the below thread is vital feedback from @milesjennings and @a16zcrypto on the Senate's risky departure from regulatory framework established in the House's bipartisan CLARITY bill. In particular, there are two extremely hard-fought 'wins' in CLARITY without which I would not have endorsed it & which are essential if token markets are to have a healthy future, but which are lacking in the Senate approach: (1) CLARITY makes very clear that tokens can have intrinsic economic value flows etc. as long as these economic flows derive from their use within a decentralized/autonomous system--they can look a bit like securities, as long as their trust properties are unlike those of securities; in contrast, the Senate framework resorts to an antiquated and gray-area test around whether tokens are associated with 'rights' to determine the securities dividing line...this is completely different from current securities law and would place any value accrual mechanism that appears rights-like into serious jeopardy, creating more and more incentive and 'moral hazard' for 'valueless memecoins' as a pure regulatory arbitrage . . .CLARITY also makes this point clear not just for 'investment contract' analysis but for every other type of 'security' that a token could be regulated as ('notes' etc.), the Senate bill only deals with investment contracts. . . (2) the entire point of a *market structure* bill should be to do just that--improve *structure*, improve *capital formation* for the projects that are worthy of capitalizing... but if project insiders and VCs can dump with complete impunity without delivering a single one of their promises, market structure will get *worse*. . .this will be particularly bad if combined with point #1..taken together, we will have a market with strong incentives toward creating valueless tokens that are pumped-and-dumped fast, and high-quality tokens and projects will be *punished* with greater regulatory ambiguity & risk

here is a more specific expansion of the point: let's say your community has a grants ORG that is supposed to give grants to fund the project--like the Ethereum Foundation or a DAO-funded grants council now let's say you want to give tokenholders some kind of right to monitor & adjust the performance of this entity over time, and make sure they are following their mission of funding community-relevant projects rather than random things the people running them just happen to like or various conflicted transactions CLARITY Act--it is absolutely clear, and indeed *encouraged* that tokenholders could have rights (through voting or otherwise) to monitor, partially govern, and hold these entities accountable...the entities and tokenholders can together comprise a 'governance system' that can actually help qualify the project for good regulatory treatment, because it has credibly neutral governance and users and tokenholders are protected through a system rather than needing protection from a regulator Senate bill--the token is now at high risk of being regulated as a security, because it is associated with a right In other words, under the Senate bill, because tokenholders have *more* power and are less apt to suffer abuse from agency problems, the token is *more* regulated and likely is not allowed to exist at all. What kind of sense does this make? None at all. Rights are *good* and should not be punished.