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From the SEC's filing:

> Grams are securities because the Initial Purchasers and subsequent investors expect to profit from Telegram’s work: the development of a TON “ecosystem,” integration with Messenger, and implementation of the new TON Blockchain. Grams are not a currency because, among other things, there are not any products or services that can be purchased with Grams. Rather, there is an expectation on the part of investors that they will profit if Telegram builds out the functionalities it has promised.

It continues:

> The definition of a “security” includes a wide range of investment vehicles, including “investment contracts.” Investment contracts are instruments through which an individual invests money in a common enterprise and reasonably expects profits or returns derived from the entrepreneurial or managerial efforts of others. In a variety of circumstances, courts have found that novel or unique investment vehicles constitute investment contracts, including interests in orange groves, animal breeding programs, railroads, airplanes, mobile phones, and enterprises existing only on the Internet. As the U.S. Supreme Court has noted, Congress defined “security” broadly to embody a “flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.”




Your first quote is interesting, as that definition fits quite well collectible items. As the brand grows the value of the collectible also grows, and the collectible is purchased to make profit (or can be purchased to make profit; maybe I do the reverse and by GRAM just for the fuzzy feeling it gives me). Yet we do not see such actions taken against companies that produce collectibles.

This is probably because when adding the second, you see there is a major theme of profit redistribution. In all of those cases profit is collected centrally and then redistributed. With a collectible or a token such as gram it is not -- the item may become more valuable, partially due to activities of the creator, but it is not a profit sharing scheme.

So... do Telegram's tokens grant you some definite share of their future profits? You're giving them money, but there is no legal recourse to claim a return from what I can see.


Collectables usually fail the "common enterprise" prong of the Howey test. Unless the operator is manipulating the market. Then, trouble. "In a fraudulent business scheme based upon the secret and dramatic manipulation of collectible stamp values, Escala and its former CEO, Manning, violated the antifraud and reporting provisions of the Exchange Act...."[1]

[1] https://www.sec.gov/litigation/complaints/2009/comp20965.pdf


I'm not a lawyer, but I think if you marketed a collectible as valuable to US residents because its price will rise due to your efforts to promote the associated brand, you would come under SEC jurisdiction by passing the Howey test.


> So... do Telegram's tokens grant you some definite share of their future profits?

Effectively, yes. People who buy these contracts are funding the development of the TON Network. The promised reward is in the form of digital coins on that yet-to-be-developed network. The contract only pays off if Telegram's development succeeds. It's effectively an investment in Telegram.


So it sounds like a kickstarter. Does the SEC regulate those? Realize the IRS has ruled cryptocurrency isn't any different than property.

It looks like they claim they are allowed to (https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfu...) but at the same time in various businesses it is normal to take the money before a thing is built, that's just usually how it has to work.


Kickstarter doesn't give any money back to funders; they get a pre-defined good based on how much they give.

There is no reasonable expectation of profit for people funding via Kickstarter.


If someone would make a kickstarter that'd promise money returns, then yes, SEC would get involved.


Yeah, and Telegram doesn't promise any return as far as I can tell.


Telegram promises Grams (digital coins), to be delivered once the TON network is operational. Telegram even projects what the price of a Gram will be on the market.

This is a vehicle for investing in Telegram's business. If you buy this contract, you're giving Telegram money, which they promise to use to develop a new service. They promise to give you a cut of the value created by that new service. This is very much like a stock offering.


Collectibles are not exclusively purchased to be resold at a higher price ad infinitum. They are at least physical items.


>Collectibles are not exclusively purchased to be resold at a higher price ad infinitum.

Neither is crypto.

I use it to buy real things all the time.

Usually at a significant price discount, to boot!


In this case the SEC mentioned that there is nothing you can buy with Grams and there won't be for the near future. All you could do with Grams is trade them on exchanges.


Cryptocurrency. This is about crypto tokens.


A large number of people "invest" in collectibles only to resell them for a higher price. See: beany babies, trading card games, figurines, dolls. Just like those items tokens can be owned though their representation isn't much to look at. I'm not sure that is a useful distinction, unless you can explain further? E.g. why doesn't it apply to intellectual property?

I keep getting downvoted -- I'm not arguing that Telegram has a workable business plan, just that this isn't really something the SEC can regulate.


You can put collectibles on a shelf to impress likeminded friends. Or to feel happy. You can only trade securities and other similar assets. Also, generally if everyone bought figures to resell... I dont know how that can work... There is always an "unlucky fool" who buys from "scalpers" and keeps the item.


How about virtual collectibles in MMOs?


If purchased to resell, then yes it should be and already is mostly made illegal/breach of TOS.

People can buy things to enjoy, not just to resell.




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