The Tampa Bay Rays just reported for spring training in Port Charlotte, Florida. The Port Charlotte Sports Park is a cozy place for pre-season and minor league games. The Class A Charlotte Stone Crabs play there when the Rays don't.
Port Charlotte wasn't always. In the 1950s, the General Development Corporation (GDC) bought about 180,000 acres of grazing land for about $45/acre. This land eventually became Port Charlotte and adjacent North Port. But that land was pasturage because it sat at sea level. Just over the wall in deep left field at the Port Charlotte Sports Park is what the brochures call a "lake," which connects to an intricate network of "canals." They cover Port Charlotte and North Port. Those are really drainage ditches, which you need when you're trying to convince people to build homes in a swamp. See, e.g., https://www.florida-backroads-travel.com/lot-sales-towns.html .
In the 1960s and 70s, GDC sold quarter-acre building lots to folks up north who, blinded by the light of the Florida sun, eagerly bought in to the idea that for a few dollars they could own a piece of land in the Sunshine State. I know this because my father was among them.
I think he paid something like $1,200 for his lot in the mid 60s. As swampy pasturage, that land was worth, well, about the $12 that GDC paid for it. It is in the $1,188 price difference that our story rests. GDC's pitch was that it would build the infrastructure that would make Port Charlotte and North Port places where people would clamber to live. That meant all the subdividing, building roads and sewage systems and drainage ditches . . . er, I mean canals . . . and everything else needed to make a swamp habitable. It was pure Field of Dreams. If GDC built it, they who owned all those quarter-acres would come. When the critical mass of a city emerged, vibrant and valuable, the $1,200 paid for the lot would become the bargain it was hyped to be.
Now, let's shift to that other swamp, on the Potomac. The SEC has been trying to make sense of how crypto assets fit into the world of securities regulation. There are essentially two kinds of stable cryptoassets. Debt and equity interests in traditional businesses that are distributed on a blockchain rather than as traditional stocks or bonds clearly are securities. And cryptocurrencies that can be used as money, like bitcoin and ether, are not. Utility tokens that can be used to buy goods and services within a fully developed decentralized blockchain network are a form of cryptocurrency, and so they are not securities either. See https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219-2a1.htm
But in between the two is a transitional state where the troubles lie.
What makes a security turns on the so-called Howey test. A thing is a security when it represents an expectation of profit from the managerial efforts of others. Traditionally, those "managerial efforts"are the day-to-day running of an ongoing business. In Howey, investors were sold interests in an orange grove. But investors expected the orange grove to be cultivated and the fruit harvested and sold -- in other words, they expected the orange grove to be managed so as to turn a profit, and that made the orange grove interests securities.
Howey's orange grove was more like a traditional business than is the development of a crypto network. The oranges were expected to grow year after year and be profitably managed indefinitely. But token development is expected to be a short-term project. The blockchain should soon become autonomous, operating without any human management. That's the whole point of a blockchain. In extending the Howey test to cryptoassets, the SEC essentially determined that the necessary management effort need not be ongoing. The effort needed to build a crypto infrastructure and to support a token economy until that infrastructure is fully self-sustaining is enough to make a token a security -- even though that management effort is not intended to last indefinitely.
We can see this rationale in a recent SEC enforcement action against Telegram Group. Telegram sold tokens, called "Grams," that would someday be usable to send instant messages through a decentralized blockchain called TON. As the SEC put it in its complaint: