Strength and weakness are irrelevant. Compliance is needed—NTRN excluded US residents from their airdrop for a reason, namely, that they are complying with US securities regulations…
But now NTRN on ICS has violated those regulations, and it has done so by implicating the Hub and all of its stakers in the arrangement. That needs to be suspended/reversed until the Hub can acquire professional legal review of the situation and the recommendation of a qualified attorney.
Regarding NTRN’s status as a security—and I would extend this also to STRD, which is currently seeking to be added to ICS, and also the Atom Accelerator DAO—I provide a quote from Alan Palmitter’s text Securities Regulations:
"Applying a framework developed by the Fifth Circuit in Williamson v Tucker, 645 F.2d 404 (5th Cir. 1981), many lower courts permit a nominal general partner to claim that his interest is an investment contract by demonstrating that he was so dependent on the promoter that he actually could not exercise meaningful control. To establish that a general partner interest is a security, the investor must show either
- No legal control. The partnership agreement leaves so little power in the investor’s hands that the arrangement in fact distributes power as would a limited partnership, or
- No capacity to control. The partner is so inexperienced and unknowledgeable in business affairs that he cannot intelligently exercise his business powers, or
- No practical control. The partner is so dependent on the unique managerial ability of the promoter that he cannot replace the manager or otherwise experience meaningful partnership power." (Securities Regulations, p55)
NTRN’s airdrop gives 5% control to “the community”—NTRN offers no meaningful control to investors. It is almost certainly an unregistered security and its revenue should not be distributed to ATOM stakers.
STRD’s airdrop gives 6.4% control to “the community”—STRD offers no meaningful control to investors. It is almost certainly an unregistered security and its revenue should not be distributed to ATOM stakers. In addition, since liquid staking providers like STRD delegate tokens to validators in ways that are disjunct from how users would directly delegate themselves—either through a “whitelisted” subset of validators, or at the discretion of STRD voters (though note that “STRD vote” is controlled not “the community” but STRD devs and their VCs)—such liquid staking providers deprive investors of control of their investment and put chains under obscure networks of influence, further weakening any nonsecurity claim.
The ATOM Accelerator DAO has virtually no community oversight and deprives investors of control. The community member Ray Raspberry recently uncovered conflicts of interest in AADAO’s approvals. AADAO securitizes ATOM and weakens ATOM’s nonsecurity standing. That Youssef Amrani was on a recorded Twitter Space bragging that AADAO is backdooring ATOM 2.0, which was pointedly rejected by the community, is a sign that AADAO has taken control as the promoters of ATOM.
These all point to a broader question/problem within ATOM: is ATOM a commonwealth/polity or a company? If it is a company, it needs to comply with legal requirements of doing business with people in jurisdictions all over the world. Being on blockchain does not create special exemptions to the law, nor should it.
I don’t think that Hub stakers should be forced into such positions without full disclosure of the risks they are exposing themselves to.
NTRN clearly understood, and perhaps had legal counsel explain, that their model would raise concerns with regulators. That NTRN did not share this information with ATOM stakers when applying for ICS is potentially negligence/a failure of NTRN’s fiduciary obligations in a commercial exchange.
It is better to suspend ICS for any chain until professional legal review can be provided. Literally any company with the market capitalization of ATOM would have legal wrappers and attorneys reviewing all commercial decisions.
It is negligent, not revolutionary, for the Hub to continue without such services. Suspending NTRN (plus other ICS additions and AADAO) until legal review minimizes damages; allowing NTRN (and other ICS additions and AADAO) to continue just digs a deeper grave for the Hub to climb out of.
You do not change the law by breaking the law. The suspension does not “weaken” the Hub. What weakens the Hub is ongoing regulatory violations.