Sounds positive. Only, YouTube also showed this past week that it struggles to live by its rules. It came to light that Steven Crowder, a popular conservative commentator on YouTube, had repeatedly insulted Carlos Maza, a journalist from Vox, using racial and sexual slurs. Initially YouTube said Mr. Crowder’s comments did not break its rules. Later, after an outcry, it appeared to backtrack and said he couldn’t earn ad revenue on his channel unless he changed some practices.
So, rules. Great if you enforce them effectively. But … kind of pointless if you can’t?
What’s in an I.C.O.?
Imagine you run a company and need money. One idea: Promise a thing to people, take some money and send the thing later. That’s O.K. It’s crowdfunding. What if, instead of offering a thing, you offer a cryptographic token to exchange for a thing in the future? That may be less O.K.
On Tuesday, the Securities and Exchange Commission sued Kik Interactive, a Canadian social media company, over this. In 2017, Kik sold $100 million worth of digital “coins” called Kin that would be used to buy and sell digital services. This is an initial coin offering, a practice with a bad rap thanks to some less than scrupulous companies. Kik isn’t accused of fraud; it’s accused of not properly registering the offering with the S.E.C.
This rests on what, exactly, Kik was offering. The S.E.C. says Kin counted as a security, like stocks, because it couldn’t be used to buy anything when it was launched. The S.E.C. also claims Kik said Kin investors could “make a ton of money” from appreciation, as with securities. Kik says that Kin is now a proper medium of exchange and that investors didn’t expect to profit, so it’s not a security and didn’t need to be registered.
Well, it either is or isn’t, and now a court will decide. The distinction will be important: It will shape the S.E.C.’s ability to regulate the industry, and help the crypto world understand what it can, and can’t, do.
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