Impact Certificates on a Blockchain

Summary

We can create liquid markets for public goods by porting impact certificates to a blockchain. The decentralized exchange Serum appears to be well suited for the purpose. I can see no technical barriers.

But the legal situation in the US and UK (where most EAs are) seems complicated and risky. Some tweaks to the idea of the impact certificate might enable someone in a country with more advantageous legislation (like Switzerland) to operate the system. I’m based in Switzerland, conveniently.

Investigations of the legal situation and the building of various software tools that I envision will take a lot of effort, time, and a bit of money. So before I go forward, I want to check that (1) there’s sufficient demand for the system to warrant the costs, and (2) I’m not making any deleterious, irreversible mistakes.

I Need Your Help

1. Are you planning to use these tokenized impact certificates? If so:
   1. Do you want to issue certificates? For what project?
   2. Do you want to buy certificates? What would be your yearly budget?
   3. Do you want to trade or arbitrage certificates or use them in other creative ways? Can you guess some metric, such as daily volume, to give me an idea of the magnitude of the engagement?
2. You can create a token for your charity or project right now. (Please read the section on legal risks first.) If you’ve considered it but you’re still hesitant, what are the reasons? Risks, missing features, or something else?
3. If there were a certificate that represents the impact of the whole field that you work in, would you accept it as a donation? Would you hold it or would you sell it within months?
4. Which whole field of altruistic work are you most excited about? If there were a certificate that represents the impact of that whole field, would you buy it? How much would you invest?
5. Do you notice mistakes in my thinking or gaps in my knowledge that you can correct/fill?
   1. In particular, do you see downside risks that I’ve overlooked, i.e. risks that are not merely like a failure of the project but create net harm?
   2. Do you think the better approach would be for an economist to first publish something like a whitepaper on the risks and opportunities from tradable public goods?

It'd be wonderful to get frank feedback in the comments so I can decide how to prioritize this project among some other options that I’m considering!^[1] Thank you!

Problems

Public Goods are Illiquid

Public goods are currently very illiquid investments: Donating not only comes at the cost of the money you donate but also at the cost of the option value to donate it elsewhere later.

I’d guess that I’ve improved my giving by a factor of about 100 between 2012 and 2015.^[2] Most other investments of mine are liquid enough that it takes me just seconds or days to sell them in such a case.^[3] But in 2015, I had no way to sell out of my investments from 2012–14 anymore to shift my impact portfolio toward my new preferred allocation.^[4]

This illiquidity of the market for public goods is probably part of the reason that people, even altruistic people, are much more hesitant to invest the same amounts of money into charities as into publicly traded companies. The first is final; the second is more a form of parking money with minor risks owed to price volatility.

As a result, large funders can’t park their money in conservative assets like GiveDirectly, Oxfam, or the Global Fund until they find a better opportunity; they need to park it in for-profit companies, most of which probably perform worse on the bottom line that the funders care most about.

Public Goods are Treated Like Consumables

A reason for this illiquidity may be that there isn’t a general understanding that you can resell investments into public goods or that there’ll be buyers. It’s as if they were consumables that the donor eats right after buying them. Yet some interventions that we can support have lasting effects – be it cash transfers for just a few years, a brief period of reduced catastrophe risk that has an effect on the aggregate catastrophe risk in any period that contains it, or changes to knowledge and culture that may even compound over time.

Before I buy a share in a public good from someone, I’ll want to know that there is no one who can produce or draw on an arbitrary amount of it at a smaller cost than what I’d pay, that I can prove that I own the share in the public good, and that there’s a somewhat liquid market for shares in this public good. If some of these are only somewhat lacking, I might trade that off against any additional utility that the proof of ownership might have – dividends, voting rights, access, etc. These desiderata are not currently fulfilled except in unusual cases.

