š Director of the SEC was asked... š
Director of the SEC was asked - "What is the current thinking of the SEC in light of the recent court decisions in the SEC vs Ripple case?
š Jeremy Hogan chimed in:
The SEC's pat answer when asked hard questions about crypto regulation is deceptive. It always starts with "The Howey test is clear..., it's been the law since 1946..." Like most pat answers, it's superficial and based on half-truths. Yes, on your first day of law school, you learn that most legal tests are based on "elements" such as is found in the Howey test for whether an asset is sold as a security.
Eg., The test for whether you've formed a contract with someone requires you look at 3-5 "elements."
These tests allow for flexibility in approach and are guided by case law that is built around an articulated test. But WITHIN these elements are all sorts of room for disagreement and litigation.
This is both the key feature and weakness of the common law approach. In the context of a contract dispute or auto accident, the tests work fine (in my opinion).
There has been a problem, a dispute that needs to be resolved, and the elements of the legal test provide a framework for an analysis and resolution. This is NOT the case with crypto.
The problem is that the common law framework/analysis which works good for disputes, is HORRIBLE for compliance - especially when dealing with areas where there is little/no case authority.
Trying to apply the Howey "elements" to various crypto projects is a crapshoot.
This is where the SEC is disingenuous. When confronted with a nuanced opinion from one Judge and the almost opposite opinion from another judge, the SEC can only say "all attorneys know what the elements are." "It's clear."
That has an element of truth followed by a lot of lie.
Yes, any lawyer who reads Howey can rattle off the elements, but APPLYING them to a crypto project with a unique token model is just educated guesswork.
And that's where you would hope that the SEC would do its mandated job and interpret the law, make it clear what is allowed.
But, the guidance from the previous SEC administration was superficial, and even contradictory.
And this SEC seems to have abdicated the "interpretation" part of its mandate and instead is focusing on "enforcement" (and how much $ it brings in every year per its latest video).
For whatever reason, this SEC has decided to only respond "Howey is clear" instead of interpreting the laws for a new technology.
This allows, even incentivizes, uneven and capricious enforcement of the laws.
And although the "test" is clear, the application is anything but.
It's like you go to the gym and say you want to look like Brad Pitt in FightClub and the gym owner gives you a pamphlet outlining how fat is burned and how muscles grow and then says "good luck."
Yes, it's clear how to look like Brad Pitt, but the pamphlet is hardly any help.
And by the way, when you fail to look like Brad later that year, you get kicked out of the gym. And sued.
And yes, this thread was inspired by me feeling old and soft today. Excuse me while I go exercise a little. If I stay old and soft, I hope no one sues me.