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gruez

This seems like... obviously a security? I seriously hope they're registering with the SEC for this.

https://www.investopedia.com/terms/h/howey-test.asp

>1. An investment of money

check

>2. In a common enterprise

check

>3. With the expectation of profit

Probably? Why else would they be buying a team for?

>4. To be derived from the efforts of others3

check.

edit: I took a look at their "Flightpaper", and in it they acknowledged that some parts of it might pass the Howey Test, and they recognize the possibility of regulatory oversight

>This funding model requires extensive SEC regulation oversight.

However, they're pretty light on details on whether it would actually be approved by the SEC or not. Also by the looks of it they haven't registered with the SEC right now, but they're already raising funds?

View on HN

> This seems like... obviously a security?

Or obviously an ETF, or obviously a mutual fund, or obviously a market maker, or obviously The Fed.

There is literally a 1-1 attempt at mimicking the current financial system under the label "DeFi".

The problem is that the vast majority of the participants don't care about this. They care about 720,687% APY as of this posting on things like this, which anyone should realize is nonsense:

https://euphoria.money/

That's $100 to $3 billion in two years.

Good luck with that.

those insane yields are deceptive because they are not adjusted for inflation of the currency/token/coin

Well, sort of. Your yield isn't in dollars, it's in number of tokens.

Your dollar yield will be the token yield minus the change in token price.

> Well, sort of. Your yield isn't in dollars, it's in number of tokens.

Perhaps they should be more transparent about this, because I can end homelessness in the United States right now with $100 based on their reported APY.

The only people who are attracted to this misinformation are amateur investors, and I fear that is the whole point.

Absolutely. I’m not defending it.

But this is my point, it takes an understanding of finance and an understanding of what’s actually happening with these smart contracts. Retail will get slaughtered.

Yes, ETFs and Mutual funds are both registered securities. They are regulated instruments/investments. They could not be sold, legally, if they were not registered with the SEC (it doesn't have anything to do, specifically, with being traded on stock exchange- a security can be non traded too)

The parent comment is pointing out that this looks like it meets the same definition as those other things and needs to follow the same laws, no matter how much people like it, want it, think it's better than what's it's "replacing"

3 really depends on the rights of the token. It’s not exactly without precedent, take the Green Bay Packers it’s the sole NFL team not owned by private billionaires, in fact it doesn’t have any owners. Nearly every 10 years they raise funds through a “public offering” of “stock” amounting to hundreds of millions of dollars. Every time they obtain a no-action letter from the SEC. Packers “stock” is not stock in the common sense of the word as it doesn’t convey ownership, again there are no owners of the team (despite people often incorrectly saying the city owns the team). But Packers stock does give holders the right to vote/elect a certain number of directors to the board. Lots of DAO tokens are structured this way, where holders are given voting rights but not ownership rights. There are numerous other examples including other sports related examples.

Perhaps the best part of the Green Bay Packers is that the reason they only publicly offer “stock” every 10 years or so, is they have to obtain permission from the NFL and the NFL’s official position is that the NFL must restrict the Packers public offerings because it is a “competitive advantage” over every other team backed by billionaires.

Nearly everything you said here is completely false.

> But Packers stock does give holders the right to vote/elect a certain number of directors to the board.

The toy stock certificates they give out to the fans that buy them have no voting rights whatsoever. Or any kind of rights at all. It's basically just some packers memorabilia.

> Nearly every 10 years they raise funds through a “public offering” of “stock” amounting to hundreds of millions of dollars.

what on earth. they do not raise "hundreds of millions of dollars".

From https://www.newsweek.com/green-bay-packers-ready-sell-stock-...

> Shareholders don't receive any power in the organization aside from an invitation to an annual shareholder's meeting with voting rights to issues decided at the meeting. The stock also pays no dividends to shareholders.

Oh ok so they apparently do give them some kind of a little play vote at their yearly "shareholder" fanfest at lambeau field once a year.

This thing is like buying a Packers jacket and trying to say you own some of the team...

That's no different than any other common stock you can buy

I'm pretty sure that the Green Bay Packers are in fact a publicly-owned non-profit corporation. A share in the Packers is not the same as a share of common (or preferred) stock, but it is a share in ownership that actually matters. It's very easy to prove this: the Packers have remained in the smallest market in all of North American major professional sports for over a century. They stay there because all those "little play votes" matter.

I’ve worked with the SEC on these matters, where do you get your information?

