reSee.it - Tweets Saved By @JoelKatz
@JoelKatz - David 'JoelKatz' Schwartz
We can fight each other or we can align against those who think people shouldn't be allowed to make their own choices. Do we want to repeat the mistake that got us into the mess Trump's getting us out of?
@JoelKatz - David "JoelKatz" Schwartz
I noticed something interesting about many memecoins on XRPL. In many cases, nearly all of their liquidity is in the form of an AMM between XRP and the memecoin. This means that if the price of XRP (say, measured in dollars) goes up, say, 5%, the price of the memecoin (again, measured in dollars) goes up 5% automatically because the AMM maintains the same exchange rate to XRP. Of course, the memcoin's price can change independently of the price of XRP. And an increase in the price of XRP leading to an increase in the price of the memecoin can trigger profit taking in the memecoin even if it doesn't trigger profit taking in XRP. But still, it means that if you hold $50 worth of a memecoin of this type, one component of the future price of the memecoin will be changes in the price of XRP. In effect, you have some exposure to the changing supply and demand for the meme and some exposure to the changing value of XRP.
@JoelKatz - David "JoelKatz" Schwartz
So if you want to hold XRP but want even more risk and even more volatility, consider holding a memecoin whose liquidity comes primarily from an AMM to XRP. ;)
@JoelKatz - David "JoelKatz" Schwartz
Are you telling us that a quorum of ByBit signers all blindly pulled the code they used to decide whether to sign a transaction from the Internet?!
@JoelKatz - David "JoelKatz" Schwartz
I've talked a little bit about US securities law, and I'm going to do that a little bit more. As most of you know, the primary argument that some tokens are securities comes from the inclusion of "investment contracts" in the list of things that are securities. The Supreme Court explained what something had to have to be an investment contract in the Howey case we've all heard of. Since then, there are a number of cases in a number of courts deciding whether particular arrangements do or don't constitute investment contracts. What they've shown is that Howey is a flexible test that can't just be applied robotically. For example, Howey said profits had to be expected to come "solely" from the efforts of others. But even things that are obviously investment contracts can be affected by market forces. So future cases made clear that they don't have to come "solely" from the efforts of others. But what exactly does that mean? And if you look at each requirement of Howey, you can find some case that said you don't strictly need that requirement. Howey says you need an "investment of money" but there are cases that say sometimes something given for free can be an investment contract. If you put all of those cases together, you pretty much get that nothing is an absolute requirement. But, of course, you can't put all them together in one case or everything would be an investment contract. What they say is that the "requirements" aren't so much requirements as indicia to be weighed to see what the actual nature of the relationship between the buyer and seller is. To do this, you have to look back at why we have securities laws at all. We have securities laws primarily to prevent securities fraud. But fraud is already illegal. So why do we need special laws for securities? It's primarily because securities fraud can be hard to detect and punish. If I promise you profits from a business but tell you that there were no profits, how would you show otherwise? Securities laws aim to make securities fraud more difficult to get away with by, for example, imposing disclosure requirements on those who seek money from the public on the promise of returns from future operations. As the Supreme Court pointed out, there are unique legal problems when people solicit investment money from the public that require unique legal solutions. It's through this lens that I think we should look at the various cases deciding what is or isn't an "investment contract" and try to figure out why orange groves were an investment contract in Howey but works of art from early in someone's career aren't even though this funds the artist's later works and buyers hope later works will drive the market for earlier works. Collectibles aren't securities -- but why? Every Howey element is there. I go back to why we have securities laws. It's to ensure that those who get money from the public to build their business can't get away with defrauding their investors. And for that to matter, there would have to be something they could do that would constitute fraud. I think the only way to make this make sense and to get results that align with common sense if to accept that for something to be an investment contract, it has to first be a contract. Or, to put it another way, there has to be some future set of facts that would constitute defrauding the investor. If not, the securities legal regime serves no purpose. This is consistent with every Supreme Court decision I'm aware of if you view it through the lens of nothing being a literal hard requirement. Looking first at Howey itself, the issue in Howey was that there were two contracts and neither of them met the definition of an investment contract. But, of course, a "contract" isn't a piece of paper, it's the entire legal arrangement between the parties. And in that case, that arrangement was an investment contract. There's no dispute that there were future obligations that Howey could have failed to honor. But the most important case to look at is SEC v. Joiner. First, I would argue that regardless of what you actually deliver to purchasers, if you make reasonable purchasers think they're buying a security, that's an offer of a security. So Joiner's argument that they didn't deliver actual securities because there were no future obligations doesn' t matter anyway -- they made reasonable buyers believe they would have future obligations. But more importantly, I think Joiner defines about the outer limit of having an investment contract without future contractual obligations. As I said, nothing is an absolute hard requirement, and in Joiner, you had contractual obligations of the buyers tied to performance of the sellers. As the court itself said, "But, at any rate, the acceptance of the offer quoted made a contract in which payments were timed and contingent upon completion of the well, and therefore a form of investment contract in which the purchaser was paying both for a lease and for a development project." It's the nature of the future obligations between the buyer and the seller and their ties to performances of the seller that would benefit the buyer that made it a form of investment contract. Do you have that with art? Do you have it with other collectibles? I am not a lawyer. I have not discussed this with any lawyers. I have no idea if this does or doesn't reflect the position of my employer (it probably doesn't). There may be some obvious reason this is entirely wrong. But, for what it's worth, it makes sense to me.
