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> TLDR: An investment contract is a type of security. Many securities exist, and they don’t have to be typical stocks and bonds. When selling an investment contract in the US, companies and DAOs are subject to federal securities laws. All they have to do is register their token with the SEC, and disclose complete and truthful information to the investors who buy that token.

Crypto companies and DAOs issuing tokens must determine if they are (or will become) subject to U.S. federal securities laws. Tokens that are sold as *investment contracts* are securities, which means the laws would apply. Many things can be categorized as securities — stocks, bonds, transferable shares, governance and utility tokens, income share agreements (which is what most “creator tokens” are) and more.

Any contract or agreement that is sold to investors with implied or promised expectation of future profit should be considered a security. Using the money raised from token sale to build the product offering classifies the token as an investment contract.

When selling an investment contract or a security, certain information must be disclosed to investors. The purpose of disclosure is reduction of informational asymmetries that may exist between the builders and the investors. One important piece of disclosure covers how the builders (and their effort) will affect the success of the enterprise.

## Framework for analyzing an investment contract

Because investment contracts fall under securities, the same reasoning as the Howey test applies. The SEC staff [offers a framework](https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets) for figuring out if a token is a security in their effort to help. The SEC itself [neither approves nor disapproves](https://www.sec.gov/news/public-statement/statement-framework-investment-contract-analysis-digital-assets) its content.


1. **The investment of money** is satisfied when the token is purchased. It can be bought using fiat currency, another token, or other methods that exchange value for value. For example, giving tokens in exchange for services rendered to further the goals of the token issuer would qualify the sale as *the investment of money*.
2. **In the common enterprise** means pooling each individual investment with other investments into the same enterprise, where distribution of future profits is proportional to the amount invested.
3. **Relying on the efforts of others** whose expertise and decision-making impacts the success of the business that sells the token. This includes creating or supporting a market for the token and its price. One example of how price can be supported is by limiting token supply to ensure scarcity, and building-in burning mechanisms or buyback schemes.
4. **With reasonable expectation of profits** that range from capital appreciation to participation in income sharing. The first part is applicable when investors can sell their tokens on a secondary market to realize their gains. The second part applies when holding a token gives investors rights to dividends or distributions earnings.

## When the token might *not* be considered an investment contract

When assessing if there might be a reasonable expectation of future profits, US federal courts look at whether the token is bought to be used or consumed. If people buy the token not as an investment, expecting it to become more valuable over time, a few characteristics of its use are considered.

* The network on which the token can be used is operational and holders are able and incentivized to use their tokens immediately
* Token is built to maintain constant value or degrade over time, making it unattractive as an investment
* If it’s meant to be used as currency, holders can use it without converting it to another token or fiat
* Token can be used to buy goods or services on the network it runs on, and is the easiest way to pay for them
* Increase in token price is incidental and corresponds with how much demand there is for it
* Token is marketed for use on the network and not as an investment

### Next in our editorial calendar

* How to register a token as a security with the SEC
* When is a token not a security?
* What is a broker-dealer in crypto?
* When tokens fall under the Safe Harbour proposal

Subscribe on [our blog](https://poet.network/blog) to get these posts sent to your inbox.

What classifies a token as an investment contract.

# Are DAO tokens securities according to the SEC?

> TLDR: If you sell someone an instrument or a contract that promises future returns because of the work you’ll do with their money, you are selling a security. An investment DAO’s “governance token” would be a security if the DAO promised or implied that the token’s price would increase because of that DAO’s investments. Majority of governance, utility, and membership tokens are securities.

## The story to date

The first DAO on Ethereum was formed by a German company [Slock.it](https://Slock.it) to “build projects”. It sold tokens to investors to fund them, and promised to share future profits. Investors were allowed to and had ability to re-sell their tokens on trading platforms. Before the DAO could work on any projects, it was hacked, and 1/3 of its funds were stolen. The DAO found a way to get them back.

The SEC investigated the DAO to discern if its tokens were securities and found that they were, under both the [1933 Securities](https://www.govinfo.gov/content/pkg/COMPS-1884/pdf/COMPS-1884.pdf) and [1934 Securities Exchange](https://www.govinfo.gov/content/pkg/COMPS-1885/pdf/COMPS-1885.pdf) acts.

