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Comment by everdev | Hacker News Reader

This seems to be a trend in the US with crypto and marijuana as examples. If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market.

I like that both are gaining acceptance, but to the early entrepreurs willing to sell a clear security without filing or the growers willing to sell a controlled substance underground, go the spoiles when the states and federal government bend to the will of the market.

Unfortunately, it creates an unfair playing field for those willing to take a criminal risk and puts those that try to do things legally from day 1 at a disadvantage.

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Don't forget Uber and Airbnb ignoring taxi laws and hotel/zoning laws, then expecting that governments change the law to suit them.

This is a good point... But actually they call themselves ride sharing instead of commercial activities.

And yet the vast majority of Uber drivers I talk to derive their primary income from being an Uber driver.

And likewise, the majority of listings on Airbnb are properties that aren't normally resided in by the owner.

The whole "sharing economy" is a cheap veneer. It's commercial activities at heart.

How is that an unfair playing field? People being rewarded for productive risk taking is one of the fairest things I can think of.

Pablo Escobar was on to something then, ... well until he wasn't.

His crime was he got too big and bold. Fly under the radar and you'll survive.

Even facetiously, that's a hard point to make. Cocaine has been illegal in the US for a very long time.

Well, I called the SEC and they said they can't think of a way how these ICOs are not violating the Howey Test. Basically that in time, they be prosecuted.

So, those of us that decide that the potential for financial or criminal consequences is not with it miss out when it turns out all but the most egregious scams will get a pass.

Through my work we’ve been in contact with the SEC as well, a few times, and they are pretty clear on not stating any real absolutes unfortunately. We do more of the service side of things for the institutional space, however - so perhaps our questions were a bit different.

Sure, I understand where the risk is coming from. I don't understand where the unfairness is coming from.

I guess because it's unfair to people who view breaking the law as an unacceptable risk when those who bend or break the law are profiting.

Because what you classify as "taking a risk" most of us classify as "potentially breaking the law."

Breaking the law shouldn't be considered a competitive advantage.

That depends on what the law is and if it is ever enforced.

So, you'd consider for-hire hitmen a fine business, if they pay off your police?

but it is, and always will be, a competitive advantage. that's part of why the law should be kept as small as possible.

Well, yeah, exactly, but that's why it's the law. Stealing is a competitive advantage (for the thief), but a net negative for the society, which is why it's illegal and persecuted.

I agree with you, that the law should be as small as possible, but you're missing the second part (just as important IMO) - that the law (small as it should be) be enforced fully and applied fairly.

If she doesn't say no it's a competitive advantage to other suitors, right?

That's literally what you're advocating for.

The rule of law is a public good; companies that damage it are imposing a negative externality on others for their own advantage, and should be penalised rather than rewarded.

> If you move faster than the government, the letter of the law no longer seems to apply once you have established a substantial market

The track record of firms breaking laws to get ahead is grim. Where running ahead of the law has worked, it involved a trifecta of (a) popular support and (b) a municipal (not state or federal) law challenged with (c) civil (not criminal) penalties.

The narrow opinion this article is based on is limited to Ethereum. It is the personal opinion of a single SEC commissioner (albeit, an influential one).

More important than any of that, which you don't mention at all are the people who get caught in the middle and lose out. The victims of the move fast, break stuff attitude.

I care about protecting them far more than preventing an unfair playing field for the unfortunate startups that didn't break the law fast enough.

Who are the victims?

Anyone who gets scammed by an ICO?

Do you mean to imply that there are ICOs that aren't scams?

You are not protecting anybody, Holden Caulfield, and nobody asked for your protection in the first place.

'everything is legal if you scale it up'

Wish I could recall the months old thread I found that in. I believe it was also blockchain-related

There is a better way to think about this.

What the SEC cares about is whether uninformed investors are being ripped off.

What matters way more than the letter of the law is whether people are being scammed.

Ans I don't think this is a bad thing. The whole POINT of these laws in the first place is to protect people from being ripped off.

And if you ARENT ripping people off, then the government probably won't go after you.

Fairness isn't the purpose. The purpose is to protect people.

And if you don't hurt anybody, well what was even the point of the law to begin with? No harm no foul is a perfectly reasonable philosophy.

That’s not law. It’s exactly the kind of thing the rule of law is supposed to prevent. What constitutes “ripping people off” is an incredibly political and ever-shifting judgment. We vigorously debate and make laws, so that everyone knows what is allowed and what is not, regardless of what they think the law should be.

> What constitutes “ripping people off” is an incredibly political and ever-shifting judgment.

I think that for the example given, ICOs, the opposite is true.

For "most" of these situations, whether something is a straight up scam or not is very obvious. And I am glad that the SEC has chosen to mostly go after the scams.

Sure, grey areas will come up. But what does it matter if the grey areas are less than 1% of the market?

There are certainly cases in the world where the nitty gritty details matter, and that there are huge grey areas. I just don't think the ICO market is one of these nuanced cases.

Fairness actually is the point sometimes. Obama talked about raising capital gains tax, even if it results in lower money for the government, simply for reasons of fairness [1][2].

[1] https://abcnews.go.com/Politics/DemocraticDebate/story?id=46...

[2]https://www.washingtonpost.com/opinions/obamas-flawed-sense-...

Then why not scrap the Howey Test (which was out forth as the definitive test to determine if an investment is a security) and just keep the existing fraud laws?

Security law is in place for good reason, to protect investors.

The Howey Test was created by the Supreme Court, not the SEC. Harder to scrap.

The problem is, those that are doing the action usually will disagree that they are harming people.

I think the idea is to respect the spirit of our laws and you won't get punished. Taking a risk here is fine, but make choices which are moral/ethical and aren't abusing your customers and are generally a positive for the economy. Do that, and if the laws turn in your favor, you'll probably do ok.

Government, good government, isn't trying to crush the entrepreneurial spirit. They also recognize that startups deserve a different legal arena than more established companies.

you mean like uber disrespecting taxi laws or paypal blatantly breaking international banking and money laundering laws?

this seems to be the trend for a few years already.

Marijuana is more states rights vs federal though. Those MJ operations following state law are making a bet on federalism, rather than simply flagrantly ignoring law.

Ridesharing and Airbnb is another example.

Part of the problem is that we’ve criminalized too many regulatory violations. Exclusively civil liability is more appropriate for the vast majority of regulatory violations. Provision for statutory and punitive damages if you want extra bite.

If it is truly worthy of prison time, it will probably fall under existing general crimes: criminal fraud, reckless endangerment, theft, and so forth.

Securities are civil though

Many violations of securities laws carry the possibility of criminal sanction.

Not by the SEC which was the point

That’s misleading. All federal criminal prosecutions are done by the Department of Justice. But when it comes to prosecuting regulatory violations, it usually starts with a referral by the regulator (e.g. the SEC) who otherwise enforces that regulation.

My point is about the regulatory regimes being enforced with criminal penalties, not some technicality over who does the prosecution. I’m not sure why you’re so focused on that.

That absolutely is not misleading, the SEC flat out doesn't have the power to criminal prosecution and send someone to prison.

The problem is that we haven't criminalized it enough. Civil fines are bullshit. In 2008 thousands of people should have gone to prison. Not be allowed to continue to move on to the next insane scam.

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