Cardano disclaimer implies an investment contract

I realise I am sticking my neck out here and only want to open up discussion; certainly not criticising anyone or demanding any changes…

On closer reading of the pages on today, I’m worried the disclaimer language in the page footers would allow SEC auditors to legally argue that assets managed with Cardano represent an “investment contract” and are therefore subject to regulation, e.g.:

  • You are fully and solely responsible for evaluating your investments , for determining whether you will exchange blockchain assets based on your own judgment, and for all your decisions as to whether to exchange blockchain assets with Cardano. …

  • Past performance is not indicative of future results. Any investment in blockchain assets involves the risk of loss of part or all of your investment . The value of the blockchain assets you exchange is subject to market and other investment risks …

This reads like a cautious lawyer copied a standard disclaimer from an ad for a mutual fund (an example investment understandably well regulated by the SEC) into the Daedalus pages, without thinking of the legal & regulatory implications unique to cryptocurrencies.

Saying that Daedalus is used to obtain something that may “rise and fall in value” and especially with the word “investment” repeated over and over again, wouldn’t such language create opportunities for the SEC to rule that ADA is in “investment contract” if this is how we keep introducing Cardano to the public?

Most readers will already know this but I remember when such a claim was made about Ripple (2020-02-27: Lawsuit Alleging Ripple’s XRP Is Unregistered Security Moves Forward). IOHK & the Cardano Foundation have always stood apart from companies like Ripple who’ve held out the idea to buyers that XRP was a way they could make a lot of money, and therefore the Cardano community deserves to be immune from claims that ADA itself is an investment contract.

As I understand it (I am not a lawyer) SEC regulations about “investment contracts” are currently only targeting ICOs (SEC: Spotlight on Initial Coin Offerings (ICOs)) and won’t necessarily apply to the cryptocurrencies themselves unless there are particulars about them that subject those tokens to such regulation (e.g. the Howey Test).

Nobody would argue that the SEC is going to introduce further regulation this space, but I am sure Cardano’s goal would be that only its blockchain applications are regulated, and not ADA itself (2019-06-25: Investopedia: How SEC Regs Will Change Cryptocurrency Markets)

Without these disclaimers, the documentation & writing already circulated has long established that ADA is for use in a “settlement layer” and is purchased by a market price relative to supply & demand. According to the language of the Howey decision itself (SEC v. Howey Co., 328 U.S. 293 (1946)) that doesn’t imply an “investment contract” at all.

So at least until the SEC may be granted broader powers to regulate all cryptocurrencies, why not trim those disclaimers from any use of the term “investment” and other investment-like characterisations of Cardano … unless it would somehow suit the Cardano developers, promoters & ADA holders to be regulated as such?


great criticism @rphair , let’s hope it’s not censored by ambassadors as fud.

my initial thoughts are that there’s a distinction between daedalus the wallet and ADA the currency itself. much like the difference between a bank account and a national currency.

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It runs a fine line. When Shelley goes to mainnet, the words I heard are it will be considered currency. However, CH doesn’t want this considered as that, as to not have any implication in cashing in on Ada would thus make it an investment but not as much something for profit. As per that mindset, it could be counted as a form of donation, especially if enough people or those that feel the same way all actually do things certain ways.

I think the disclaimer is just to cover basis. You know everybody always has a hand out, even if it is something that doesn’t rightfully belong to them. I would even think that there’s rules if enough people allowed it to happen, that would let our ada be regulated and a percentage partially taken if enough didn’t stand against it.

And that there, this specific reason is the reason why something like ada, and what cryptocurrency stands for and is against, is meant to change this exact practice and revolutionize the particulars actions and the way everything is done.

How long it will take, is maybe more time than we have. How many will do the right thing while taking the appropriate steps against egregious regulations meant to pilfer a democratic system and bring down all but for a few. Hopefully soon enough.

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I believe the difference is, that basically in the Howey Test, if what Ada you have you put toward Cardano and just collect the interest, that you should never be charged anything nor be confined to anybody regulating a tax on what you own.

The other side of it is, that anybody is free to sell or trade their Ada and if there is a profit from it by trading or cashing out it then becomes subject to regulations, taxes and rules that imply it is being used for currency and not the intended purpose and contributer for just Cardano and its affiliates.

As much as most involved would Love for the sole purposes of the initial inspiration to beget that meaningful vision, as has been said, the latter is still filled with greed and selfish intentions here and there.

For everybody to be in the Unity and change that would offer a universal opportunity and declare change to absolute decentrization, the timeline between these things will be a very long road. You cannot hold back those that try to instill opportunity until all others see how great a great system or rather systemless gift that’s truly been created.

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Great discussion. I don’t see why anyone would criticize. Only thoughts explained very well.

I’m positive there will be a day when bitcoin soars high and people cash out and THEN the IRS will really get involved.


On reflection today on Pavel Durov’s announcement (What Was TON And Why It Is Over) I found this basis for the SEC’s lawsuit against Telegram (SEC Halts Alleged $1.7 Billion Unregistered Digital Token Offering). I’m further reassured that there are major differences between this classification of TON as an “unregistered security” and the presentation of Cardano / ADA to the public so far.

Since the SEC’s description above of that injunction didn’t say why “TON is a security” I found this later article citing “expectations of profit” (SEC Taps 3 Experts on Why Telegram’s Token Is a Security). This article reads like a checklist of “How to get the SEC to classify you as a (rogue) security” and I feel confident Cardano has done none of these things. (There are some notes about the relevance of the Howey Test to the TON case here.)

So although it makes more sense than ever that the Cardano disclaimer squashes any expectations of profit, I do wish it could accomplish that purpose without characterising itself as an investment that might not profit. Simply replacing “investment” with “purchase” (and replacing “investment risks” with just “risks”) in that disclaimer would preserve 100% of its legal strength without that potential liability.


I have enjoyed this conversation very much.

As I see it Cardano was never available to the U.S until after it had established itself as a digital asset subject to free trade, at that point as a digital asset the future of the coin was not for sale and there was no way for someone to buy Cardano vouchers as a security, had the ICO been held in the U.S then the Howie test likely would have applied to Cardano vouchers and come under scrutiny of the SEC, luckily a token in itself as a digital asset does not make it a security unless there is an organization responsible for its distribution promising a future reward, all ADA on the market can at this point be considered to be subject to free trade - genius.

The disclaimer you seem to have issue with in the wording of ‘investment’ is interesting and would seem to me to be only a perspective you hold, every time that I buy ADA I look at it as an investment - further; when I buy butter I also look at it as an investment, whether or not that investment gains value or loses it I invested value that I earned to be in control of it, so I get a little lost when you explain the following

I really do not understand why changing the wording changes anything cause if you buy ADA you will be making an investment in it the same as if you were buying a lb. of butter.

Maybe you could be more clear on what the difference and impact of the wording would achieve compared to what it is now?

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By definition butter is a commodity. Anyone purchasing butter as an investment is, again by definition, hoping to make income from it… a very bad example because butter declines so quickly in value. You can buy commodities on the generally unregulated spot market (cash on delivery, like you were saying) or the futures market (for future delivery, after an increase or decrease in value) which is subject to regulation (e.g. the CFTC in the USA whose purpose is to “protect investors”).

What you’re saying about ADA establishing itself as a commodity (since it’s a commodity of value, an asset) from the very early days is clear enough. Yet after all that excellent preparation paving the way to relatively unregulated trade, the current disclaimer refers specifically to “increase or decrease in value” which is characteristic of futures, options, investments, and other regulated activities. The disclaimer cautioning the Daedalus user about “investment” four times further reinforces this.

If it can be argued in court that ADA is an investment (trivially, since the current, official disclaimer on the Daedalus site refers to it as such), then by the Howey Test will further qualify it as an “investment contract” since, according to the wording of that U.S. Supreme Court ruling, the increase or decrease in ADA’s value will come from the efforts of a “third party” (neither the “promoter” nor the buyer). That would put ADA into the same soup as XRP, TON, and any other recklessly launched cryptos.

Like I said in the OP I am especially trying not to assume expertise which I definitely don’t have, so I won’t put up the current disclaimer on the whiteboard here or offer a full replacement. And I can’t repeat any more what I’ve said already… but I must say that all the Cardano devotees in my own circle hope someone at IOHK or Emurgo will chime in about this (maybe our moderators can help?), especially to confirm that the current disclaimer has been given a proper legal review from a crypto competent lawyer familiar with all the regulatory disasters of the last couple of years.


p.s. in case the web site presentation or wording changes, here is the current text for reference only, so future readers will know what we are talking about in case the wording does get tinkered (not that it needs to be, nor to imply it should be edited by forum participants… that’s my own disclaimer :innocent:)

Cardano is a software platform ONLY and does not conduct any independent diligence on, or substantive review of, any blockchain asset, digital currency, cryptocurrency or associated funds. You are fully and solely responsible for evaluating your investments, for determining whether you will exchange blockchain assets based on your own judgment, and for all your decisions as to whether to exchange blockchain assets with Cardano. In many cases, blockchain assets you exchange on the basis of your research may not increase in value, and may decrease in value. Similarly, blockchain assets you exchange on the basis of your research may fall or rise in value after your exchange.

Past performance is not indicative of future results. Any investment in blockchain assets involves the risk of loss of part or all of your investment. The value of the blockchain assets you exchange is subject to market and other investment risks


I see this more clearly now.

I am also interested in an analysis on how Cardano specifically compares to the Howey test by a legal expert,
Yet I am not worried much about it personally as in the past I explored it and made my decision that the vouchers from the ICO would have been sold as security’s that would have triggered the test had they been sold in the U.S. yet after the release of ADA on exchange and it being a Commodity rather than security for anything it no longer triggered the test, how exactly that changes anything is surely a complex argument of Law and like yourself, I am no expert, so further clarity would be reassuring.


Cardano pre-sale was done with full KYC & AML under Japanese law and absolutely no Ada was sold to anybody living in the US nor was there any marketing done in the US. The pre-sale was NOT done by IOHK and so it’s not related to them anyway. You can find out more here


Since the last posting from Emurgo doesn’t address the disclaimer question specifically (i.e., the original posting), I will assume these details about the launch of ADA / Cardano place us so far outside of the USA regulatory sphere that any disclaimer or “investor” perception wouldn’t matter with respect to ambitious regulatory efforts in the USA.

Well explained.

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@SebastienGllmt these links were obliterated in the recent web site redesign. Can you please find out where this information ended up… where we can access it today?

Thank you for flagging. The problem is already known. If anyone urgently needs the data, it can be accessed here via

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@adatainment thanks Tommy, my associate & I found the archive links last night. For anyone else who didn’t find the other page: