If you were to stake your Air Jordan's with coinbase and Coinbase told you in a years time you'd have 2 pairs, it would become a security.
because the sneaker trade market focuses on sneakers that are released with artificial scarcity, where many participants in that market buy with an investment of money, with a reliance on the issuer and others to keep them scarce and valuable and promote them, with an expectation of profit.
the SEC is basically saying if any random person has an expectation of profit guiding their purchase at any time, the entire asset and all transactions is a security and everyone that is trading it needs to be a registered broker dealer or registered promoter, and then even if they could be registered they would not be allowed to trade unregistered securities, or even registered esoteric securities like shoes and digital commodity units because the Self Regulatory Organizations are too permissioned for shares and bonds exclusively.
> if not every digital token does?
that's the point. there is either a way where a digital asset is exclusively a commodity, or there isn't at all and every corporate controlled unnatural commodity inherits the same regulatory framework that the SEC is trying to impose on digital assets and the entire trading ecosystem.
Sneakers would not meet the Howey Test: An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
The four parts of the Howey test, distilled down to plain English (and therefore losing a great deal of nuance in the process):
- It is an investment of money.
- The investment is in a common enterprise.
- There is an expectation of profits.
- The expectation of profits is solely from the efforts of the promoter or a third party.
Buying the latest Yeezy's is not a common enterprise. The fourth point is debatable.
The howey test doesn’t need all prongs satisfied and avoidance is based on probability only
The SEC and securities industry has enjoyed a symbiosis for 70 years, where things that blurred the lines didnt exist, were never imagined, or were never challenged. Challenging one challenges them all.
The stance is that applying it to digital tokens as unregistered securities means applying it to other places, like Nike shoes and baseball cards, just because any random individual expected to profit when they bought one
that this framework is not applied everywhere, specifically how congress exempted spot commodities and commodities derivatives from the SEC framework specifically because it was untenable
That there is a difference between a digital commodity and a digital security that is mutually exclusive, but the SEC has provided no way of understanding that distinction, and now has resorted to just arbitrarily claiming random assets are securities in cases against the people that trade those assets
That it is impossible to comply if it was applied everywhere, as registered security status inherits tons of unrelated regulations to protect incumbent intermediaries
That the SEC will never achieve congress’ delegated mission of investor protection and only hurt investors
And that actually inconveniencing everyone will put this framework under a constitutional test that the SEC probably needs to avoid, but I’m all the SEC going after the entire sneaker trading ecosystem as unregistered broker dealers as fallout to their crusade just to prove they aren’t just trying to debilitate crypto
(The staking program has a separate evaluation)