Let me share with you a vision of where Steem-engine.com is heading. We want it so that when you create a token it has instant liquidity on the steem-engine.com dex that's currently in a testing phase, but also on exchanges the world over that already offer Steem! Can you see what that could do for your business? Imagine getting instant access for your token on the major exchanges like Bittrex, Kraken, and Binance!?! Talk about liquidity.
Anyway, that's what we're working towards. We've barely started, but we should have the Dex out sometime in February. But that also brings up some legal concerns. We're not legal experts and certainly not agents of the bar association. So, take the following as something to consider as you complete your actual legal due diligence.
(Though I should also note, because this stuff is complicated and the consequences can be massive fines or jail time we're planning on partnering with a law firm that has some expertise in cryptocurrency to offer legal services. So, watch out for that this month as well, but for now let's just get started with some token basics.)
USA regulatory body - the Security and Exchange Commission (SEC)
I was born in new england. I have to worry about American laws and the SEC. They have rules regarding selling securities that often involve a ton of reporting, which is difficult for small companies to do. There are exceptions and when our team begins offering legal services it'll be around these exceptions that make it vastly easier for small companies to issue securities LEGALLY! (looking at you eth for your vast array of illegal security tokens)
Selling unlicensed securities is no bueno. That can land you in serious legal trouble with fiat based regulatory bodies that have a way of taking your money or locking you away. So, for your sake we don't want you to do that. That said not all tokens are automatically securities, and there are of course legal ways to make your security legal. **It's complicated and that's why we suggest working with a legal team.
Meet the Howey test
To determine if your token is a security the Supreme Court came up with what's known as the Howey test, which is essentially the litmus test that the legal and financial system uses to determine if what you're offering is a security.
They ask themselves does this token represent "a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party."
That might still be too much legalize for folks, so let me try to break that down into English a little more-
Did you invest money?
Was it in a common enterprise, like you expect to own a part of a company vs owning a product?
Do you have an expectation of profits?
Are your profits coming from the work of other people?
If the answers to those questions are "yes" then you're very likely buying/creating/issuing a security. If it's a security you're going to have to figure out a pathway with regulatory bodies.
This however is just a guideline that they use. Ultimately it doesn't matter what you think the token is and only matters what the SEC thinks the token is. If they call it a security token, or you don't get them to weigh in on it initially and they later determine it's a security token then life may get pretty hard for you and potentially anyone that bought the token.
That's why we are working to get a legal firm involved and I keep repeating you should be seeking legal advice before you get yourself in hot water with a tool that you didn't weigh completely.
Be safe as a token creator or a token buyer
If you're looking to issue a token do some more research or partner with a legal firm (preferrably thorugh us starting later this month) to make sure what you're doing is legal.
If you're looking to purchase tokens either for products and services or as an investment make sure you do your due diligence on companies to verify if they are acting within the law they are governed by.
The dex protocol is open to everyone who creates a token and we're not offering any guarantees or issuing any advice on the tokens that come out. We're expecting third parties to come through and start talking about and rating the various tokens and possibly categorizing them as securities.
This is for information purposes only, and at this very moment we're not currently offering legal advice or services. Since we know many people are going to be interested in raising millions of dollars through steem we're going to start offering those services soon. For now, issue tokens with care and thought, and if you're going to treat them as company/dapp ownership be careful and be sure that you're acting within the laws of the country you operate in.