@JoelKatz - David "JoelKatz" Schwartz
Why thank you ChatGPT 3.5, that's nice of you to say. https://t.co/2DsOnGhTot
@JohnReedStark - John Reed Stark
Newsflash: Ripple Decision Already in (Big) Trouble SDNY District Judge Jed Rakoff today allowed the SEC to go forward with its case against Terraform Labs and founder Do Kwon. In doing so, Judge Rakoff specifically rejected the distinction made in the Ripple case between public… Show more
@JoelKatz - David "JoelKatz" Schwartz
@JohnReedStark This ruling seems to be based no some very unsual properties of this particular scheme and not the way cryptocurrencies generally work. None of the below, the crux of the reasoning here, applies to typical cryptocurrencies as far as I can tell.
@JoelKatz - David "JoelKatz" Schwartz
@JohnReedStark To be clear, the court also does make it clear that it disagrees with the ruling in the Ripple case and explains its disagreement. But, oddly, it doesn't seem to have based its rejection of that ruling on its disagreement with it but rather in the difference in facts.
@JoelKatz - David "JoelKatz" Schwartz
I guess I read it as somewhere between two possible things: 1) The worst case for fans of the decision in Ripple: The court is saying it disagrees with the Ripple decision because it applies additional tests that are not part of the Howey test and so it won't apply/follow the ruling here. 2) The best case for fans of the decision in Ripple: The court is saying it disagrees with the argument that it should follow the Ripple decision because the reasoning relied on in Ripple makes sense not because it directly implicates the Howey factors but because it indirectly implicates them due to facts not applicable in this case.
@JoelKatz - David "JoelKatz" Schwartz
The put two another way, the court might be saying that there's no rule that secondary sales need to be treated differently from institutional sales because nothing in the Howey test says so. So if the court did so in Ripple, it was either wrong or did so because the facts in that particular case justified that distinction and the court thinks the facts in this case don't justify such a distinction. Those are my initial impressions anyway, for what it's worth.
@dee_bates - Danielle Bates
@JoelKatz @JohnReedStark Find me a case where the court extended securities laws to the secondary market.
@JohnReedStark - John Reed Stark
Thanks Danielle, I totally appreciate your point but this quote from Judge Rakoff is quite compelling though, don’t you think? “Simply put, secondary-market purchasers had every bit as good a reason to believe that the defendants would take their capital contributions and use it to generate profits on their behalf." And this one too: “That a purchaser bought the coins directly from the defendants or, instead, in a secondary re- sale transaction has no impact on whether a reasonable individual would objectively view the defendants’ actions and statements as evincing a promise of profits based on their efforts.”
@JohnEDeaton1 - John E Deaton
John that quote isn’t compelling nor is it illogical, if applied to specific facts. Judge Torres or Judge Rakoff can’t ignore the issue of PRIVITY - or the lack thereof, in many instances. The bottom line is that there isn’t a single case in history where an investment contract has been found with absolutely no privity between the seller and the buyer. Period. And by prvity I mean some level of contact, communication or business dealings. If it’s a direct sale - there’s contact - a transaction between the two. However, that doesn’t mean direct sales are required before you can have an investment contract. For ex, Ripple sent brochures to 100 investors. If after receiving the brochures some of those investors purchased XRP on Coinbase, not from Ripple, there could still be an investment contract, depending on whether Ripple made promises or caused an objective person to rely on the efforts of others in expecting a profit in those Brochures. The SEC could possibly prove an investment contract existed with those receiving the brochure and then buying XRP. But to argue that all XRP purchased on exchanges by people who never received the brochures or don’t even know Ripple existed would be absurd AND it’s never been done in 80 years of caselaw. As a trial lawyer, you know cases are decided on facts and evidence. In fact, Judge Torres acknowledged that some secondary purchasers MAY have bought XRP relying on Ripple’s efforts but that doesn’t turn all secondary sales into investment contracts. Judge Torres cited ACTUAL EVIDENCE in the case demonstrating many secondary market purchasers were unaware of Ripple as a company. I submitted 3600 XRP holder affidavits showing the majority of first time acquirers of XRP were completely unaware of a company called Ripple. Thousands of people acquired XRP for non-investment reasons, to transfer money on the XRPL or access the DEX. Thousands of vendors accept XRP as payment. In my amicus brief I point out Time Magazine accepted XRP as a form of payment. You know damn well Time Magazine didn’t acquire XRP as an investment, considering it almost immediately sold it for fiat. @TapJets accepts XRP for payment and it allows them to fly on the weekends when the banks are closed because XRP solves that problem. Torres’ decision will be validated because it’s the right result and the SEC couldn’t cite a single case to show otherwise.
@Zer0LM - ZeroLatencyManifestation ☀️
@JohnEDeaton1 @JohnReedStark @dee_bates @JoelKatz @reseeit save thread
@GQBader - OverHere ⚽️
@JohnEDeaton1 @JohnReedStark @dee_bates @JoelKatz I (and 1000s of people) would love to listen to you guys discuss your opinions on Twitter Space or the CryptoLAw channel. @CherryEmpress21 and @attorneyjeremy1 too. Thanks in advance 🙏.