Forbes cites Senior Fellow John Berlau on his book, George Washington, Entrepreneur: How Our Founding Father’s Private Business Pursuits Changed America and the World:
John Berlau, Senior Fellow at the Competitive Enterprise Institute, traced the history of financial innovation in his best-selling book George Washington, Entrepreneur: How Our Founding Father’s Private Business Pursuits Changed America and the World, noting how the first President used tobacco warehouse receipts for money. Berlau challenged the view that cryptocurrencies endanger investors, noting instead that misguided regulation increasingly shuts out middle class investors from financial markets, limiting their ability to enjoy its benefits. He gave the example of Home Depot which went public in 1981 at $12/share with only 4 stores. The notion that entrepreneurs can use markets and exchanges to raise capital is increasingly limited. SEC regulation has had the perverse effect of increasing cost and legal and regulatory requirements such that firms must become significantly large before they go public. Larger IPOs with bigger threshold requirement reduce the participate of small investors. Cryptocurrency emerged as an alternative to centralized finance and offers a way for small investors to get involved, but government intervention hinders this democratization of innovation.
Berlau highlighted many defects in the SEC’s arguments as well as the downsides for other parties. He notes the lack of a working definition and limiting principle for the Howey Test and how that has led the court to find, for example, in United Housing Foundation, Inc. v. Forman that shares in private cooperative apartments were not securities. Even in the Howey case, the court observed that the shares on offer were to the orange grove real estate, not to the asset of the oranges themselves. This would seem to be an important point relating to Ripple and XRP, as investors have bought currency, not shares in the company.