This repository contains databases and analytical software for compliance. Accelerating excellence in compliance and ethics is an important part of Choice Coin's role as an open source governance platform. Below is an evolving regulatory corpus for blockchain technologies. The corpus includes statutes, cases, secondary sources, and corporate filings relating to the evolution of blockchain and law. The focus for this repository is on U.S. securities and commodities compliance. However, over time, focus will be expanded to other areas of law as well. The goal for this repository is to advance an optimized compliance program for Choice Coin and make information availible to the public.
The software is open source and may be used by anyone, subject to the terms and conditions of the License and Disclaimer. The work for Choice Coin compliance has been supported by both the Algorand Foundation and the Solana Foundation. We are extremely grateful to both the Algorand Foundatioin and the Solana Foundation for their support.
Solana can be found in the Solana-Compliance repository.
Algorand can be found in the Algorand-Compliance repository.
This repository is for compliance purposes only. Nothing in this repository is or should be considered legal advice. Nothing in this repository can replace a lawyers advice or counsel.
Demonstration using chatGPT to build automation software.
The Choice Coin Compliance AI is designed to statistically measure digital assets on a scale of 0 to 1, where an asset with a score of 0 is almost certain to be considered a security and an asset with a score of 1 is almost certainly not a security. The AI is an embedded system, which codifies human knowledge and analysis for optimizing non-security asset compliance. As part of Choice Coin's committement to excellence in compliance and ethics, regular assessments of the Choice asset are run to ensure growth toward decentralization and regulatory compliance. The goal for the Compliance AI is to use an evolving regulatory database to inform smarter compliance decisions. Choice Coin AI Demo
Choice Coin Compliance for Solana, see Solana-Compliance.
Choice Coin Compliance for Algorand, see Encode-x-Hackathon and Algo-Compliance.
Broadly, there are two main types of securities: debt and equity. The SEC website includes six types of securities: stocks, membership interests, stock options, restricted stock units, convertible instruments, debt. However, not listed among these six securities are digital assets, cryptocurrencies, or blockchains.
Securities are financial instruments, which represent an interest in equity or debt. The Securities Act of 1933 defines Security:
“(1) The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.”
The definition includes 30 total financial instruments as securities. But, digital assets are not one of them. Thus, only certain digital assets are considered securities under the scope of SEC regulation.
Most analysis of digital assets as securities focuses on a seminal case in securities law, Securities and Exchange Commission v. W.J. Howey Co et al. (Howey). In American Jurisprudence, Howey established the principle that, “The test of an investment contract within Securities Act is whether [the] scheme involves an investment of money in a common enterprise with profits to come solely from efforts of others...”
Since Howey, courts have adopted a four prong test, where each element must be met for a particular asset to be considered a security, it must include:
- An investment of money;
- In a common enterprise;
- With a promise of profits; and
- Profits promised solely from the efforts of others.
Securities Exchange Act of 1934.
SEC v. Howey Co. 328 US 293 (1946).
United Housing Foundation, Inc. v. Forman, 421 U.S. 837 (1975).
Curran v. Merrill Lynch, Pierce, Fenner and Smith, Inc., 622 F.2d 216, 221 (6th Cir. 1980).
Stenger v. R.H. Love Galleries, Inc., 741 F.2d 144, 146-47 (7th Cir. 1984).
George R. Jarkesy, Jr. Patriot28, L.L.C., v. SEC, No. 20-61007 (5th Cir. 2022).
The term commodity is defined under U.S. Law in 7 U.S.C. § 7(1a). According to § 9,
"The term “commodity” means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13–1 of this title) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in."
Complaint: Ooki, et al. and Order: BZeroX, LLC, et al. (September 22, 2022).
Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes
Customer Advisory: Use Caution When Buying Digital Coins or Tokens
An Introduction to Virtual Currency
Customer Advisory: Understand the Risks of Virtual Currency Trading
A CFTC Primer on Virtual Currencies
Securities and Exchange Commission v. Bittrex, Inc. (2023).
SEC v. Terraform Labs and Do Kwon (2023).
SEC v. Ripple Labs, Order on Motion for Summary Judgment (2023).
SEC v. Ripple Labs, 20 Civ. 10832 (2020).
SEC v. LBRY, Inc., Civ No. 1:21-cv-00260 (D.N.H. March 29, 2021).
Securities and Exchange Commission v. Barksdale and Barksdale (March 8, 2022).
Securities and Exchange Commission v. Ginster (Novemer 18, 2021).
In Re: Erik T. Voorhees (June 3, 2014).
In the Matter of BlockFi Lending LLC (February 14, 2022).
In the Matter of Poloniex, LLC (August 9, 2021).
U.S. v. Chastain (Wednesday, June 1, 2022).
Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984).
Griswold v. Connecticut, 381 U.S. 479 (1965).
Lil Yachty v. Opulous (January 27, 2022).
United States of America v. Anatoly Legkodymov (January 18, 2023).
Legal Matters in Web 3: A Desk Reference (2024).
United States Securities and Exchange Commission, Coinbase, Wells Letter (March 22, 2023).
Kraken Down: Statement on SEC v. Payward Ventures, Inc., et al. (Feb. 9, 2023).
SEC Division of Examinations Announces 2023 Priorities (Feb. 7, 2023).
Riley T. Svikhart, Blockchain’s Big Hurdle, 70 STAN. L. REV. ONLINE 100, 101 (2017).
Commissioner Hester M. Peirce, Token Safe Harbor Proposal, SEC Statement (April 13, 2021).
IRS, Virtual Currencies (2022).
SEC Cryptocurrency Enforcement, Economic and Financial Consulting and Expert Testimony (2021).