Gath3r Weekly Updates – Edition 7 | 24/08/2019
Posted by admin on August 24, 2019
We’re excited to release the latest issue of our weekly update blog, covering everything from marketing, partnerships, tech and other general developments.
As such, here are some of the most important updates from this week we wish to share with you.
Also, don’t miss the below summary presented by our CEO, Reggie and our legal general counsel Steven Young:
New Brad Laurie AMA with Reggie
- The previous day, Gath3r’s CEO, Reggie, took part in a Telegram AMA with Brad Laurie, aka Blockchain Brad. The one hour long discussion has taken place on Brad’s Telegram channel and you check out it out in its entirety here.
Ambassador Program Addition to Gath3r’s Website
- Our brand new Ambassador Program is up and running and we have just finished updating our site with a whole new section for it as well. You can check it out and also apply here. The Program is split into three main areas, focused on community growth and engagement (Sapphire), publisher partnerships (Onyx) and child chain outreach (Ruby). Click on either one of them and fill in the form to apply, or go to our website.
A Look Into The GTH Token From a Legal Perspective
The Gath3r, LTD (“Gath3r.io” or “Gath3r”) cryptographic token (the “Token”) has the possibility of being considered a “security” in various jurisdictions, but it would likely fail the Howey test (the U.S. Securities law test) on several counts. Gath3r does not operate in the U.S. or sell to U.S. investors unless under specific safe harbours, but determining how the Token fits within the Howey test framework will illustrate how it may be seen in other jurisdictions.
Relevant securities laws: The case of U.S. v. Howey outlines the test that the Securities and Exchange Commission, as well as judges and lawyers use to determine if a transaction is an “investment contract” (also called a security). Under the Howey Test, a transaction is an investment contract if:
- It is an investment of money,
- The investment of money is in a common enterprise,
- With the expectation of profits, and
- Those profits come from the efforts of a promoter or a third party.
This test looks at an investment’s substance, rather than its form. This means that, even if some or all of the factors above are undertaken using cryptocurrency, U.S. courts and regulators look to the economic realities behind an investment plan, rather than its name or form. And in substance, the Gath3r token will be providing the token holders who purchase them in the public sale an operational token.
- Investment of Money: A Gath3r token sale will probably meet the first requirement because it will accept money (in the form of cryptocurrency) from investors.
- Common Enterprise: The majority of federal courts in the U.S. define a “common enterprise” as having “horizontal commonality”, meaning that the money or assets are pooled from multiple investors whereby the investors share in the profits and risk in some proportion. Other federal courts have used the “vertical commonality” which focuses on the relationship of the investors with the promoter who is putting the deal together. The Gath3r token sale may meet either definition, because there is a group of investors that are pooling money/assets together and they are depending on the promoter (Gath3r) to bring the deal and the investors together. However, the Gath3r network depends directly on the holders of the tokens as well as many other contributors to the network. The merged mining method of blockchain computing requires the input and work from many individuals, not just the promoter. This means that the investors are not just investors, but they are participants as well. Since token holders are actively working within the token ecosystem, this will actually work in favor of the tokens not being considered as a security under the Third-party efforts prong of this test, expanded upon below.
- Expectation of Profits: This analysis turns on whether the investor is expecting a return on their investment. They can either come from capital appreciation, cash return on investment, or other earnings (like dividends and interest). The Gath3r token sale will probably meet this requirement because the investors are expecting the value of the tokens to increase.
- Third Party Efforts: U.S. courts understand this to mean that the efforts of the promoter(s) or third party(ies) must be undeniably significant in the success or failure of the enterprise. The Gath3r Token and the sale thereof will not likely meet this requirement because so much of the success of the Gath3r blockchain network relies on various other third parties to run merged mining nodes, and the ability for different users to create new forks of the Gath3r blockchain for their own uses.
Based on the form of the Gath3r blockchain network, rather than the appearance, it is unlikely that the Gath3r token will be considered a security for the sake of government regulation. The Gath3r token will likely fail the second and fourth prongs of the Howey test. Too much of the day-to-day running, and the potential profitability, of the Gath3r Token and the Gath3r blockhain network rely on the Token holders and many other individuals for this to be a security.
Importantly, Gath3r has already sold some tokens to private investors (within general securities regulations), but will not sell tokens to the public without the token already working (at least on a test [i.e. beta]) that provides value to the holders.
These are the latest updates from this past week, stay connected until next week, when we will be releasing a new one with even more exciting news.