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However, the Howey Co. Howey's own fruit groves, therefore, were found to be tied to its leased groves, which qualified as an "investment contract" instrument — or a security. And, in that regard [bitcoin] wouldn't pass the Howey test. Like many other cryptocurrencies such as Ripple, Ether digital currency acts as a "fuel" for the Ethereum blockchain network, which is an open-source distributed ledger technology over which businesses can transact business without a central authority.
Because the Ethereum network is based on open-source protocols, it's relatively easy for new distributed applications to be created for it. Ether acts as an incentive to ensure developers write quality applications because those who write useable code are rewarded in Ether.
The Ethereum Wallet where Ether can be purchased, is a gateway to decentralized applications on the Ethereum blockchain. It allows users to hold and secure Ether and other crypto-assets built on Ethereum, as well as write, deploy and use smart contracts, according to the Ethereum Foundation. The Howey test has been articulated in slightly different ways by different courts, but the test generally determines whether an arrangement constitutes 1 an investment, 2 in a common enterprise, 3 with a reasonable expectation of profits, and 4 to be derived from the entrepreneurial or managerial efforts of others.
There are a plethora of legal and factual issues "that could be teased out," including what is an "investment," what is a "common enterprise" and who are the "others" whose managerial or entrepreneurial efforts will impact token value and how impactful those efforts are, according to Jennings. The determining question for Ethereum and other cryptocurrencies established through ICOs may be whether those purchasing the digital coins had a reasonable expectation of profits, Jennings explained in an email.
That raises the question of whether the potential increase in the value of Ethereum was to be derived from the entrepreneurial or managerial efforts of "others," he said. Context, however, matters. The basis on which Ether was launched is not the context of today in that there was a smaller community of players with the possibility that part of that community included Ether developers, Fallon said.
The ultimate conclusion in an investment contract analysis can often depend on whether the purchasers at that time were motivated by the desire to buy Ether or speculate on its future value. For example, if you were to buy a condominium to reside in, that condominium would not be considered a security because it was bought with the intent to use it. The Howey test is famously flexible, both Fallon and Jennings agreed, and as a result it can be applied in innovative contexts, which could allow Ether to be seen as a commodity.
However, the flexibility also means that the test can allow reasonable people to arrive at differing conclusions, "which can be maddening even for lawyers, who are accustomed to living with uncertainty ," Fallon said. Here are the latest Insider stories. More Insider Sign Out. Sign In Register. Sign Out Sign In Register. Excess supply will get generated and will also lead to weak hands panicking and selling it out.
That will definitely lead to a crash and weak sentiment for that cryptocurrency in the short term. To listen to the audio version of this article click on the play image. Brought to you by tts. If you find it useful please consider upvoting this reply. This post has received a 8. All posts.
Newcomers' Community. Steem Venezuela. Steem POD Team. Comunidad Latina. Explore communities…. Implications on being deemed a security Currently most exchanges are not licensed to list securities. Reply 3. Sort: Trending Trending Votes Age.
The SEC's point man on cryptocurrencies and initial coin offerings (ICOs) says that bitcoin and ether are not securities but that many. Ripple's fight against a lawsuit from the Securities and Exchange Commission has gone "exceedingly well," CEO Brad Garlinghouse said. The ripple effect stemming from the SEC v. Ripple Labs lawsuit could eventually lead the SEC to officially determine the nature of Ethereum.