Chalk One Up in the Crypto Vocab Directory as Lawyer Calls SEC’s New Framework a “Nothingburger”
A frenzy was sparked yesterday when a Framework was published on the Securities and Exchange Commission’s website. The document was titled “Framework for ‘Investment Contract’ Analysis of Digital Assets,” and was released under the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub).
The document went on to outline how investors could determine whether a digital asset they intend to invest in qualifies as security or not. This is one of the most highly-debated topics in the crypto world and for many, this document, though not approved as legislation from the SEC itself, have some sort of closure regarding the issue.
The document went on to explain in detail that a digital asset would be considered a security if it passes the Howey Test, in which an asset is deemed to be an investment contract if there is an investment in a common enterprise, in which investors are reasonably led to expect profits that others generate.
It has also been stressed that the document should not be seen as a guideline.
“It’s just an analytical tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale of a particular digital asset,”
said Bill Hinman, the director of Division of Corporation Finance and Valerie Szczepanik, senior advisor for Digital Assets and Innovation.
Since the document came out, it has faced some criticism for not being concrete enough Information to help out the public.
One of the critics of this new document is Preston Byrne, a lawyer, who spoke about it on twitter.
“Although, per @stephendpalley, judicially non-binding SEC interpretations are creeping their way into court decisions. Meaning that, to paraphrase Stephen, Article I SEC guidance has a funny way of transmogrifying into Article III case law.
Anyway. tl;dr, the SEC doc and the no-action letter are, legally speaking, nothingburgers. What these documents tell us is that the Commission understands the issues and is unlikely to be swayed by technobabble. Structure accordingly,” he tweeted.
He is not the only one who took their views to social media as Marco Santori also tweeted about the Framework.
“The SEC promised guidance that would aid entrepreneurs in determining what tokens are securities, then published guidance saying ‘If it makes sense to use a token, it’s probably a security,” he wrote, adding, “Because the no-action letter and the framework each contain “no-transferability” caveats, I don’t immediately see how this advances the discussion or gives clarity to any entrepreneur who really needed it. Bummer.”