## The definition of a security

A security includes an “investment contract”. That means an *investment of money* in a *company, org, venture, or a project*, with the *expectation of profiting* from the investment that you get *because of work others perform* through their entrepreneurial or managerial efforts. The definition is laid out in sections Section 2(a)(1) of the Securities Act and 3(a)(10) of the Exchange Act and is popularly known as the Howey test.

The definition is meant to be flexible rather than formulaic. How the token is used is more important than what it's called. A "utility token" is not exempt from being defined as a security because it has "utility" in the protocol, such as governance. If the company used it to raise money and gave investors expected of future profits, it's a security.

## Where modern DAOs stand on the regulatory landscape

The act of “investing” in something can take on the form of “investing goods and services” and not money. When a group of people or firms jointly pursue shared (i.e. *common*) goals, they become responsible for success or failure of that enterprise. Any contract they *sell* and promise *others* future *profits* is a security.

Yes, a lot of DAO tokens are securities by definition.

##  What about DAOs that mint tokens but the members perform the work themselves?

The token would be a security if:

1. Members (who buy the token to get access to the DAO) own so few tokens that they can't influence its direction through a vote

2. Members are so inexperienced in the business operations that they are incapable of exercising their partnership powers

3. Members are dependent on unique entrepreneurial or managerial abilities of DAO's founders, leaders, and promoters that they cannot replace them or otherwise exercise meaningful partnership or membership powers.

## Is it bad for the token to be called a security?

No, it just has to be registered to afford its issuers and investors adequate legal protection.

### Next in our editorial calendar

- How to register a token as a security
- Is a token an investment contract?
- When is a token not a security?
- What is a broker-dealer in crypto?
- When tokens fall under the Safe Harbour proposal.

Subscribe on [our blog](https://poet.network/blog) to get these posts sent to your inbox.

Are DAO tokens securities according to the SEC?

`即便我把整个点心架子都撞倒了也没关系。如果有人觉得摔了盘子很重要，他值得被我过年的时候写在白纸条上踩在红袜子下面记恨一辈子。`

朋友，你好！

现在是早上，我清晨总是觉得恐慌，所以我试图搞明白为什么下楼吃早餐如此恐怖。


***

我总是感到恐惧，即便在我看来也是非常没必要的恐惧。比如一些很细小的事情：我害怕领口低于锁骨的衣服，害怕给人发问候语（是快乐还是安康？），害怕吃饭的时候手滑摔了盘子，害怕早晨穿高跟鞋下楼，害怕走路的时候快乐地哼歌，害怕以至于必须剪掉所有海外快消品牌的衣服标签，害怕叫错别人的称呼。我一方面明确知道“这是多大点事儿？”另一方面，这种恐惧让我几乎每一天都在最基本的事情上难以行动。我有充足的理由评估这些事情会给我带来的危险，但这不是我想说的话题。

我的恐惧有理有据，我只是不喜欢被恐惧干扰判断，缺少进展的自己。在我征求建议的时候，人们也会强调困难和危险的方面，我不能说这不对。但如果我相信这是一件有益的事情，那么来自人类的风险、攻击、伤害、阻碍，只要在我能够处理和减少的范围内，它就是值得试一试的。

比如拒绝很多安排好的相亲，比如辞职，比如踏进一个全新的专业，比如拒绝那些明显在戕害我的人和事。

如果去餐厅吃饭对我来说是一种冒险，那么，我会试者思考一下收益是否值得，我可以得到免费的美味的食物，我喜欢吃东西，而且我的钱能够支付赔偿餐具和食物的费用，那么我就可以去餐厅吃饭，并且随机应变。但我还是倾向于那是某个人故意撞了我的胳膊让我打碎了盘子。

如果他想伤害我，他做到了，快四年了我仍然很难在自助餐桌面前放松，我恐惧有人在的餐厅，我总是担心我吃饭的时候被人看到。我都觉得可笑，但每天我都花时间说服自己去餐厅，现在也是，我记住了那个人，我写到这里的时候还是会希望他死。我的本能里没有和解的概念，我甚至记得小学一年级入学的时候一个家长把她的孩子推到了我前面，那个时候我还不知道什么叫加塞，但我记得那个孩子的名字和她甩过我脸的高马尾。

