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1/ Read through the SEC cases against paragon, airfox, coinalpha, and munchees. Top three takeaways (A,B, C) are below. The SEC is doing a solid job of establishing their case and setting precedents to clean things up.
2/ Three tools the SEC used: (A) "Expectation of profits" -- from the Howey Test, this was the bulk of the case the SEC made. (B) "Efforts of others" -- also from Howey Test. (C) KYC/AML requirements are not something you can gloss over.
3/ (A) -- Expectation of Profits -- For paragon, the expectation of profit was more obvious because there wasn’t a working product. The team mentioned several mentions how the token would “moon”
4/ For airfox's expectation of profits: i/ application for exchange listing and answering the questions why the token can increase in value, ii/promotional materials mention the token will be available on secondary markets, and iii/ marketing targeting at investors, not users.
5/ (B) SEC re-establishes "Efforts of others" - no ambiguity here. No way to argue that any of these companies were decentralized. The SEC made sure to hit this other component of Howey. One-two punch.
6/ (C) The importance of KYC/AML -- Coinalpha offered LP stakes in a fund. The interesting tidbit here was that the investors were actually all accredited. The mistake appears to be not checking accreditation at time of investment. SEC established that KYC and AML are critical.
7/ (A) and (B) are Howey Test and well-discussed. Interestingly most of the emphasis seems to be on establishing the case around the expectation of profit, implying "efforts of others" was trivial/obvious.
8/ (C) is worth noting because it demonstrates a willingness to use other regulatory tools in crypto outside of Howey. KYC/AML are critical and indicates how govts will enforce regs against companies, funds, banks, etc. for not properly following requirements even beyond Howey
9/ Note, the above is not commentary on intent or a value judgement about any of the projects or people involved. Just trying to share some observations from the primary sources as they may be useful to early stage projects thinking about these issues.
