Probably the most relevant part of the SEC's report on the DAO [0] for you is this sentence: "These offers and sales have been referred to, among other things, as “Initial Coin Offerings” or “Token Sales.” Accordingly, the Commission deems it appropriate and in the public interest to issue this Report in order to stress that the U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale."
To put it simply: it doesn't matter what you call it. If it passes the Howey test, they'll deem it a security. If I fold my company's share into a paper airplane and call it a "utility share" (or "AirShare" ;) ) because I now have a use for the piece of paper, it's still a security.
I understand your token thingie can be used like a digital coin to redeem for data, but surely that doesn't require a blockchain... you can just do internal accounting of the digital coins in MySQL? Then you wouldn't have to pay the Ethereum network for every state change or transaction so you could cut costs.
EDIT: I just had a realization. This means you intentionally chose inefficient tech (Ethereum as a database for your coin) JUST so you can pay for a regulatory circumvention mechanism. Oh god...
AirBnB -- sure
Palantir -- They may be scummy in other ways, but I don't think they're based on avoiding regulations
WeWork -- I don't think they're ignoring zoning or whatever
SpaceX -- No. But maybe they don't count because LA?
Pinterest -- No.
Dropbox -- No.
Stripe -- No.
Hulu -- No.
Lyft -- sure
Magic Leap -- Nope.
Zenefits -- Okay, sure.
Cloudera -- Not even a little.
Credit Karma -- I don't think so.
Docusign -- No.
That's how far down the list of wikipedia's unicorn startups I got before I got bored.
Notice the way that is phrased. The whole backlash across the western middle class against the "liberal elite" is a sense of "all tech has done for me is replace my nice union job with a gig job driving for Uber". There is a real sense that Silicon Valley doesn't have to play by the same rules as the rest of us, and people want that to stop.
No. He's not selling shares in the company. He's selling the product, he just hasn't built it yet.
The reason to do this on Ethereum instead of MySQL is partly because it makes it easier for users to exchange tokens with one another, partly because the infrastructure is already built, and mostly because people ho mad for it and it seems to be an easy way to get millions of dollars.
I think almost all ICOs are basically scams, but that doesn't mean they're just a way to sell shares without regulations.
Edit: and in fact the vast majority of Ethereum network costs are paid by the customers, not the company. I'm confident that using Ethereum for this is a cost-saver relative to MySQL, but it wouldn't even matter if it wasn't because of the huge ICO craze.
Why is this better than crowdfunding in general??
If you think the tokens (equity or not) are likely to become worthless, you can sell them to somebody else, as long as there is anybody willing to buy. It doesn't matter that it's not equity.
Even if it was equity, at the point where it was a dead cert that the tokens would be worthless, they'd still be worthless, regardless of how hard the SEC ensures that you own a slice of that worthlessness.
a) the token is redeemable, and in that case why buy securities you don't intended to use (speculation is the only reason) b) or the company folds before delivering and the token is worthless, so by selling it you are just pushing the loss to a greater fool
Either way, this is objectively worse than Kickstarter.
People who buy diamonds, physical diamonds, may be speculating on them. Others may actually like the diamond. For whatever reason, they bought the diamond, and now own it, and can resell it. It isn't illegal to buy something in the hope it goes up in value. People do that all the time with videogames, cars, whatever.
Now, let's say ownership of a diamond was moved to the the blockchain. Not only could you buy and transfer it easily, provably, securely - you could even buy 0.000000001 diamonds, or 100000 diamonds, just as easily.
In my opinion, all of this is objectively better than kickstarter.
Sure, because you don't even have the little bit of oversight that kickstarter offers. In your case you can just keep pumping coins into the market while they have any meaningful amount of value. Then when they are worthless you just claim your project failed and take the money from selling the coins.
And what justifies these tokens you are offering having such a variable price? They aren't tied to the company equity or actual success of the company, but for your inability to launch when they would become completely valueless, in fact you claim they are a utility transferable for data but why would the price of the product/data being offered fluctuate other than speculation of a blockchain based crypto coin separate having nothing to so with the alleged utility.
The same reason the price of anything fluctuates. Do you think the price of mobile data should be different?
You can claim it's the same reason anything fluctuates, but point me to other products/goods/services with prelaunch fluctuating pricing.
If mobile data becomes more of a commodity, it, too, will have a free-floating price.
I can't begin to explain this to someone who has been locked into the traditional mindset. Everyone on HN knew about bitcoin before everyone else did yet most still missed out on 450,000% gains if buying in at $1. Sometimes the future is staring you in the face but you can't accept reality.