据说排队是一种舶来的文明？我在后来的生活中总是感觉到这样那样的矛盾并且增加自己记仇的名单。但从什么时候开始，我害怕那些被我记仇的人呢？从什么时候开始我意识到被欺负了一次就永远变成弱者了呢？我不知道从哪里来的这种归因，我觉得可能是听人说的。我最近在社交网络请求帮助，也被劝忍气吞声当个心胸宽广的受害者。

据我所知我自学前班就是个心胸狭隘，罔顾校规，挠别人脸挠出血的人，不知何时失去了这部分的自我。这不好，我得回来，我不应该放弃美味的食物，那些可爱的水煮蛋、烤面包片、咸豆腐脑，让我感到幸福，给我能量和营养。

那个让我恐惧吃饭的人，那个让我不得不拖延吃饭，在饥饿的时候靠泡面和麦片充饥的人，从健康、食品添加剂、预防胆结石的角度考虑，他真的该死，我无法说服自己不去恨他。

我在想明白恐惧的可能成因以后，至少在食物的问题上，我尽量鼓励自己去吃新鲜制作的，有蔬菜水果蛋的食物，我甚至制作了食材的rolling weekly打卡页面，帮助我吃那些健康的食物而不是“不恐惧”的食物。我可能永远无法在食堂享受食物，但食堂是我决心踩在脚下的恐惧。

我已经发现我较为坚定的那种决心，往往和痛苦愤怒仇恨联系起来，但无论积极消极情绪，只要它足够强烈和坚固，就可以作为驱动力。我觉得这可能和我总是感到痛苦有关，但让我们面对现实，**一个活人，不可能在这样烂的环境中，感觉不到痛苦。**

最近不是在看星球大战吗，按照设定，公认的战力天花板，走廊战神，正骨专家，伟大的西斯尊主，同人作品中的银河好爸爸达斯维达大人，他的原力黑暗面就是“從一些情緒，如恐懼、憤怒、仇恨、甚至熱情和侵略性中獲得力量。”（星球大战百科全书-原力阴暗面，<https://starwars.fandom.com/zh/wiki/%E5%8E%9F%E5%8A%9B%E9%BB%91%E6%9A%97%E9%9D%A2>）

“那个，安纳金哥哥，你师傅要是知道我想学这个，他不会砍我吧QAQ”

（噗哈哈哈哈，但是星球大战系列真的很不错！请都去看！！）

但我发现通往原力黑暗面的道路也不容易，我的意思是，我的愤怒，痛苦，仇恨转化为坚定的意志、决心、耐心和行动这个过程，我必须把它控制在一个不至于干扰理智的范围，我的目的是不因为失落，恐惧，焦虑遏制我的行动，如果反而让别的情绪干扰就得不偿失了。

但可能要问，为什么不原谅它们，忘记它们，我情感丰富，敏感，自尊心强，这几乎注定我在这个不把人当人看的环境里只能扭曲自己，做不到心甘情愿，我曾经说我是对活着过敏，现在我仍然坚持这个判断。

我怎么想的其实不重要，绝大多数时候我都是由内而外地孤身一人，我只是，我需要想个办法在忍受越来越严重的痛苦的同时保持进度，直到我攒了足够多的凭借能让我跳出去的，我才能真正作为一个普通的活人度过剩下的人生。

抱歉没有校对，因为我可能需要睡一会，才能更好地面对有很多人的餐厅。但我会打消所有对食堂恐惧和对恐惧食堂的感受的恐惧，总之我会迅速地去餐厅，如果我所料正确，今天我可以吃到烧卖、馄饨、煮鸡蛋和辣椒豆腐丝，没有人和噩梦能够阻止我。

\
May the force be with you.（原力与你同在。）

中禅寺千姬

BACK TO DIVERSITY 10 摔盘子真没什么大不了的

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> Disclaimer - The above are links to our relationship with Amazon/associated programs as an affiliate. We will be compensated if you make a purchase after clicking on our links

\


Sabse Sasti Online Shopping: Best Deals 5th March 2022

### Welcome!

Hi, and welcome to my blog & newsletter.

I’m a **Senior Software Engineer at Google** in Mountain View, since September 2017. I manage the Real-time Communications Abuse team within Counter-Abuse Technology.

Beyond that, in my free time, I write quite a bit of TypeScript and React in a handful of side projects.

In my newsletter, I write about my experiences at Google; working with cutting-edge JS frameworks; and more.