Public Goods Fail to Reward Price Discovery

If I do research and thereby receive private information that a for-profit venture promises to be very profitable, I can invest in it (or found it) and get rewarded for my prescience when my shares appreciate in value. Therefore I’m incentivized to do such research and can refinance the cost of the research. The same is true if I’m ahead of the curve in discovering that an existing project is overrated and I short-sell it. This mechanism gradually increases the power of those who can make good predictions and decreases the power of those who don’t.

This is very hard to do with public goods at the moment. You can invest into some plant-based and cell meat companies (or some people can), but if this were true across the board, for example with wild animal welfare and insect welfare, then people like Brian Tomasik would be much richer than they are. Shorting playpumps and Scared Straight might’ve also been profitable. (Make-A-Wish might’ve been a less profitable short since its share price would’ve been held up by people with somewhat different values.)

A central limit order book is also anonymous. If you think a project is badly run or follows a bad strategy, you can short it, and no one will know. But everyone will see the decline in the share price. This avoids all the social awkwardness of gossiping about it in a way that warns them away from it without making you seem cynical, jealous, or vindictive. If you are, and that’s the only reason you short it, chances are you’ll lose money.

Other Problems

1. The benefits of working for vs. donating to charities are often nonobvious. You can’t easily see at what size of a donation a charity would value your work for them equal to the donation. This depends on the supply they have access to for the particular type of work and the degree to which they are funding constrained, both of which are not routinely published in job ads or donation appeals. There is also no marketplace where you can track these prices in real time and compare them between charities.^[5]

2. Public goods can evade democratic oversight. Some charities have a lot of leverage over the future. (80,000 Hours has a list of pertinent risk factors.) They are mostly using it thoughtfully at the moment, or that is my impression, but the risks remain. My plan is to empower charities much further, so it’ll become even more important that they serve some sort of causal or acausal compromise morality rather than burn resources in Pareto-inefficient battles. Democratic oversight will also be important if charities start to act like decentralized governments to provide government services to people worldwide, especially those who don’t receive them from their country’s government.

3. Altruists often feel bad about reinvesting. Many altruists are hesitant to reinvest in themselves rather than “generating impact” right away, so they neglect their mental health or are impatient with their learning or training progress. But if profits are the for-profit equivalent of impact, then it stands to reason that if many companies reinvest all their profits to grow faster for many years, it’s probably a perfectly good approach that altruists should consider too. Companies have other metrics, like revenue, to track their progress, but altruists may lack them, which can feel like stagnation.

4. Impact investing is often not very impactful. Impact investing is held back by the inability of fund managers to invest into the organizations that have the biggest altruistic bottom lines because those tend to be nonprofits. Just like it’s hard to create a low-volatility cryptocurrency fund that mixes cryptocurrencies or tokens that are correlated with Bitcoin with such that are anticorrelated (because they don’t exist), it is hard for managers of impact investment funds to put together a fund that is reasonably strong on the profit and the impact bottom line.

5. Funding is difficult to scale down. Funders seem to be doing a good job funding big and highly promising projects. But it seems plausible to me that there’s a long tail of small and mediocrely promising projects that yet are unlikely to do much harm if they fail. At the same time some funders have trouble allocating their funding because the big and highly promising projects are already well funded.

Solution Concepts

I want to draw on the idea of impact certificates to create a form of certificate that does not represent any sort of asset or monetary flow (e.g., a hotel building or fundraising revenue) of a charitable project but its all-things-considered impact on the world.

That’s impossible to measure with certainty, we don’t know if it’s defined at all, always infinite, or whether the first single-celled organism is to thank and blame for everything, but if thoughtful altruists are involved in the market and either own a lot of certificates or want to buy a lot of certificates, other traders will want to predict what these “impact whales” think is impactful. That can be as easy as reading about it on their websites. Hence the price will hopefully roughly track the enthusiasm that thoughtful altruists feel for a given charitable project, which is probably as good as it gets at the moment when it comes to approximating whatever it is that we care about.

These certificates can come with additional perks so that they’re also interesting for people who don't just want to speculate on their price. Owners of the certificates might have a say in certain decisions, especially those that concern moral preferences rather than predictions, because the experts of the charity are usually better at making predictions in their area of expertise. (Without certificates, the charities would likely run polls to get a feel for such preferences.)