Here is the Packers 2012 Public Offering Document: https://shareholder.broadridge.com/pdf/gbp/offering_document...

see page 7 for the voting rights

> On each matter submitted to a vote of the shareholders of the Corporation, the holders of outstanding shares of Common Stock are entitled to one vote per share. Among other things, shareholders vote annually to elect members of the Corporation’s Board of Directors.

In terms of the amount the public offering document includes the price $250 per stock and the range 250,000-888,000 shares. These offerings historically sell out in minutes. I could pull the most recent SEC no action letter to confirm the amounts sold, but I don’t think it’s necessary at this point.

I'm well aware of what this is and your description of it is quite overblown.

You went from calling everything I said “completely false” and going off on how there are no voting rights, to admitting you are fully aware of the Packers Public Offering Document but that my description is “overblown”.

The public offering document speaks for itself and I quoted it, so what’s overblown about the description? If you think it’s fraudulent launch your complaint with the SEC instead of arguing on HN about it and prove your intellectual superiority.

> I'm well aware of what this is and your description of it is quite overblown.

Your comments could have some credibility if you provided any information or made any point. Unfortunately you're instead saying nothing and just adding noise to an otherwise interesting discussion.

While you’re mostly right on the stock structure, you’re both (a) overstating the capital raised in the offerings by a significant amount and (b) overstating that the team “has no owner”. The team has an owner. It’s Green Bay Packers, Inc., represented by an elected president. The ownership structure is tolerated by the NFL because they’re quite old school but it will never be repeated.

If you work with the SEC on the governance of Green Bay Packers securities, it’s alarming how loose you are with facts. I suspect “work with the SEC” boils down to got coffee for your lawyer while you were in the room, because you’re saying some plainly false things that even Wikipedia, that bastion of truth, quickly proves wrong.

Source: Shareholder.

Green Bay Packers, Inc. has no owners.

Every other team is owned through a business organization, but no one refers to those organizations as the owner, they refer to the private individual billionaires (ie no one says the Kraft Group is the owner of the Patriots, they refer to Robert Kraft as the owner. Or Mark Cuban is the owner of the Dallas Mavericks). No one would argue in good faith they are not the owners.

Your personal attacks are sad, FYI I am a lawyer.

Their website [0] seems to disagree with you. They’re currently selling stocks for $300 each and have sold a total of 5,000,000 in the past, suggesting a total raised on $1.5 billion overall. Obviously that’d be in today-dollars, but the current sale has already raised $41 million in the last week or so [1], so the number seems in the right order of magnitude. Certainly having raised “hundreds of millions of dollars” sounds right though I haven’t been able to find reliable sources for the previous stock offerings to confirm.

The official stock website [2] also says the following about the voting rights.

“Q: How many votes will I receive for purchasing Common Stock?

A: You will have one vote for each share of Common Stock you purchase.”

I’m not sure what those votes actually count for, but they at least exist.

[0]: https://www.packers.com/community/shareholders [1]: https://www.nbc15.com/2021/11/25/packers-stock-sale-nets-mor... [2]: https://packersstock.com/faq

hrm. Reread the website and I think you'll find it's very much not stock in the normal sense of the word. And they're very clear that you can't make a profit from it (you can't even sell it) and it doesn't given any ownership:

>Common stock does not constitute an investment in “stock” in the common sense of the term. Purchasers should not purchase common stock with the purpose of making a profit.

> You cannot sell, assign or otherwise transfer shares of Common Stock to a third party, except that you may transfer shares to an “immediate family” member by gift or in the event of death. “Immediate family” is defined as the spouse, children, mother, father, brothers, sisters, or any lineal descendent of a shareholder.

I agree that it’s not stock in the traditional sense, but neither of the people in the chain above me seemed to think so. Just because it’s not-for-profit doesn’t mean that it can’t sell for a lot (people buy team merch for a lot more) and the vote seems to mean something even if not much.

Sounds like you know what you're talking about. What do you think of this idea of a DAO from a legal perspective? Are there any DAO models in particular you find attractive?

It’s an area of law in its infancy. A few states, Delaware and Wyoming, have laws permitting corporate and LLC records to be kept on blockchain. I think I was probably the first attorney to file Articles of Organization for an LLC in Delaware that incorporated Ethereum smart contract addresses.

More recently Wyoming passed a law creating a “DAO LLC” which is pretty novel and allows “algorithmic management” of the LLC. The only entity I am aware of that has used it is CityDAO LLC, you can look them up and review their Articles on the Wyoming Secretary of State website. I’m not overly familiar with them but understand they are experimenting with owning a parcel of land.

