Is Sam Altman's Worldcoin an unregistered securities offering in the United States? Probably.
Why?
1) I think it clearly satisfies the Howey test for an investment contract.
a) Investment of money ✅(yes, providing biometric data as a means for paying for an investment counts).
b) common enterprise ✅✅ (hello, Worldcoin, Inc.)
c) investor led to expect profits ✅ (obviously, why else would one part with their personal biometric data)?
d) from the efforts of others ✅(again, obviously. Who is putting those orbs in all those cities around the world?)
2) It is not saved by any purported consumptive use or "utility" even if at some point such utility is established -- growing caselaw (including recent XRP decision) reveals that utility simply doesn't magically unmake a securities offering. (See, e.g. last years LBRY case)
3) It's pretty significant that Worldcoin kept for itself a significant allocation of the token for itself. Judge's have traditionally found this problematic in securities cases (I wonder if leadership had to give up their eyeballs?)
The timing of launching it in the immediate aftermath of the partial victory for Ripple in the XRP decision is curious. But even under that decision's logic (which I don't think ultimately holds up), Worldcoin seems like a prime candidate for the SEC to target.
Just another reason why I love Bitcoin. It’s anti-fragile due to its inherent properties, yes. But it was also designed and distributed in a methodical way to avoid legal scrutiny for as long as possible—until it has grown to something they simply cannot stop.
Worldcoin will go the way of Libra
SEC to Appeal XRP Decision
A recent filing in an action the SEC brought against Do Kwon following the infamous Terra Luna collapse offers a glimpse into the agency's litigation strategy for XRP.
And the appeal looks like it could be strong.
The SEC told the Do Kwon court it “should not follow” Judge Torres’ decision in SEC v. Ripple. This is perfectly plausible because district court decisions, while important, are NOT binding on other courts.
The best argument I saw in the filing was that Judge Torres inappropriately **added** requirements to the Howey test including requiring a “direct sale” of the token, a sale that included individual promises to buyers, and that those buyers knew their money was going directly to fund Ripple.
These are NOT part of the Howey test, but for some reason Judge Torres incorporated them anyway. And this is where the SEC stands the best chance to prevail on appeal.
Not only is the “direct sale” distinction one that historically never mattered, but it also turns the Securities Act and the purpose of the SEC on its head. Recall, these statutes were passed in the 1930s in response to retail (and the whole world) getting rugged by supposedly sophisticated institutional investors.
But what does Judge Torres do? She gives the protection (to the extent you view the SEC that way) not to retail but to institutional investors! That makes very little sense and the SEC has now signaled it will take this development up on appeal in the 2nd Circuit.
Will keep updating legal developments here in Bitcoin and occasionally the broader crypto space as they happen.
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