The marketplace itself could also reward people for buying and holding certificates. It might have its own certificate and pay a slowly decreasing fraction of it to people who hold other certificates.

There are two practical hurdles: Clarifying the legal situation and creating a liquid market. I have three ideas for addressing them.

Charity Shares

Here it is a charity that creates its own certificate and offers a fraction of it for sale. Say, they might create 100,000 shares, offer 10,000 for sale, give 20,000 to employees with a vesting period, reserve 20,000 for contingencies, and lock the other half up for several years.

That probably works fine in some countries, but without professional legal advice (for at least the US, UK, and Switzerland) it is, at this point, hard for me to tell what registration requirements a charity would have to satisfy to be allowed to issue a certificate.

US federal law draws on the Howey test to determine whether something is a security. Four factors need to all be met for something to be a security: It is “(i) an investment of money, (ii) in a common enterprise, (iii) with an expectation of profit, (iv) solely from the effort of others.” (Source) (Some states, notably California, apply different tests.)

That implies to me that charities would have to register their impact certificates with the SEC regardless whether it represents a share in something monetary or in their impact. Such a registration is said to take some 1–1.5 years, so charities are unlikely to do it. Some nonprofits are exempt, but they adhere to requirements that prevent most forms of trade of the shares.

These legal constraints can make charity shares unappealing, at least in some countries, or they might give rise to a new type of charity, a decentralized autonomous charity, that is not geographically located, is run by a fully anonymous team, and is governed by smart contracts.

Project Shares

In the case of what I tentatively call “project shares,” it’s not the charity that issues the certificate, but an individual employee or several employees who work together on a project (an unincorporated project). Say, Ajeya Cotra’s project to investigate AI timelines. A number of charities are distributed, so these employees may be in countries where it is easier to issue certificates than in the country where the charity is registered.

The project will also be smaller than the whole charity. Some countries have thresholds in terms of the revenue from the sale of securities below which no registration is needed. The project could be sized such that these requirements are met. If they even count as regulated securities in that country that is.

Intervention Shares

Another option is to issue certificates not for the impact of one charity or project but for the impact of a whole “space,” that is, of a whole group of charities that work toward a common goal or even work toward that goal using similar methods. An “AI safety” certificate might be conceivable or a “technical AI safety” one. The boundaries of the “spaces” would be fairly arbitrary.

Anyone could issue such a certificate. That person or organization could be based in a country with laws that make it easy to issue it. (I could be that person if Switzerland turns out to be a good location for that.)

The creator would put together a committee of trusted, thoughtful altruists to decide on the initial allocation of the shares. Half of them may be retained and the other half split among trustworthy organizations within the space, which they’ll be donated to.

There could be, e.g., quarterly events where a new organization can receive a fraction (which decreases every time) of the remaining shares. The shareholders would vote on who the new awardee will be, and the issuing organization or a smart contract will donate the shares accordingly.

I will need professional legal advice to be more certain about this, but it seems to me that this solution has the advantage that it’s legally unproblematic for the charities to receive the shares donated to them. (They’d behave like any other crypto donation.) There is also the additional perk that the value of the shares each charity holds will depend on the success of all other shareholders, so that charities are incentivized to support each other and not fall prey to the “narcissism of small differences.”^[6]

Implementation

I prefer to follow a “lean” strategy where I start with a minimal viable product (MVP) that is hopefully just good enough that it can tell me whether people will want to use it, i.e. whether there is a market for it and whether the product market fit is at least on the right track, or whether I should change something about my approach fundamentally or prioritize another project entirely.

Proto–Minimal Viable Product

My first attempt at an implementation was based on a Google Doc that stipulated the terms of the certificate and a spreadsheet that tracked the ownership of the shares. The version history of the documents made it transparent what changes have been made to the allocation. Monetary transactions (bank transfers) happened based on trust.