Hypothetically say there were a DAO that got sued, without a legal entity it is a very real legal risk all participants of the DAO could be jointly and severally liable (which could include personal liability above beyond the DAO funds). Legally the concept of a DAO LLC is giant, because it creates a legal mechanism to shield participants of a DAO from personal liability.

I have a trademark application from March that has been approved by the USPTO examining attorney and been published (~10 more days left of publication), then I will set up a Wyoming DAO LLC and assign the DAO the trademark (I think it will be the first registered trademark owed by a DAO). It’s very simple, minimal risk of liability (unlike property) and I think will provide a solid legal framework moving forward (almost like an anti-troll mechanism for IP). It’s a real problem in the space, just as an example there have been bad-faith actors filing trademark applications for Doge and Dogecoin, which if left unchecked could lead to all sorts of legal problems.

Damn this post is solid. Even if I don't really get it, I can tell you do.

My takeaway is that what makes DAO LLC unique is that it allows for "algorithmic management".

I'm familiar with LLC management, where there are owners, wondering what advantage the algorithmic aspect adds. I'll go read up on CityDAO. Congrats on the upcoming project)!

> ... but understand they are experimenting with owning a parcel of land, in the middle of the desert.

Indeed, one with no water or access to water, or anything else.

Sounds perfect for experimenting with. Worth little and no likely problems with anybody.

Indeed.

Agreed! Similarly, the best outcome for the ConstitutionDAO was likely for them to bid but not win. Can you imagine the complexity of actually owning it. High odds it would have ended up intentionally destroyed somehow.

Oooh, a copyright DAO. This is the most interesting thing in this entire comment thread, worth the time-value price of admission. Can you email me about this? Email’s in the bio.

I’ll drop you an email December 10. Nothing cryptic, that’s the end of the publication period for the trademark.

Well said, most interesting thing in this thread. "Show HN" when you get there!

If you're describing an equity structure, you're unpacking the definition of the word "ownership." Saying "the city owns it" or "no one owns it" is just a naming thing.

Ownership is just a bunch of rights. In any case, why not securitize a sports team?

As it relates to the Packers, like any non-profit, I’m describing a legal structure with a lack of equity. Typically I wouldn’t use the words owners/ownership and just say non-profits don’t have shareholders, but the Packers happen to be the exception that proves the rule as they are a non-profit with stock. So it does have “shareholders” but unlike the commonly accepted use of “stock” and “shareholders” there are zero ownership rights, just governance/voting rights.

If this DAO did give its members ownership rights, then obviously it would be a security and their raise would be a regulated public offering, unless it met an exemption. That is an idea baked into my original comment, where I simply say “maybe” as to 3 and it is dependent on the rights the DAO conveys.

As to why not securitize a sports team, that would be great and a DAO would be a potential vehicle for that, but a DAO wouldn’t be needed either. From a practical point of view, the reason we don’t see billionaire owners IPOing their team and reaping the financial windfall of an IPO is because the NFL, NBA, MLB don’t allow it. The leagues maintain very tight controls on who may own teams. For example a few years back there was a owner of a major - billion dollar plus - team that made some racially charged statements to the media and the league forced the owner to sell the team. Again the NFL even controls when the Packers can raise funds by issuing stock. Nothing prevents the leagues from changing their policy, but historically the leagues don’t like giving up control.

It's definitely an enterprise of some sort, and hence probably qualifies for many kinds of checks and laws.

For good or ill, a common pattern is (1) someone just does it. (2) it attracts regulatory oversight/action/whatnot (3) regulation becomes actually functional.(3.5) the incumbent now has advantage. PayPal, Uber, etc.

What's the alternative? Ban it? Create a framework regulating something that does not exist?

All that said, crypto-ish ownership of a sports team isn't a bad idea.

