Please don't be so narrow sighted. Have you ever been charged with a crime you didn't know was a crime? You don't think overzealous sheriffs or prosecutors love pulling out old statutes on people?

Holding people accountable for laws they had no reasonable way of knowing is a miscarriage of justice. Our criminal system absolutely takes intent into account when determining criminality and sentencing.

I have no idea why people think the Howey test is so cut and dry when courts sometimes struggle with a legal definition for a sandwich.

Also, that all only applies to criminal statues, not civil/regulatory ones. If you're a construction firm who doesn't know that houses have to be built to fire code, maybe you'll escape criminal prosecution, but the government is going to take an axe to your business anyway.

Does that mean they have a duty to their own business partners or customers or investors to shut down their own business?

If we're looking for an analogy in this space, I think it's more like snake oil. So imagine a company started selling a new "nutritional supplement" or "herbal blend" that helped with anxiety. But it turned out the secret ingredient was weed. That would be a fraud on investors and they could well get charged for that on top of the base drug charges.

Courts never struggled with the legal definition of a sandwich. But yes, they had to come to a decision on what counted for legal reasons.

The difference is in terms of punishment and enforcement mechanisms. The person who keeps doing something bad out of fear that there's no way out is, in a sense, a failure of society as a whole. The person who is doing something bad as a way to get a leg up thinking they can get away with it is a failure of themselves to understand that society comes with a social contract.

The end results and the ultimate suffering are the same. For the first situation, we want to educate people such that they are more aware and can avoid falling into that trap, and give them ways to get out of the trap that minimize damage. For the second situation, we want to isolate the damage they can cause and prevent them from causing more damage because they are fully conscious of what they are doing and what is going on, and that makes them more dangerous.

If you mess up and get into an inextricable situation, there should be a way to resolve that with the promise of personal growth (along with guard rails to prevent repeating the same mistakes). If you deliberately cause an inextricable situation so you can profit off of it, the only resolution is to isolate the person who caused it from committing further harm until they go through personal growth such that they don't want to cause that harm anymore because they understand that harming others also means harming themselves in the big picture.

But for large-scale financial crimes, I think worrying about that too much is not just unknowable and irrelevant, I think it's actively harmful.

As with toe-stepping, we can recognize that a whoopsie moment may not deserve punishment. E.g., if you're out hunting with your buds and accidentally shoot somebody in the face, as with Dick Cheney, that's different than intentionally shooting somebody.

But when somebody intentionally sets up or takes on a position of power, I think there are no whoopsies. Drinking a beer on the couch? Have fun. Drinking and getting in a car? Criminal. Drinking and getting in a car and killing somebody? It may be no more intentional than toe stepping. But at that point I don't really care whether they killed somebody because they meant to or not. The harm's the same.

I think this especially matters when we look at things like the 2008 financial crisis. It caused enormous damage, both in financial and human terms. Yet basically nobody was held accountable. Why? Because they didn't mean it. They were just greedy fuckers in positions of extraordinary power that they used for personal gain without regard to the human impact. Plus they were the sort of people who looked a lot like the people who made the laws. They went to the same parties and had nice friends. So they were all somehow let off the hook. And we did little to make sure they'd get held responsible the next time.

I think the personal growth bit is nice, but hopelessly naive. There are plenty of people who will do the right thing not out of love but of fear. There are worlds where those people are kept from doing harm, such that we can help them grow up to be decent. But we don't live in a world like that. And if we want to create that world, we need to stop the sociopaths and morally deficient goofs from causing massive trauma to those around them. Because I promise you, that will interfere with the victims' personal grwoth.

You state that they don't satisfy the test with quite some certainty but left the reasoning to the reader; but, it would seem, to me, like Pokémon cards are no different from many of these cryptocurrencies the SEC is interested in:

In this case, some company decided to print a bunch of supposedly rare things that they pinkie swear are actually rare, even though this company can print more any time they want. People who buy these cards from the company don't even know what they are buying, which seems particularly egregious, and maybe should be regulated as an illegal lottery!

They then sell these things to people who are absolutely buying them with the expectation that they will go up in value. The people who print the cards insist they have "utility" in the form of a game people can play, and yet I have never heard of anyone actually playing this game... hell: the only 10 year old I know well happens to be obsessed with these cards and is presumably in the target market, and I'm not even certain he knows how to play the game!

Instead, this kid just keeps his cards in binders and talks constantly about their rarity and potential later sale value, as even our children are being turned into amateur investors by the marketing efforts of this company; and the reality is that--like other so-called "collectible" crazes--most of these cards are going to be near-worthless in the long term as this is just a bubble being held up by the company's management efforts designed to shill their shitcards.

Yes, if you ignore the primary reason for Pokemon cards (the game), then they can magically be made to look like securities....

They then sell these things to people who are absolutely buying them with the expectation that they will go up in value.

