday night, the US Securities and Exchange Commission (SEC) ended a few months of speculation, issued a landmark report, indicating that the DAO based on the block chain project under the US law has been formed Securities issue. And the more important significance of this report is how the existing laws and regulatory frameworks of securities law apply more broadly to cryptographic tokens. This leads to the explanation of how the key concepts known as Howey Test apply to The DAO and other tokens. This article uses a fable to help all those who are not familiar with the concept of a more thorough understanding of the importance of this complex concept.n
nnTranslation: Clovern
nOn Tuesday night, the US Securities and Exchange Commission (SEC) ended a few months of speculation, breaking the long-standing block for the block chain silence, and issued a landmark report. The report shows that the block-based project, called The DAO, has already constituted the issuance of securities under US law.n
nHowever, the importance of the report has gone beyond its applicability to The DAO: it helps to describe how the existing laws and regulatory frameworks of securities law are more broadly applicable to encrypted tokens. More specifically, it shows how a key concept (known as “Howey Test”) applies to The DAO and other tokens.n
nFor those who are unfamiliar with the concept, Howey Test dates back to the Supreme Court’s decision in 1946, which establishes the basis for determining whether anything that is sold in the United States or to US investors is a kind of security.n
nHowey Test is useful because it helps to define some of the most important aspects of federal securities law into a relatively simple formula.n
nIn an important meeting on Wednesday night, Howey Test’s story was broken down by Cooley’s partner and financial technology head Marco Santori into a very simple story. And the following is a review of the views of Santori in Cooley’s activities.n
nSantori is known as the “chief digital money lawyer” by American Banker magazine and is seen by many in the field as one of the key figures in the legal theory of money. This was shown during his speech at Cooley’s event.n
nMost of the descriptions of Howey Test are as obscure as legal documents; but Santori’s story sounds more like a fable:n
nnA long time ago, a man named Howey had an orange forest.n
nHowey said: “Although I have this piece of orange forest, but it can not make money through it, because only money can make money.n
nTell you a message. I will sell this piece of orange to you, and as an exchange, you will get the land produced by any profit.n
nI am responsible for farming the land, picking oranges, squeezing juice, you have to do is pay me money.n
nThe prosecutor said: “This is a kind of securities.n
n”This is a security,” the SEC said.n
nHowey said, “No, no, it ‘s just a little bit of the place where the oranges are sold.n
nUltimately, the Supreme Court said: “that is a kind of securities” – because it meets these criteria: there is a money investment. And constitute a common cause. While the expected profit is mainly from the efforts of others.n
nnn
n”Reliable” regulationn
nAt this time, you may want to ask some questions.n
nHow did the Howness Test have been in existence for more than 70 years? Yes, it is true. And the existence of the underlying legal framework of Howey test as the test standard (mainly the 1933 Securities Act and the Securities Exchange Act of 1934) is even more distant.n
nHowever, as Santori said in a panel discussion, this composite regulatory system is still very effective and applicable for half a century and will continue to be effective. This is “a proof of a reliable, principled regulatory basis.”n
nAlthough the initial digital tokens issue (or ICO) is perhaps the latest combination of all software technology brought about by the latest innovations, but the SEC’s new report once again affirmed the world no new things.n
nUsing the lessons learned from the SEC’s DAO report, we can take a closer look at a whole new story.n
nThen we show how to adapt this ultra-modern scenario to this legend for decades:n
nnNot long ago, a group of developers launched the DAO project.n
nThe DAO developers said: “This is some of the central to the project, and they can not get the funds, because they need to use money to make money.n
nTell you a message. We will write the code and sell the token, and as an exchange, the person who buys the token will receive any profit from the items.n
nWe are responsible for writing code. They will choose the project. Then these projects will flourish, and everyone will be profitable.n
n”This is a security,” the SEC said.n
nThe DAO developer said, “No, no, it’s just selling tokens.”n
nEventually, the SEC said, “This is a security.” Because it applies to Howey Test: There is a money investment. And constitute a common cause. While the expected profit is mainly from the efforts of others.n
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nComplex conceptn
nPerhaps we should call it “DAO Test”. To be serious, it is important for investors to understand the legal concepts involved in coin investment.n
nThe same, do not ignore the complexity of the law casually explain the risks and risks are also essential.n
nOtherwise, as Santori specifically pointed out for the SEC’s report:n
nn”Many of the tokens are in line with this standard, but there are a lot of nonconformities, and it is important to realize that some people will look at the problem and say, ‘It looks like a security and feels like a Securities, then it must be securities right. ‘Far from these people. This lawyer from the actual paper is the worst. Some of these things are securities – but some are not.n

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