Before TerraD and Luna tokens crashed and the FTX exchange imploded, Securities and Exchange Commission Chair Gary Gensler gave a speech laying out his views on the regulation of the digital asset markets. Among other things, he said: “When a new technology comes along, our existing laws don’t just go away.” He reiterated the position of his predecessor Jay Clayton: “Without prejudging any one token, most crypto tokens are investment contracts under the Howey Test” adopted by the U.S. Supreme Court in 1946. The SEC and other federal regulators have spent the past year bringing enforcement actions against digital platforms that ignored the regulators’ warnings.

This article discusses a correlate of the proposition that digital assets are investment contracts and therefore are securities, namely that pools of digital assets are investment companies as defined in the Investment Company Act of 1940 (the 1940 Act). That act was adopted because of abuses that arose approximately 100 years ago in the then relatively new “technology” of pooled investment vehicles. As it happened, some of these investment funds engaged in a variety of abuses: selling to unsophisticated investors, participating in self-dealing transactions to prop up failing entities, manipulating prices and providing benefits to affiliated parties, and using combined power with controlled funds to force combinations with competitors,

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