No, completely false and this betrays a complete lack of understanding of why people buy collectibles. People buy collectibles to collect them; the value is in possessing the collectible; rare collectibles have value because it is harder to acquire them to add to one's collection.

With respect to baseball cards: they are collectibles. They have value because people collect them. To keep. They don't represent an interest in a common for-profit enterprise, and they don't derive their value from the efforts of others. The value of a card is derived from the card itself: the quality of the print, the rarity of the card in its respective printing run, and (most importantly) its physical condition. Popular players' cards are usually more valuable because more people want to own the card, not because owning the card will somehow make you more money from that player's efforts. (I still have a few baseball cards from when I was a kid. My Ken Griffey Jr card is worth about a penny because it is not in good condition; my mint Tim Belcher card is worth $1.35 because I never had a reason to look at it. But even though nobody knows who he is outside of hardcore Dodgers fans, some people out there still want to have a complete Dodgers lineup from the 1987.)

And this is why analogies to collectibles always fail for crypto bros: collectibles have value in themselves, but crypto only has value to the extent it might represent something else.

If you are willing to admit that there are "utility" to these cards, then what makes them different from cryptocurrency projects that do the same? If the game weren't so popular--maybe it is one of the numerous card games we wouldn't quickly be able to name that are all rip-offs of the concept, but didn't have the juicy IP of Pokémon--would you then suddenly consider it a security?

It fails on points 2 and 4.

If you disagree with this analysis, maybe you can show how this is (or is not) different to, say, Axie Infinity (a crypto company even I actually do feel is a security under this test--with centralized servers managing centrally minted NFTs--and which is very similar in nature to Pokémon as it is clearly a rip-off of their IP) or (to take a more standard example) Filecoin (one which the SEC claims is a security in their lawsuit against Coinbase)?

Axie Infinity might run afoul of the Howrey test because of deliberate design decisions in the game which make it nothing like Pokemon: the ability to cash-out in-game currency, and the ability to loan out axies to other players and make money from their in-game efforts. Unlike Pokemon cards, which can be loaned out by players without any involvement from the company printing the cards, loaning out axies and earning money from other players' playing required the active involvement of the company behind the game. Moreover, making money (and especially making money pyramid-style from loaning out your axies to other players) was marketed as the primary selling point for the game for over a year, in contrast to Pokemon and baseball cards where the printing companies have never made claims about the value of the cards or the putative income that could be derived from engaging in a career trading them.

There's no common enterprise for ordinary collectibles. A truly analogous situation would be if pokemon represented a share in the pokemon company where you could participate in the profits derived from pokemon merchandising or something like that.

For older cards though I disagree that the the pokemon company can just reprint more any time they want and dilute the value. The most valuable card out there is the original first edition Charizard from the 90s. They can never really reprint this card and have it be treated in the exact same way. And they do regularly "remaster" or reprint the original set from the 90s in order to cash in on the nostalgic 30-somethings who now have a disposable income (I believe there is another one coming later this year). But these are just replicas and not the "real" thing. Kind of like an original antique/book/currency/artifact vs a replica.

However I'd say at least 50% of the cards in any printed set are not useful in gameplay if you are actually trying to build as competitive a deck as possible, and are really only good for collecting a complete set. They will also print "alternate artworks" of common cards which are the exact same gameplay-wise but visually different and artificially much rarer.

Magic is being held up by the early cards having been driven up in price by millennial and young gen x players who became adults with real incomes and social lives that revolved around the game. WoC manipulates the market as much as it can manage, trying to maintain the hope that one can strike it rich, but they make their money off the new cards, not the used ones.

It's the same thing that happened with comic books and baseball cards: people who bought baseball cards in the 50s and early/mid-60s found themselves with small fortunes, because there were wealthy nostalgic baby boomers to sell to. People bought baseball cards in the 80s and 90s trying to cargo cult the price increases of those classic cards, and the people who printed baseball cards played into that. That doesn't make baseball cards a type of security where one is investing in the growth in the community that buys baseball cards any more than buying a washing machine makes you an investor in the growth of the community that buys washing machines, although washing machines also have a resale value.

Buying crypto gives you nothing but a line in the distributed accounts of the people who are coining crypto. It's nothing but an obligation. There's not even the token value that a 10 cent stock certificate might provide.

Boring?! That's very subjective, don't you think? It's 'boring' in the sense that chess is boring.

There's an entire market around the cards, yes. You don't _need_ that if you just want to play and have fun, but people will try to min max everything. I used to play with borrowed decks since I figured out as a teen that building decks out of booster packs was far beyond what I was willing to spend.

Much like if they had talked about an age limit on purchasing them, it would be related to cigarettes or alcohol (in the US).

... Pokemon cards were only used as an example to explain what happened, almost like an ELI5. Whether they'd pass they Howey Test or not is irrelevant.

Not if you're the SEC enforcing securities laws, which only apply if they pass the Howey test.