Edward Flores's Avatar
Edward Flores
published in Blogs
Feb 11, 2021
Can Cryptocurrencies Pass the “Howey Test”?

Can Cryptocurrencies Pass the “Howey Test”?

Blockchain is enjoying a moment in the spotlight, brought on by the rise of cryptocurrencies like Bitcoin and Ethereum that function as assets on a blockchain protocol. Decentralized applications, or Dapp (pronounced ‘dee-app’), are in early stages of development, but have extraordinary potential to revolutionize the way economic ecosystems grow and function removed from a centralized authority. Cryptocurrency models, which are open-source, peer-to-peer, and encrypted end-to-end, are likely the foundational pieces of the next phases of data storage, social media, and the internet as a whole.

But cryptocurrencies and decentralized ownership are raising difficult legislative and regulatory questions that have roots in an influential court case from the 1940’s, SEC v. Howey Co.

In 1946, a large Florida citrus farm called the Howey Company planned to lease half of its vast acreage “to finance an additional development”. Several local businessmen, anticipating a healthy return, signed the lease contract, establishing a speculative relationship: the Howey Company would work the land, while the investors, with no experience or ability farming citrus, provided the capital and became nominal land owners.

Unfortunately, the Howey Company neglected to notify the Securities Exchange Commission (SEC) of the arrangement, per the requirements of the 1933 Securities Act. Having violated federal law, the SEC issued an injunction, which was rebuffed by a Florida appeals court. A series of back-and-forth legal battles ended with the US Supreme Court ruling that Howey’s contracts were indeed investment contracts, and needed to be regulated as such.

 

 

SEC v. Howey Co. birthed the “Howey Test,” which is used to determine whether SEC jurisdiction over securities applies. The test defines the sale of a security as when a transaction’s value hinges on another’s work. This test is being applied to the most-pertinent blockchain questions, primarily because fundamental tenants of decentralized apps and tokens – anonymity, autonomy, decentralization – are rendered useless if crypto owners must register with the SEC.

Naturally, the Howey test has raised questions about coin ownership and initial coin offerings (ICOs). Coinbase, in collaboration with Coin Center, Consensys, and Union Square Ventures, recently issued a paper called “A Securities Law Framework for Blockchain Tokens”, addressing that question by advocating that all decentralized apps be designed in accordance with the Howey test. The paper includes guidelines for developing blockchain tokens within an open-source framework so they will not be regulated as securities.

The idea is that, if designed properly, blockchain tokens are the equivalent of a franchise agreement. Owners gain the right to contribute to a larger system by holding blockchain tokens – by classifying these tokens as a contract, “rather than a passive investment interest”, owners are not subjected to the legal rules that come with holding a security.

The paper’s pragmatic approach stands to pay dividends as Dapp technology evolves. By removing the legal intricacies that come with security ownership, decentralization can continue to grow efficiently and safely.

Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 07, 2021
4 Tricks Hedge Funds Use to Get Ahead

4 Tricks Hedge Funds Use to Get Ahead

If the stock market were Major League Baseball, hedge funds and institutional investors would be the pros on championship teams while everyday self-directed investors (SDIs) are the benchwarmers in the minors.It’s how they get ahead, and it’s why 90% of SDIs lose money trying to play (invest and trade) in the major leagues. The 4 tricks we discuss below are rooted in one common theme: they all use Artificial Intelligence and algorithms to generate data and ideas.
John Jacques's Avatar
John Jacques
published in Blogs
Mar 22, 2018
A.I. Stock Market Predictions: Head & Shoulders

A.I. Stock Market Predictions: Head & Shoulders

Statistics for the Head-and-Shoulders Bottom Pattern The days where only hedge funds used algorithms to trade stocks are officially over. Now retail investors can use Artificial Intelligence (A.I.  Here’s an example of the algorithm in action: Late last year, Tickeron’s A.I.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Jul 10, 2020
3 Stocks to Buy if Coronavirus Second Wave Hits

3 Stocks to Buy if Coronavirus Second Wave Hits

By analyzing market trends from the first wave, you can predict behavior for the second. Technology stocks have performed at historic levels this year, but the market is severely overbought.To compensate for that, look at performance during Q1 and Q2, the height of global Covid shutdowns.
Edward Flores's Avatar
Edward Flores
published in Blogs
Feb 06, 2021
How to Become the Millionaire Next Door

How to Become the Millionaire Next Door

The Golden Gate Bridge is always a fixture of these walks too, one of man's most beautiful creations.  As we were walking, at one point she turned to me and said, "Man, I'll never have a million dollars."" My girlfriend is 27 years old and works as a graphic designer, making about $75,000 a year.
Alla Petriaieva's Avatar
Alla Petriaieva
published in Blogs
Feb 23, 2021
Is Ethereum’s Bomb about to Explode?

Is Ethereum’s Bomb about to Explode?

Ethereum’s software is set for an update in October.Until it is finished, participants in the Ethereum blockchain must determine how to delay the difficulty bomb – code that necessitates a steadily increasing amount of computer power to mine blocks and unlock rewards – that is already in place.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Aug 07, 2018
When Is the Next Recession Coming?

When Is the Next Recession Coming?

However, we also know that economists predicted 22 recessions out of 11 that took place since 1945. Are there real recession signs we should watch for?Indeed, the answer is yes, and here are a few very important ones: The first one is almost obvious and known to everyone – it is the Fed.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 22, 2020
Central banks have been buying $2.4 billion in assets every hour for the past two months

Central banks have been buying $2.4 billion in assets every hour for the past two months

Some $17.8 billion has been poured into  bond markets over the past week, the biggest move in more than three months.Around $3.5 billion has been invested into gold, the second largest on record. 
Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Feb 07, 2021
Mid-January Short Interest Report Shows 8 Stocks with Good Fundamentals and High Short Interest
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 10, 2021
How to Start Trading Penny Stocks

How to Start Trading Penny Stocks

Penny stocks have long been marginalized within the professional investment community, oftentimes being painted with a broad brush of simply being “too risky.” Leonardo DiCaprio’s depiction of the penny stock peddling conman, Jordan Belfort, in the Wolf of Wall Street certainly didn’t help.Here are four reasons to start trading them now. Reason #1: Let’s State the Obvious -- Penny Stocks are Cheap A single share of Apple Inc. costs over $350.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 08, 2020
US unemployment rate jumps to 14.7%, the highest in series history

US unemployment rate jumps to 14.7%, the highest in series history

The U.S. economy’s employment fell by -20.5 million in April. The coronavirus crisis led to unemployment rate soaring to 14.7% in the U.S, the highest rate in the Bureau of Labor Statistics-tracked series history that goes back to 1948. However, the figures were better compared to several economists'/analysts' forecasts of 22 million job losses and 16% unemployment rate.  Another unemployment measure that includes those who have stopped looking for work as well as those holding part-time jobs for economic reasons also touched an all-time high of 22.8%.