Joey DeBruin
@joey
Does anyone have a handle on the legal side of Royal music NFTs? Is an LDA similar to what Opolous or Republic call an S-NFT? Is Royal registered under U.S. Regulation Crowdfunding? I can't find in their docs.
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JD Ross
@jd
It is not a security so not registered. It’s a fully on chain contract containing rights to streaming income. The contract is linked from each token. Using the royal app or directly on chain each owned can claim royalties as they are released
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Tara Fung
@tara
This is a big topic among private market securities folks. Many experts would argue that Royal is offering unregistered securities as their product checks all the prongs of the Howey Test and they should be utilizing some of the private market exemptions (e.g. reg CG or reg A)
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Tara Fung
@tara
For instance, Royalty Exchange has a similar product and they utilize a securities exemption (which is different from non-registration) to offer royalty streams as an investment product to individuals.
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Tara Fung
@tara
The argument supporting Royals product as not being a security hinges on the “common enterprise” prong within the howey test as I understand it, namely that streams of a song are not centrally controlled and so no common enterprise is responsible for the “expectation of profit.”
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Aman Dhesi
@aman
Isn't that akin to making the argument that revenues generated by a company are not controlled by the company (they're controlled by the market) so no common enterprise is responsible for expectation of profit? :)
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Tara Fung
@tara
I didn’t say it was a good argument 😉
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