Minimal Viable Product

That system can easily be improved upon. Blockchains are designed to serve the purpose of the version history, and in recent years tokens (called, for example, ERC-20 tokens or SPL tokens depending on the blockchain technology) have become a popular way of representing securities, credits, or votes. They are perfect for our purposes. Creating SPL tokens takes a few minutes and costs mere cents.

Furthermore, Serum (based on the Solana blockchain) is an exchange that supports order books like a normal stock exchange but is completely decentralized, i.e. there is no central company that decides whether you get to list your asset on Serum. It currently costs around $100–200 to create a new market on the exchange. Then a founder can set up limit orders to implement a bonding curve auction or get in touch with Raydium, a Serum-based automated market maker. (A specialized auction platform is also in the making.)

So not only can we easily create tokens to represent our shares, we also have the technology at our fingertips that lets us create a streamlined market to trade them. (And the project is managed or advised by Sam Bankman-Fried, an EA who started out earning to give at Jane Street and has since become a major crypto entrepreneur.)

Here is a fairly nontechnical guide to creating and listing your own token. Be sure to assess your legal situation before offering it for sale.

Future Plans

Incentives

It’s imaginable that those who would typically donate to charities would also be ready to buy shares in the charities’ impact from the charities. But why would anyone buy shares from anyone other than the issuing charity? And why would purely profit-oriented investors buy impact shares? Arguably most of the best-case impact of the project will be in attracting enormous amounts of for-profit funding for charities, so that’s important.

All of this becomes a nonissue once there is an established, liquid market, because then people will want to profit from increasing prices. So it’s a bit of a chicken and egg problem.

I’m hoping that tokens will eventually find use for all sorts of purposes that are interesting for holders: Charities can use them for governance, i.e. let impact shareholders decide on matters that are relevant to them and that they know more about than the charity, such as where and how to hold the next general assembly. Intervention tokens in particular can govern their own distribution. I’d also be interested in a platform that allows for some form of “staking” of the impact tokens and pays out a reward for that. Finally, one could develop a mechanism whereby holders can quasi-burn their shares in a verifiable way while still being identifiable as holders; they could thereby forfeit their ability to ever sell the share again and decrease the future supply that others expect.

I’m hoping that such immediate uses will make the tokens interesting for enough buyers that we can establish markets that, in turn, make the tokens interesting for pure for-profit investors.

If no such market wants to emerge, buy-and-burns from platform fees may help, though I haven’t thought much about the precise mechanics. A platform that runs a Serum instance could generate fees and use these fees to buy back impact tokens, specifically intervention tokens. It could, for example, buy them back at the market price proportional to grants from the EA Funds, the Open Philanthropy Project, or some other sophisticated funder.

If the funder makes grants of $1 million to A, $2 million to B, $4 million to C, $8 million to D, and $16 million to E, and A and B are charities within the ABBA intervention ecosystem, and A, C, and B are within the ACDC intervention ecosystem, and there are no other intervention tokens, then $(1 + 2 + 4 + 8) million = $15 million are going to charities within defined intervention ecosystems. But for the sake of the calculation we need to double-count A, because it is in both ecosystems, so the new, artificial total is $16 million. ABBA accounts for 3/16th of it; ACDC accounts for 13/16th. Hence, the platform would allocate 3/16th of the fees to buying back ABBA tokens and 13/16th to buying back ACDC tokens.^[7]

It would be straightforward to then burn these tokens, but alternatively they could also be locked up to be allocated to new charities that get voted into the ecosystem.