Its a prisoner's dilemma, the SEC's mission of protecting investors is impossible if their only response to compliance are enforcement actions that will hurt investors

In the past, this meant that exchanges won't list the token to trade (or delist, with traders panic selling before the delisting events), as any asset notified as being a security requires a broker-dealer to trade it ONLY IF it is registered. But for the past 2 years, centralized exchanges aren't involved in the liquidity. The network has innovated a way to incentivize liquidity with a fundamentally different model of exchange called AMMs (automated market markers, the acronym tells you nothing about why it is different though, but thats the term to look up). AMMs let people pool liquidity onchain and there is practically zero consequence anymore from SEC action - with regard to globally accessible liquidity. And sure, maybe the numerous liquidity providers can be sanctioned but they don't care, it is extremely easy to mix your legitimate funds with Tornado Cash and come out the other side and make a liquidity pool anonymously with mixed funds. It is up the regulator to figure out who to sanction and in this case the mixer's use isn't criminal and the clean funds on the ensuing anonymous side are only a civil issue. Also, even if you want to argue the cat and mouse game favoring the government's omnipotence, liquidity can be burned making that liquidity permanent no matter what happens to the human. I would actually argue a significant bullish thesis is based on how many assets are intentionally burned in liquidity pool bearer shares. Its pretty much perfect right now (with room for improvement in the liquidity pool technology). Between permissionless AMMs and permissionless bridges, and 3 trillion USD already within the crypto ecosystem outside of exchanges, its just not really the same game as it was 3 years ago.

The SEC regulates the intermediaries and now those intermediaries have been disintermediated.

You're missing the part where this interfaces with the classical finance system. The whole organization that wants to buy an NBA team exists in the US legal system, and that is the point that will be regulated, the fact they get funded with USD via a bank or crypto through a pool is irrelevant.

I was answering in general, these DAOs are dime a dozen and most never try to do something with the classical financial system

The SEC regulates companies that publicly issue stock and the intermediaries like stock exchanges on which that stock can be traded.

The company bit of the equation has not been disintermediated. In fact, that's the whole point of this transaction: to create a publicly traded company.

yes they regulate both I was mostly talking about the other daos that exist which dont attempt to do anything in meat space

>> 3. With the expectation of profit

> Probably? Why else would they be buying a team for?

Teams are money sinks. The reason to buy a team is political power. To the extend that the state will turn a blind eye or two (see ^2). A totally random example[1], less random examples: Juventus, AC Milan, Olympiacos[^2] and countless others.

Just pointing the obvious, I agree that this transaction should be regulated, all I'm saying is that (3) is not _necessarily real_ in this or other cases.

[^1]: https://en.wikipedia.org/wiki/Joan_Laporta#Political_activit...

[^2]: https://newrepublic.com/article/159252/noor-one-vampire-ship...

American sports teams are generally very profitable due to the structure - franchises, closed, no relegation or promotion, shared academy intake academy preference to the worst performing teams - basically an owner can not invest anything, the team can perform bad, and they'd just get good youngsters without getting relegated, and keep the same revenues, whereas a European team being managed badly or with little investment will fall down the pyramid, with diminishing revenues, and they'd have only their own academy to count on, without investment to buy new players.

And for your Barcelona example, it isn't a good one. It's a fan owned club, the president is elected and isn't an owner and can't really invest in it bar some special cases.

If it's a non-profit organization, acting as the intermediary between the DAO and the legal system, that takes legal ownership over the team, then it could eliminate the expectation of profit, and be free to engage in this transaction, right?

> With the expectation of profit

Umm no. I have the expectation of loss but am putting a small amount money to insure myself against the emotional distress of if I missed a big mooning opportunity. The default expectation is that the money is all lost.

So no, it's not a security.

> big mooning opportunity

If you invest $100 with the expectation that it will be lost with 99% probability, and that it will become $100,000 with 1% probability, you are expecting a profit of $901.

That is an "expectation of profit" my friend.

> you are expecting a profit of $901

No, it would be stupid to "expect" a profit of $901 because there is no scenario in which you would gain $901. You would either have -$100 or +$100000 and never +$901 in your stated scenario.*

In your case since there is a 99% probability of -$100, my "expectation" would be -$100 and if "surprise" of $100000 happens that is "surprise", not part of the "expectation".

* I realize there is a term called "expectation value" and I hate that term with a passion because in any distribution that doesn't roughly resemble a bell curve it would be stupid to "expect" the mean value. Statistics like the mean are not a good way to establish a strategy for a game that you only get to play once.

"Expected value" means the mean of any distribution, not just ones shaped like bell curves. GP is correct.

Exactly, my point is it's stupid terminology. I use the word "mean", not "expectation". That brainwashes people actually "expecting" the mean to happen, which in this case, it never will. Treating the mean as an expectation of some sort is just not a good formulation to strategize about this game.

