One of the main reasons the Cryptocurrency market has fallen precipitously in price from it’s all time high is because of the uncertainty of regulations from the SEC. For those that are not from the western nations, the SEC( Securities Exchange Commission) is the arm of the U.S government that is in charge of regulating the offering, creation and exchange of securities. To start out we must define what a security is.
The leading case on the definition of an investment contract (security) is the U.S. Supreme Court case, SEC v. W.J. Howey Co. Under the Howey test, an investment contract is “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.”
The U.S. Supreme Court has defined “profits” as “either capital appreciation resulting from the development of the initial investment . . . or a participation in earnings resulting from the use of investors’ funds.”
So the question is whether Telos is a security from the brief explanation from above? I will allow the Douglas Horn of the Telos foundation explain this in his own words;
“First, TLOS(TELOS) has never been offered in any type of ICO. TLOS is an entirely new token that will be created upon the Telos mainnet launch. The Telos network is recreating a modified ownership snapshot of the Eos token sale as a way to reward those who paid to have the open source EOSIO software created by Block.one. To be clear, all of the monies contributed to this ICO went to Block.one, none to the Telos network. The EOSIO software is open source and free to copy. The Telos ABPs have decided to reward the backers of Eos by granting tokens matching their Eos purchases, up to a capped amount per address, but there is no affiliation with Eos or Block.one. Telos did not sell anything so it is difficult to conclude that it ever offered a security.”
When you look out how Telos is set up, Telos has no owners, managers, or fiduciaries. The Telos network is run by independent network of validating node operators called block producers who are continuously elected through the smart contract voting of TLOS token holders. The TLOS token ownership is notably one of the most evenly distributed and decentralized of all cryptocurrencies. There is no evidence that any single entity will control even 0.5% of the Telos network. The TLOS token ownership is notably one of the most evenly distributed and decentralized of all cryptocurrencies.
Now before the Telos network becomes live and open to transactions, the 6 appointed block producers (ABPs) will all relinquish their privileges and step aside for the 21 block producers elected from voting of at least 15% of all TLOS token holders. TLOS tokens will only attain value if the token holder-elected block producers in conjunction with the efforts of the members themselves create a working, valuable network.
With the deep explanation above of what constitutes a security and how the Telos network and the TLOS token will be launched and used, I believe that Telos is not security but laws might be changed to redefine it. We shall all see as regulation of Cryptocurrencies by the SEC progresses!
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