I think the DAO group got a pass, but the SEC was pretty direct in the wording they included with the opinion:
“Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection.”
The violations of these referred security law is a felony. I think most enforcement has been in the form of fines to date. It the tornado cash guy is in jail still, although that is more of a national security issue.
I do think one consideration of how the regulators respond is what kind of app is becoming a DAO. I don’t see the regulators freaking out about the SNS1 which is essentially a website with a poem. I don’t see the regulators freaking out about OpenChat which is a messaging app whose token allows you to pay for things like disappearing messages.
I could see the regulators freaking out about anything defi - a DEX like InfinitySwap.
I do think it is likely inevitable that the SNS will split off from the NNS because of the regulators coming down on the SNS. But if the regulators come down on the NNS, then that means it’s getting traction and getting used and the authorities are taking notice.
What I would say is that if you truly think the risk isn’t worth the squeeze you should argue why the downside case is existential. I think Dom is fighting to be relevant and wouldn’t put the IC in existential risk - unless he was convinced his actions are putting the whole project in danger.
At a minimum, Dfinity should create another SNS front end and launch pad with voting so that when the time comes it can quickly transition away from the NNS front end. That would at least be the prudent thing to do. Hope for the best but plan for the worst.
If you think even this isn’t good enough because named neuron representatives could actually go to jail, I think the job is somehow to convince Dfinity of this. As they clearly don’t believe it right now.
Alternatively, never do free or nearly free airdrops / public sales through the NNS. Projects should price their tokens so demand is sufficient for full subscription and not so low that demand overwhelms supply and leads to network congestion. I imagine that most dapps looking to raise funds will aim to do precisely that. SNS-1 was far from what will be typical in this respect. The NNS should be a place for serious fundraising, not giveaways. If tokens are priced properly, nobody will have incentive to create an army of bots to bid.
Regardless of whether or not the SNS sale is attached to the NNS (it probably shouldn’t be), the focus should be to expand the capacity of the network (and subnets) to be able to handle a large enough # of txn/s for any reasonable event, including against a potential DDOS attack of the NNS.
@icme raises a red flag here - if I were to stage an attack on the NNS, I’d upload a malicious wasm, get a few whale bad actors on board, vote (pass 3% voting threshold), and attempt to DDOS the NNS to block any votes going through afterwards until the replica/canister upgrade is made.
Maybe a bit more manageable of an attack would be to wait until a few hours before a less controversial proposal ends but named neurons haven’t voted yet (DFINITY, ICPMN, etc.) and then DDOS the NNS for just a few hours to prevent votes from being cast.
I don’t know how reasonable/manageable this is, but it might also make sense to try to decouple the ICP ledger from the NNS. It’s concerning that an attack (intentional or not) on the NNS halts IC-wide transactions (unless that’s by design ).
I think you basically raised all of the potential issues I can see with the SNS-1 matter.
The more I look into it, the more nervous I feel, especially when SNS-1 is currently traded at a highly speculative and manipulated price in the secondary markets. Folks will get screwed up and who will they blame for their loss?
Conducting a public sale in the NNS will always be considered as an unofficial endorsement and enablement of Dfinity. And that is just a ticking bomb.
A “speculative price” for SNS-1? What exactly are they “speculating” on - that the SNS-1 poem is actually a cryptic guide to a hidden treasure (e.g., Forrest Fenn 2.0)? Where is this token even being traded?