I would first like to start off by saying that I am not a lawyer and nothing in this post should constitute legal advice or should be taken as legal advice. However, I have personally looked into multiple crypto related cases that the SEC has started. I have done weeks worth of research into the Howey test and studied multiple rulings to come up with my opinion on whether or not Richard Heart will win his case against the SEC. I will specifically focus on the Pulsechain sacrifice and the PulseX sacrifice and not the Hex token accusation. Please understand that Richard Heart is being sued and charged for Hex, Pulsechain and PulseX and he may win against some accusations. He may also lose against all accusations or win against all accusations. Even with all the research I have done I still cannot come up with even an educated opinion if RH will win against the Hex argument.
Source of accusation from SEC: https://www.sec.gov/newsroom/press-releases/2023-143
Why I believe RH will win against the Pulsechain sacrifice argument. The first thing that we must understand is cryptocurrencies and digital assets on their own are NOT securities. In the SEC vs Telegram case the judge said and I quote "the security in this case is not simply the Gram, which is little more than alphanumeric cryptographic sequence" (Source:
Source: https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2019cv09439/524448/227/)
Just like an apple or a pencil is not a security, cryptocurrencies on their own are not securities. The SEC has even admitted that they have made up the term "Digital Asset Securities".
Even though a digital asset is not a security, it can still be packaged into an investment contract. The asset itself is not the security, but how its package can violate security laws. For example, an apple is not a security, but if I tell you to give me one million dollars so I can purchase a bunch of apples and sell them at my apple store while promising you that I would give you a percentage of all apples sold would constitute an investment contract (which are securities). If I did not get permission from the SEC or sought an exemption of registration then the SEC could take legal action against me for violating federal security laws.
When looking at Pulsechain and PulseX we need to understand that they are literal copies of Ethereum and Uniswap because they are forks of Ethereum and Uniswap.
The SEC and CFTC has already acknowledged that Ethereum is not a security. The Ethereum foundation even hosted an ICO that was unregistered and the SEC took no legal action against them as well as dropped an investigation into consensys (the company behind Ethereum's creation). Reason would dictate that since Ethereum is not a security, Pulsechain is also not a security. However, we have to ask ourselves, even if pulsechain is not a security was it sold as an investment contract ? In my opinion the answer is still NO.
In order for something to be an investment contract it must meet the requirements of the Howey test and to clarify, it must meet ALL aspects of the Howey test. To pass all aspects of the Howey test there must be an investment of money, an investment into a common enterprise, an expectation of profit from the efforts of the enterprise.
Pulsechain and PulseX on their own are not securities, but what the SEC is trying to argue is that the sacrifice phase in which users sent funds to the sacrifice wallets to receive Pulsechain and PulseX constituted an investment contract. Here are a few reasons why I believe that the Pulsechain sacrifice does not meet the requirement of the Howey test and therefore is not a security or investment contract.
#1 No common enterprise - There is no official company behind Pulsechain or PulseX. Holders of the Pulsechain and PulseX coin do not have voting rights, do not receive dividends, or benefits from any company. The reason why the Pulsechain and PulseX sacrifice is called a "sacrifice" is because when an individual deposited their crypto into the sac wallet they relinquished ownership of those assets. It no longer belonged to them and they did so with no expectations and the no expectation part goes into my second point.
#2 No expectations period - Richard Heart has stated multiple times that he does not work for the holders of pulsechain, hex, and pulsex and that they should not have any expectations from him period. His statements are well documents online throughout the years and I will post a few of them as reference.
Reference #1 - https://youtu.be/b7ixCCem32c
All the reasons I stated above apply to the Pulsechain and PulseX sacrifice and because of these reasons I believe that the SEC will lose their argument against Richard Heart when it comes to Pulsechain and PulseX. Even if RH ends up losing he may likely only end up paying a fine, similar to how Ripple had to pay a fine to the SEC for selling XRP without registering their sales with the SEC.
However, many people actually do not understand what it would mean for RH to win this case. If he wins the argument against the Pulsechain and PulseX sacrifice and a judge rules that the sacrifice is NOT a security then it would create a method for individuals to raise money under this method.
Thanks for reading
Mcdharyl Evra
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