equity securities are great (esp if tokenized!), utility/meme tokens are great, but the one thing you can do with securities that you can't do with utility/meme tokens is give holders real, direct economic rights
if you give such rights to tokenholders, then the utility/meme tokens are themselves securities or every sale/purchase of them will be a securities transaction
this is a red line that imo will never be legally crossed, because crossing it would be the same thing as abrogating the securities laws wholecloth (or making them "opt-in"...same thing, since no one would opt in)
many of us have worked very hard to at least help Congress and regulators understand that tokens having governance rights within a system that includes entities shouldn't cross that red line--that's something! you can see it spelled out clearly in most of the CLARITY Act drafts
it hopefully means, for example, that tokenholders via voting could have influence over who comprises the board of a grants BORG funded by a DAO, or a BORG that holds critical DAO-related IP and what it does with that IP, etc., without rendering the tokens or most transactions in the tokens securities...
but those are governance rights/powers...not directly economic!
in contrast, a business entity will never legally be allowed to give tokenholders dividend or M&A payment rights, for example...the moment it does, they would become securities, with all the illiquidity etc. burdens of securities
and no, I don't believe the complicated schemes from projects I won't name, claiming "oh yes the tokens give you economic rights, but only if one person holds at least 30% of them", are going to be permitted/legal...in the U.S., imo, they are clear wink-wink/nudge-nudge securities law evasion schemes and run afoul of all the anti-evasion rules, at minimum, and probably a lot more than that (tender offer rules, swaps rules, etc.)
and people who think these projects have some genius loophole figured out should ask themselves: why doesn't the launchpad entity pushing the model use it first and foremost for its own token? supposedly it gives holders almost all the economic benefits of equity with none of the securities law burdens...that should be a total no-brainer for any company...they should be dogfooding it, raising their own rounds structured this way, proving it's legally sound by taking the risk themselves first...but they don't, and won't, because they (or their lawyers) know better...which tells you everything...
in the U.S. we have the most pro-crypto SEC, regulators, and politicians we are ever going to get, and they are not saying anything different...they are not proposing to make the securities laws opt-in by letting tokens have dividend rights etc....read their last statement, it does not say this or anything like this, it actually says the opposite, and every time it mentions non-securities tokens, it stresses that they "do not have any rights or interest in or with respect to a business enterprise or other entity, promisor, or obligor" or "intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise or other entity, promisor, or obligor", but rather at most have "a limited license or other intellectual property rights" for collectibles or "governance rights with respect to the associated functional crypto system", etc.
you can hate it, you can wish it were different, you can build complicated financial rube goldberg evasion schemes with offshore entities that won't stand the test of time...but imo the red line of 'no economic rights in a business enterprise for tokenholders' is real and here to stay
we have pushed things as far as they are going to go short of simply canceling the securities laws entirely, and should be amazed we got as far as we did without a lot more people ending up fined or in prison
conversely though, I'm not sure people *should* hate this status quo...because the other side of the coin [sic.] is that securities are not very good at accruing value from trustless systems, being pure bearer assets, being used in remittances, powering cypherpunk apps, etc....they have too many offchain dependencies and are too bound up with the legal system...they cannot be predicates of "autonomousness" in the DAO sense of "autonomous"
so imo, both securities (tokenized or not) and non-securities tokens have important and distinctive mechanisms of value accrual, and we need both in general, and many projects need or should want both...
I totally understand people may not want the brain damage of trying to navigate both, or figure out how to hold both, and I also super appreciate teams that push the envelope to make their token as valuable and trustworthy as possible, but disregarding every dual equity/token project as a scam or as bad means:
--> you would've missed out on BTC because it's also possible to own Blockstack equity & they could theoretically pvp
--> you would've missed out on ETH because it's also possible to own Consensys equity & they could theoretically pvp
--> you would've missed out on BNB because it's also possible to own Binance equity & they could theoretically pvp
--> you would've missed out on UNI, AAVE & others because it's also possible to own equity in their Labs companies
moreover, even most projects that don't have an equity issuing labs company could form one at any time, and that could pvp the token...we saw this, for example, with SushiSwap and other notorious 'DAO takeovers'....
you can see this exact debate playing out live right now with
@pumpcade...
@PopPunkOnChain raised ~$6M of equity across two rounds while the
$PUMPCADE token was live and trading, and the discourse around it basically is the debate this post is about...I don't have a strong take on that specific cap table and I think the team deserves credit for building a real product in public, but the fact that the whole space is arguing about it proves the point: dual equity/token is here, it's structural, and the answer is better tools--not pretending the question away...
the only exception to that risk I know of is
@MetaDAOProject, which requires projects that launch on it to prohibit equity issuance via a
@MetaLeX_Labs integration...so if you're bullish on that model, great, you have an awesome option with a top-tier elite team and community trying to make it as scalable and trustworthy as the law allows...
but there is not one size fits all...and, most importantly, there is a lot more we can do to make sure as many people as possible have access to actual securities--for example, last week at MetaLeX we launched ACE so more people can hold both securities and tokens like VCs do....it also adds more covenants and transparency for how teams manage token treasuries, and there are even more ways projects and communities could keep improving that aspect...
@AragonProject's and
@DefiLlama's recent token ratings schemes are another push in the right direction...
....overall, we're talking about corporate finance and project finance....having lots of options is good, is not ideological, and certainly is not zero-sum, as projects that make sense for a dual equity/token structure are likely not the ones that could go token-only...and vice versa, many projects (eg a new blockchain) do not make sense to accrue value to securities...