Is DASH a "Security" as defined by SEC?

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ScioMind

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It has come to my attention that the SEC (in the US) considers certain cryptos to fit their definition of a "security," while others are not considered securities. Securities and ICO's are subject to more regulation than non-securities. Does anyone here know where DASH would fall?
 

strophy

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Ryan has stated he believes Dash fails more than one aspect of the Howey Test and cannot be considered a security. The most recent statement from Dash Core on this is in Section VII of this Q&A from last week:

How is Dash going to handle the regulatory crackdown coming due to it being marketed as an investment in a common enterprise (triggering the Howey test)?

Dash is not being marketed as an investment and there is no enterprise selling it, so there is no way it can be considered a security using the criteria in the Howey test.
More legal information here: https://docs.dash.org/en/latest/legal.html
 

solarguy

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As noted by Stophy, this is a big no, and will always be a big no. Anybody that suggests "yes" or that we are in danger of "yes" with regards to the 4 part Howie test, is just spreading Fear, Uncertainty and Doubt. The Dash Core Team has gone to considerable effort to insure that the answer is no, and will always be NO.

I am not suggesting that it is bad to ask the question, or that the OP is engaging in FUD. It is good to be aware of this very serious issue, and do your own due diligence to answer that question to your own satisfaction.
 

dashly

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As noted by Stophy, this is a big no, and will always be a big no. Anybody that suggests "yes" or that we are in danger of "yes" with regards to the 4 part Howie test, is just spreading Fear, Uncertainty and Doubt. The Dash Core Team has gone to considerable effort to insure that the answer is no, and will always be NO.

I am not suggesting that it is bad to ask the question, or that the OP is engaging in FUD. It is good to be aware of this very serious issue, and do your own due diligence to answer that question to your own satisfaction.
Sorry, but you are incorrect. Masternodes make it a security. Money is tied up/invested with an expectation of profits or set dividends. This makes it a security.

No FUD, just facts.
 

solarguy

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Sorry, but you are incorrect. Masternodes make it a security. Money is tied up/invested with an expectation of profits or set dividends. This makes it a security.

No FUD, just facts.
Perhaps you could review all 4 parts of the Howie test, and how Dash ticks every one of those boxes to qualify as a security. Because Dash does not tick all 4 boxes. Therefore, not a security.
 
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dashly

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I have. Are you certain your interpretation (or Dash Core's) does not include an element of "wishful thinking"?... Not trying to spread FUD, just trying to be realistic. I believe most think it is not a security, because they believe the following statement to be false:

"any profit comes from the efforts of a promoter or third party"

I can see many ways that this could be interpreted as true. Not trying to discourage, just foster independent thinking... A lot of these boards suffer too heavily from "group think" and I think it would be wise for everyone to research this themselves and come up with their own conclusion. I'll lay quiet on the subject from here, since I'll surely be labeled a troll for not agreeing with the status quo, I just thought it was important to bring up.
 

solarguy

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Mr. Ignore_The_Dash...

Perhaps later we will look at the entire Howie test, but for now, let's just look at this line:

"The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others."

Who would be the investors? The Masternodes or someone else?

And who or what would be defined as "a common enterprise"?

And who would be "others" the ones putting all the effort in?

You answer/define those three very specific little questions, then we can have a meaningful conversation.
 
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tungfa

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That source speaks to my point. For purposes of potential classification as a security, Dash is not a cryptocurrency "like Bitcoin" because it has

1. Masternodes -- which were for many years advertised as
A. offering a very high yield on the initial investment
B. offering a chance to participate directly in planning and execution of common, jointly-funded "DAO" enterprises like Core group and KuvaCash VCO

and

2. an Instamine (very large portion of initial coin distribution) being held among a very tiny group, which is logically, functionally, and legally equivalent to a pre-mine
A. thus creating a Core Clique that create the appearance of (if not actual) centralization
B. thus incurring similar regulatory scrutiny via Howey tests and ICO crackdowns


Dash claims its unique value proposition is the result of its Masternodes, Instamine, DAO, Core Group, and now, VCOs.

How can Dash claim to be radically different enough from Bitcoin to matter (and indeed be superior) yet turn around on a dime and point to supposedly overwhelming similarities when the regulators come poking around?

One of the tests for ICO is centralization. This month Dash Core is demanding all other projects' budgets be cut to less than $100k/month, while they are demanding >$300k without even giving us the same detailed cost breakdown, milestones, and escrow provisions we demand of all other budget items.

The SEC will certainly notice a supposedly decentralized project's founder-affiliated Cozy Core Clique taking almost 90% of the monthly budget while unilaterally declaring nobody else is allowed to ask for such vast sums (and place themselves above requirements for cost breakdown, milestones, and escrow).


eyyy Demo - u back ?
if u really think u can shill me with "instamine" and "dash clique" u are so wrong ;)
(and lame as usual, u will only end up with your brothers of Demo 1 - 16)
"taking almost 90% of the monthly budget"
nobody is taking anything - go vote ! o_O
 

solarguy

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@dashly and others including myself are already having a "meaningful conversation" TYVM.


