Thread by @NYcryptolawyer

1/ For those who have been following my legal scholarship on #securities and #tokens e.g., papers.ssrn.com/sol3/papers.cf…), it is for exactly this moment that we have been doing this work.

The proposed rule amendments focus on “Communication Protocol Systems”.

https://twitter.com/NYcryptolawyer/status/1486579988900028425

2/ These are defined as “a system that offers protocols and the use of non-firm trading interest to bring together buyers and sellers of *securities*”. (My emphasis.)

3/ If most tokens themselves were to be considered “securities”, this would be exceedingly problematic, as @lex_node points out in his excellent piece here:

lexnode.substack.com/p/urgent-consi….

4/ Unfortunately, despite what some might want you to think, that is simply not the law as it stands today.

(I would also argue that it is not good policy to change the law to impose “securityness“ on a token or other asset that is not itself a financial instrument of any type.)

5/ The famous “Howey test” applies by its clear terms to “contracts, transactions or schemes”, not to the asset that may a component of those schemes.

Why?

6/ Because the law recognizes that it is the relationship that is being regulated, not the asset used to part investors from their funds. If two people unrelated to the scheme believe that asset has value and want to exchange it, they are not part of an “investment scheme”.

7/ We will be publishing our highly detailed legal research on this early next week (all 250+ appellate cases on Howey reviewed!).

Please retweet and stay tuned. HMU in DM if interested in collaborating on the published piece. The more great minds on this, the better!

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