Ecosystem

If this project gains further traction and the legal questions can be resolved, I’m planning to create, or encourage others to create, a series of tools:

1. A curated gallery of certificates that details the properties of the token, explains the purview of the impact it represents, and lists the current owners. This gallery helps to make impact certificates differentially more interesting for value-aligned altruists as opposed to, for example, terrorists. I’ll be sure to interpret “value-aligned” to mean “morally cooperative,” “thoughtful,” and “prosocial” and not “agrees with me.” I’d also be happy to delegate the curation to an elected team of experts.
   1. An MVP of this gallery would probably take under a week to implement. It could be more fully featured within a few months.
2. A program to manage the governance of the “intervention shares” so that no one needs to be trusted with up to 50% of the total supply of the tokens until they are distributed. The program code could be audited so that even investors without a technical background can trust the program. No one but the program would have access to the tokens. 2. This program would be a larger project because I’d have to learn a lot more about Solana and Rust, but I can probably realize an MVP within a few months. Such a program should be audited, which may be costly.
3. A platform to allow owners of tokens to “stake” them and receive platform tokens as reward. An added incentive to buy and hold tokens. The staking rewards could be influenced by the votes of the owners of the platform tokens. 3. This platform will take longer to implement than both previous steps, though an MVP might also only take a few months. I don’t know whether I can build this on top of audited code or whether I’d have to get it audited too.

Risks

There are a number of risks inherent in this project beyond failing to find traction. I detail specific risks below.

Generally, I could test the whole concept and system on lower-risk spaces, such as athletic disciplines or music genres. Some people care deeply about barefoot bouldering or extratone music and are probably not earning a lot of money with it, so they may welcome some donated tokens. And if the idea backfires there, at least it’s not the whole future that’s at risk. But I don’t have the knowledge or connections to (reliably) identify the experts in these fields.

A compromise solution might be to test it on mental health. People with mental health problems in legislatively advantageous jurisdictions, for example, may appreciate the ability to not have to beg for comped therapy but to be able to sell their own mental health progress to people who value it directly. An added perk is that all transactions are anonymous so that no one needs to fear any reputational damage or stigma that they might be afraid may arise from revealing their mental health status.

Legal

Even legal experts will have difficulty interpreting the applicable law with confidence, and the various differences internationally complicate the situation further. It seems to me that the maximum penalty for making a mistake here is imprisonment for up to five years in the US and up to two years in the UK. I don’t know what the sentences tend to be in practice in such cases (problems with the SEC that don’t involve fraud) or whether fines are more common, but I’ve heard that settlements with the SEC are common.

In any case, it would be devastating for (especially but not only) AI safety if key people had to go to prison for a significant fraction of the time that I think we have left to solve the problem, so even a small risk of that is likely going to be too much.

The legal situation in Switzerland seems more relaxed, which makes me optimistic about the intervention shares. There doesn’t seem to be a registration requirement for securities, and the penalties for failing to disclose information are mere fines, and even those should be easily avoidable because they are penalties for failures to comply with a request, not mistakes in proactive disclosures. Meanwhile there is even an exemption from the requirement to apply for a banking license so long as you accept less than CHF 1 million for token sales. Since I’m only ever planning to donate the intervention shares, that revenue should be 0, and eventually I want the funds to be managed programmatically anyway.

Another option is to use the relaxed legal environment in Switzerland to issue charity or project shares on behalf of others and then donate them to the respective charity or project. But I don’t know whether that even makes a difference legally.

Meanwhile, confusingly, there are a lot of crypto projects that issue security tokens seemingly with very little regard for the legal frameworks. In some cases the founders are not even anonymous,^[8] and the majority of these projects are probably not intended as scams. It might be that they’re all based in countries with permissive securities law, but that seems doubtful in view of the strong representation of US Americans in the cryptocurrency space.

I work only part-time and so only have a budget of about $4,000 this year for legal costs. That’s a fraction of the retainer of a US lawyer. But I don’t know how much research it takes a lawyer to answer these questions. With most EAs (according to the 2019 survey) living in the US and UK, I want to focus on these countries first. (In addition to Switzerland, where I live.)

Opportunity Costs

I originally worked on a different project when the arguments of Ajeya Cotra and Daniel Kokotajlo gradually convinced me that transformative AI was likely closer than I thought by a factor of 4 or so. I reprioritized and found that the project I had been working on was indeed not maximally pressing in view of this urgency.