-The "investors" are specifically MNOs (with regard to KuvaCash and Masternode ROI) and more generally anyone who bough/held Dash based on the Core Roadmap.

-The "common enterprise" may be the Dash project in general, or a specific product such as Charlie Shrem's debit card, Festy's music events, Bitcart's Amazon hack, or KuvaCash's VCO.

-The "others" putting all the promotional and business development effort in on behalf of MNO investors may be individuals comprising the Dash Core group or any other entity sponsored by the MNO's discretionary budget, such as Shrem, Dash Force News' paid spam writers, or Ben Swan/Amanda type paidshills.
In none of the examples you cite would there have been a promotion prior to investment (a requirement to be a security) with the expectation of profit, "solely from the efforts of others". Kuvacash doesn't work without the Masternodes and the larger Dash functionality. And there was no promotion prior to the granting of tokens, so there could not have been expectation of profit to the Masternodes.
 

solarguy

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"...then we can have a meaningful conversation."

By "we", I meant you and I. I rendered no judgement about the quality of your previous remarks.

It is often difficult to make progress in a complex and technical conversation without properly defining terms.
 

feedbands

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Just going to post this here, some additional clarity and guidance regarding the security issue as the SEC has ruled that Ethereum is not a security, and offered guidance to other projects to help make the determination, and also is offering to work with projects to determine a status.

“In cases where there is no… central enterprise being invested in or where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created,” that digital asset is “out of the purview of U.S. securities laws”, according to William Hinman, the director of the division of corporation finance at the U.S. Securities and Exchange Commission.

https://techcrunch.com/2018/06/14/sec-says-ether-isnt-a-security-but-tokens-based-on-ether-can-be/

And here are the criteria by which they have stated that they are evaluating:

Is there a person or group that has sponsored or promoted the creation and sale of the digital asset, the efforts of whom play a significant role in the development and maintenance of the asset and its potential increase in value?

Has this person or group retained a stake or other interest in the digital asset such that it would be motivated to expend efforts to cause an increase in value in the digital asset? Would purchasers reasonably believe such efforts will be undertaken and may result in a return on their investment in the digital asset?

Has the promoter raised an amount of funds in excess of what may be needed to establish a functional network, and, if so, has it indicated how those funds may be used to support the value of the tokens or to increase the value of the enterprise? Does the promoter continue to expend funds from proceeds or operations to enhance the functionality and/or value of the system within which the tokens operate?

Are purchasers “investing,” that is seeking a return? In that regard, is the instrument marketed and sold to the general public instead of to potential users of the network for a price that reasonably correlates with the market value of the good or service in the network?

Does application of the Securities Act protections make sense? Is there a person or entity others are relying on that plays a key role in the profit-making of the enterprise such that disclosure of their activities and plans would be important to investors? Do informational asymmetries exist between the promoters and potential purchasers/investors in the digital asset?

Do persons or entities other than the promoter exercise governance rights or meaningful influence?
 
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camosoul

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Sorry, but you are incorrect. Masternodes make it a security. Money is tied up/invested with an expectation of profits or set dividends. This makes it a security.
This is a gross misrepresentation of what masternodes are.

The 1000 DASH needed is not an investment. It's an assurance that the MNO will vote and act in a non-destructive manner.

It's more akin to a bonded contractor. Put up the bond, and you're allowed to do work and earn money if that work is satisfactory; PoSe score.

There is no perfect corollary, but what you presented is absolute BS.

Either you're exceptionally ignorant, or you're a bad troll.
 
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camosoul

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In none of the examples you cite would there have been a promotion prior to investment...
Aye, and "investment" is even discouraged. DASH want's to restore the original vision of cryptocurrency, not be the next one-trick tulip...

If someone wants to gamble on that, I guess they can. [shrug]

I can bet on horse races, that doesn't make horses into a security.
 

moneyrig

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It is very unlikely. There is no expectation of profit coming from the efforts of others making DASH very unlikely to be considered a security. Even bitcoin fall in this category.
This statement lays out four main criteria for an asset to be defined as a security:

  1. It must be an investment of money
  2. The money must be held in a common enterprise
  3. There must be an expectation of profit
  4. The profits must come solely from the efforts of others
 

slamdunk

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On the other hand, a security may just be their euphemism for anything they want to screw with/impede.

I had read an article elsewhere recently in which an attorney named Jake Chervinsky described the SEC's strategy in this matter as "guidance by enforcement". Essentially, the SEC smashes little guys (Airfox/Paragon) and works it's way up. At no point do they ever directly confront whether this or that is a security which might reveal an answer that invalidates what they're doing.
 
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