Thread by @bmann

In Canada, the equivalent to the Howey Test for determining whether something is a security is the Pacific Coast Coin case.

Howey was selling ownership in orange groves, with a share of profits from future orange juice as the return.

Pacific Coast Coin was selling bags of silver coins, including an option to buy on margin, saying that silver would outperform stocks / be a hedge against inflation.

The Pacific Coast Coin is quite readable. Here’s a link scc-csc.lexum.com/scc-csc/scc-cs… - from 1977, ruled by the Ontario Securities Exchange (OSC).

There are a few other bits to note about PCC. The buying on margin was encouraged - 90% of the sales were margin. This was a big part of saying “yup, this is a security)

Investors’ money was pooled, and in turn they didn’t have specific bags of silver coins allocated to them.

Also, the sale of the coins was advertised in newspapers, and then prospective investors were sent an info pack by postal mail.

All of that sounds exactly like a lot of utility tokens. Buying into future coins.

Of course, this just means that many token sales DO need to be treated as having Securities law applied to them - in Canada and the US.

I still see a lot of use cases for utility tokens.

As well as things that AREN’T securities — like domain names and airline/other loyalty reward points — that could be implemented as tokens.

It has been suggested by my lawyer friend @evanmthomas that I create “BorisCoin” and then run a precedent setting court case so generations of legal students learn about BorisCoin.

(This is not a good idea - going to court is not fun)

I am not a lawyer in Canada or the US or anywhere, but it makes sense to do your homework and read up on these things.

I’m also prepping for a podcast interview today where I’ll get into these things.

I also find myself defending non-security tokens against everyone from regulators to grumpy maximalists.

I do believe in a millions of tokens future. I don’t want Candy Crush jewels or Aeroplan points or WoW Gold (never mind collectables) to live in walled off economies.

You can code tokens. And launch them. And sell them. And buy them.

Without them being Securities.

Just like how switching Aeroplan points from using a database to using a blockchain doesn’t turn them into securities.

Don’t think of all these tokens as currency.

Karma points. Loyalty. Or affiliations like SportsTeamCoin or GamingGuildCoib are all super interesting things to explore.

Dangers? Yep. You’re making aspects of community interactions explicit & incentivized.