Howey Doin?
This topic truly deserves more than one post. It deserves a book, which we have in the works. The key points will be covered here before we turn our attention to what the impetus was for establishing federal securities laws in the next post.
What is Investing?
This is a really loaded question. In fact, we strongly believe that it has to be the starting point for most, if not all of the crypto litigation. As you are probably aware, the SEC sued Binance on Monday, and then Coinbase on Tuesday. To us, it makes our Howey Doin? Series, which we started on June 1, even more timely and relevant.
Why does the question “what is investing?” need to be the starting point? It’s very simple. Imagine Congress passes a law tomorrow and says “Children are prohibited from doing x (fill in the blanks for x, it doesn’t matter),” but does not define the word children. Who is considered a child? Is it a person under the age of 18? 16? Something else? It is quite obvious that this law won’t work for that very reason, and wouldn’t become law in the first place.
Now, you might say, “well, Congress did not define the term ‘investment contract” for a reason. “It didn’t define it, because it wanted it to be flexible.” Fair enough. But, then it begs the question:
How can we (primarily the SEC) protect a class of people, if we don’t know who’s in it?
The simple answer is, you can’t. We need to define our investor universe first, and in order to do that, we need to agree on the true definition of investing.