While I don't agree with everything that is happening in the ICO space, I don't think the law should always, without question, be held above all. People should be able to interpret and challenge it in ways (with the exception of crimes such as murder etc).
In this case, I think the floodgates are open. The SEC and CFTC can't go after everyone, so by that reasoning, some people will be able to (maybe illegally) sell unlicensed securities through these ICOs. Some of those will do well and some of these investors will make bank. Others will lose their shirt.
What this whole ICO thing shows is that perhaps fundraising should be more deregulated in certain areas. Artificially limiting investment opportunities to HNWIs, while a sane approach, isn't working. You can keep enforcing and going after hundreds of ICOs, but it's not likely they have the resources for that. That's the equivalent of putting your head in the sand while not realising an uprising is happening.
For example: why not make it possible for companies to raise at most $25K per person, from people who do not classify as a HNWI? The law should be shaped as the world develops. And that's what I think will eventually happen. The world shouldn't be shaped around the law.
That’s one hell of a bet to encourage others to take. (You aren’t encouraging anyone. But the original article is.)
> limiting investment opportunities to HNWIs, while a sane approach, isn't working
I used to believe this. Cryptocurrencies have shown me the existing rules are closer to being correct. Given the chance to discern fraud from fact, investors without teams of lawyers bought into every single form of elementary fraud the Securities Act of 1933 successfully, to a broad degree, stomped out.
Cryptocurrencies’ buyers aren’t investing. They are gambling.
The fundamental problem is diligence costs money. In the public markets, reporting requirements shift that burden on companies. Many companies don’t want that burden. They stay private. To diligence them, investors must be able to bear the cost of diligence and risk of their investment.
Given VC investors, on average, fail to systematically outperform public markets, I fail to see the merits of the case “investors who invested in stupid things A (cryptos), despite having access to sensible thing B (registered securities), should be given access to marginally-less stupid thing C (unregistered securities).”
Not encouraging anyone to do an ICO or sell unlicensed securities, but as with anything, it's a situation of risk vs. reward. And the odds are in your favour (especially if you're not US based).
Any high risk investment is a gamble. Most cryptocurrencies are garbage, useless and will eventually disappear. But several of them (in my view) are interesting and will be around. Investing in cryptocurrencies isn't riskier than angel investing in a startup. if you love losing money, invest in 10 startups. You'll most likely lose money on all 10 deals. Your chances of making a massive return by investing in crypto are probably significantly higher.
At the end of the day, if you can risk $1 to potentially make $10 or 20, with an 80% chance of you doubling your money, a 50% chance that you 10x and a 25% chance you 20x your money -- honestly, why wouldn't you do that? Not with your entire net worth, but those odds are just too good not to put some money in.
In fact, I'd say more, anyone who hasn't at least invested some money in cryptocurrencies.. just doesn't like making money. What if Bitcoin actually ends up becoming digital gold? You'll have lost out on the best possible investment in our lifetime. What if Ethereum ends up powering most dApps? etc
That hand wavy math is batshit crazy. This is the exact same argument behind penny stocks. Huge short-term gains don't mean anything if they're followed by craters and you can't time the market. Gambling is all it is.
> an 80% chance of you doubling your money, a 50% chance that you 10x and a 25% chance you 20x your money -- honestly, why wouldn't you do that?
One, you mucked up your arithmetic (80% + 50% + 25% > 1). (I’ll assume you were expressing cumulative probabilities.) Two, you left off the tail of the distribution where one loses money.
Put together, I’d say no to your pitch—schemes promising a greater than 100% chance of making lots of money and 0% chance of losing any are 100% scams.
In this case, I think the floodgates are open. The SEC and CFTC can't go after everyone, so by that reasoning, some people will be able to (maybe illegally) sell unlicensed securities through these ICOs. Some of those will do well and some of these investors will make bank. Others will lose their shirt.
What this whole ICO thing shows is that perhaps fundraising should be more deregulated in certain areas. Artificially limiting investment opportunities to HNWIs, while a sane approach, isn't working. You can keep enforcing and going after hundreds of ICOs, but it's not likely they have the resources for that. That's the equivalent of putting your head in the sand while not realising an uprising is happening.
For example: why not make it possible for companies to raise at most $25K per person, from people who do not classify as a HNWI? The law should be shaped as the world develops. And that's what I think will eventually happen. The world shouldn't be shaped around the law.