Thread by @msantoriESQ

🚨 BREAKING: SEC Issues second-ever no-action letter to the seller of a token ...which doesn't seem to have even a single indicator of security status except that it happens to be a token wait why did we need a no-action letter for this 1/

2/ Today, Pocketful of Quarters was granted no-action relief for an ERC-20 token designed solely as an in-game currency. Quarters are a stable medium of exchange with no investment characteristics. They aren't used to raise money and cannot be transferred out of a closed system.

3/ The idea behind the product is that gamers spend a lot of time collecting in-game currencies, but when they're done playing the game, they just leave the currencies there. So why not give them real-world value?

4/ Enter "Quarters", a token with an unlimited supply, constantly available for purchase from the issuer or its affiliates at a fixed price. Gamers can earn Quarters in-game, can buy them from the issuer, or get them through promotions.

5/ Critically, Quarters will be functional at the time of sale. PoQ isn't making any promises of future functionality, so even if Quarters weren't stablecoins, any expectation of profits couldn't be "from the efforts of others" as required by the Howey Test.

6/ BUT WAIT THERE'S MORE. Quarters are 🎶🎶locked down like a penitentiary🎶🎶

7/ That is to say, Quarters can't be resold, transferred outside the closed system of game developers or listed on a secondary market. So really, where could the expectation of profit even come from?

8/ Plenty of other elements of this offering bring Quarters outside of the world of securities, like: the purchase price of quarters must correlate to the market price of accessing games (according to the SEC)

9/ Also, errbody must be KYC'd.

10/ Congrats cryptoland, we have achieved no-action letter status for... arcade tokens.

11/ Why on earth do we care about this? How is this at all interesting for those following the developing regulatory treatment of utility tokens?

Well, actually it's quite interesting. A bit somber, but also the way of our world, and no less interesting for it.

12/ First, this is an important development from the SEC because it is actually a quantum more permissive than their last no-action letter for Turnkey Jet. 'member that one? A jet company sold coupons for private jet flights represented by tokens.

13/ Ahhh sweet memories...

https://twitter.com/msantoriESQ/status/1113458502264074246

14/ While in Turnkey Jets the tokens were not transferable *at all*, here, the whole purpose of the token is transferability to third party developers. This is an important distinction, and in terms of regulatory baby steps, it's a great leap forward.

15/ This is the regulatory process working, and on regulatory timelines, at lightning speed.

16/ It's a little sad though isn't it? We live in a world where innovators like PoQ need to spend so much time and money on getting no-brainer reassurances like these, because if they don't, then their banks get nervous, their business partners get nervous and they get frozen out

17/ Such is the way of our world. PoQ will catch flak even though this is a legal victory. SEC will catch flak even though they're pushing the envelope and responding to innovators' calls. Worse, banks will insist on expensive, hollow symbols like this from the next innovator...

18/ (good news: I'm reading @weiks correct me in real time - players need not be KYC'd)

@weiks 19/ Sure, you might argue this is rent-seeking, and they could have just done this with @PaxosStandard (which you can buy, sell, store, send and receive on @blockchain!) but

@weiks @PaxosStandard @blockchain 20/ Actually I don't know why you wouldn't do that.

I'll let @weiks pitch his book here and RT

@weiks @PaxosStandard @blockchain 21/ As is tradition, here is the source material on which my very important and detailed analysis is based. Give it a read your own self and tell me what you think. What did I miss?

sec.gov/corpfin/pocket…