GGP said "you are expecting a profit of $901" -- I'm not, personally. I'm "expecting" -$100. How about we take a bet? I'll expect -$100, you expect $901. If I win you give me $100, if you win I give you $100, and if neither of us wins we split the $100K. Deal?

This is a game theory problem, NOT a statistics problem. In my case the utility of losing -$100 is zero, the utility of gaining $100K is very positive, the utility of missing out on the $100K is extremely negative.

Are you saying we should stop using the term "expected value" in cases where it isn't equal to the mode?

Yes.

I don't know about you but if you have a coin labeled 0 and 1 and flip it it would be mind-bogglingly stupid to expect a 0.5 out of this coin. Just like if you have a coin labeled A and C it would be stupid to expect a B to come out of it. You'd be better off picking either A or C and expecting that instead.

I guess you never took stat 101.

Personal attacks not appreciated.

No statistics class I took said that a coin with sides A and C can give you a B, or that you could "expect" 0.5 from a bimodal distribution with a delta function at 0 and a delta function at 1. The mean value may be 0.5 but it's not something you would expect to actually happen; if you wanted to maximize the probability that your prediction is correct you'd be better off picking 0 or 1.

You're making an entire thread about defending your position against using a term of art the way it's used by professional and academics all over the world. Judging by every reply you're getting, everyone know what they mean when they talk about the expected value of a probability distribution. Just drop it.

It’s not a personal attack. “Expected value” is a very basic term of art introduced in stats 101.

It’s like having a huge argument about a physics problem claiming “force” isn’t mass times acceleration because nobody is “forcing” you to do anything.

Back to your 0 or 1 example. 0.5 is the meaningful value to know over any kind of large sampling because that is what matters for “expected value”. It tells me what I should expect overall if I play 1000 times.

What you want is called the “mode”. Given a single instance of an event, what is the most frequent value.

> “Expected value” is a very basic term of art introduced in stats 101.

I already know that.

My point is it's shitty terminology, even though it's somehow become a standard.

Stats 101 also does NOT tell you to "expect" the expected value to happen.

GGGGGP however seems to actually use the value to formulate a strategy, and that's where I'm pointing out that this entire formulation of using stats to approach this problem is flawed. You don't have enough chances at the game such that the mean is a meaningful number to consider.

That's also why I always refer to it as the mean even if other people call it "expected value". I hate the term with a passion and I will not yield to the wise guys who wrote the books.

Honestly I'd rather not have this discussion in English because this isn't a problem in many other languages. In many languages mean is not called "expected" anything.

>This is a game theory problem, NOT a statistics problem. In my case the utility of losing -$100 is zero, the utility of gaining $100K is very positive, the utility of missing out on the $100K is extremely negative.

Calculating utility, or the expected value, is entirely statistics.

utility != "expected value" "expected value" != MY expectation utility != statistics on dollars

Just because you think so strongly that your definition is correct does not make it fact.

"Expected value" and its derivatives is a specific term, with a specific calculation. You can't just throw around words and expect others to understand you don't mean the actual definition when you say them.

https://www.e-education.psu.edu/eme460/node/730

I am not arguing over a definition, I'm just saying that the definition sucks and that GGGGGP was actually expecting the "expected value" which I wouldn't do in this case.

Expectation of "profit" actually just means that you expect to make money from the investment, not that the money you make exceeds the money you invest.

While ongoing profit from the investment itself is nice it's not legally required. For example, stock in Uber is a regulated security, even though Uber has a history of losses and is not expected to be profitable in the near or distant future, if ever.

Similarly, loss companies were once frequently sold to savvy investors needing losses to offset their taxable earnings from other sources, and those investments were similarly regulated securities even though there was clearly no expectation of profits.

If it's not a security, what is it? A lottery ticket? I've ready your subsequent posts in this thread, I'm curious what you're trying to get at here.

> A lottery ticket?

Yes, more or less. Or call it an insecurity, I don't care, whatever is needed so the SEC can stay out of this.

3 doesn’t apply. The only way to make money is to resell the token/coin/whatever. The holder can’t actually extract any value from the underlying asset.

It's part of a marketing-advertising brand awareness play, even if not directly profitable.

Stop being a fun police. The internet allows us to be free from the government.

You will find the opposition to cryptocurrency is strongly correlated with believing that people should not be free from the government.

Being free from the government, also known as being a criminal.

If we're going to parrot outdated legislation, let's also force all automobiles to be classified as horses & carriages, so they can be taxed in accordance to the carriage act of 1794.

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