But the project (this one) that came out on top, largely carried by its apparent traction, doesn’t promise to do much to avert existential and especially suffering risks from transformative AI either. At least not at the margin because additional liquidity is not often cited as a major bottleneck that is holding back AI safety research.

Do you think I’m wasting my and others’ time with this project, and that I should be doing something else?

General Use

One red flag for me is the general usefulness of impact certificates and the technology around them. If token sales become a common fundraising mechanism for nonprofits, they can also be used by terrorists or, less egregiously, by charities whose methods are likely counterproductive.

I’m not considering this a prohibitively bad problem since (1) the technology already exists, (2) my additions to it will be tied closely to a particular community of thoughtful altruists, and (3) I’m hoping to counterweight the uncontrollable nature of the decentralized finance ecosystem that I’m building upon with a curated, centralized gallery of recommended projects.

Taken together, these factors will hopefully prevent my work from appearing attractive to people whose projects are recognizably counter to cooperative, prosocial ideals.

Speculation

I’ve gotten the impression that the cryptocurrency space is dominated or at least strongly influenced by people who were selected for being early adopters (and “hodlers”) of Bitcoin. Being an early adopter is likely uncorrelated or imperfectly correlated with a commitment to value investing. That appears to me as a possible explanation for why the price of Bitcoin reflects the games of price speculators much more than its intrinsic value, and why cryptocurrencies with (in my layperson’s opinion) much greater intrinsic value, different purposes, and different implementation – such as ETH, SOL, ADA, DOT, etc. – are correlated with it even on the timescale of minutes.^[9]

The art market might be even more rife with price manipulation and speculation to the point where the price is wholly divorced from the quality of the piece (as it would be assessed by an efficient quality-of-art market).

That could happen to impact certificates too, in which case they’d be worthless for thoughtful altruists (except if they trade them as a form of earning to give). The price might then be dominated by Keynesian beauty contest–like dynamics or Fibonacci retracements regardless of whether the certificate was meant to represent the impact of playpumps or CEA. This will most likely just vitiate my vision and not cause net harm beyond opportunity costs, but it might be that an attacker with a lot of capital or flash loans or good timing can use market manipulation to usurp power over a space that uses intervention shares, and then vote to have each future token airdrop funneled to their wallets. That may well end up being net negative.

I’m hoping to address this by making those who I consider experts most powerful at the start by giving them the bulk of the shares (in the case of the intervention shares) or heeding their opinion when it comes to listing a project in the gallery. That will hopefully ground the price in a thoughtful assessment of the impact and limit the extent to which price manipulation can be successful.

Appendices

I’ve moved a few details here that seem too specific for the main text. Feel free to skip.

Terminology

Impact certificate, certificate, stock, token: A few synonymous ways in which I refer to a contract that represents the impact of a project. The term token is only applicable in the context of blockchains.

Shares, tokens: A small fraction of the certificate. Yes, I find it confusing, too, that token refers to both the whole and the part. The whole is often used in the singular and the parts often in the plural.

Charity shares, project shares, intervention shares: I expect these terms to change. I find the analogy of “like a share in regular exchange-traded stock but of impact” very helpful. The term “certificate” doesn’t evoke the same associations. Then again it may be necessary for legal reasons to avoid terms that are used for regular securities.

Peer to Peer Funding or Vetting

There’s the idea^[10] that we could cut down on vetting overhead by trusting trusted people to regrant grants to people they trust. In the simplest form, we’d have a central grantor, let’s call it the regranting bureau, that distributes delegatable votes to the people it trusts. These people delegate some of their votes and use the rest to make concrete grant recommendations. The central grantor then just carries them out.^[11] It would coordinate money transfers with recipients, do all the accounting, etc., and it could also add some bells and whistles, such as weighing the grants by how often someone has been recommended and by who (e.g., using the Page Rank algorithm), and checking for cycles.

Blockchain-based impact certificates might streamline this process, but they’d also come with side-effects whose desirability will need to be assessed.

Instead of having a regranting bureau, you’d have only (1) an initial set of highly trusted regrantors, say, Alice and a few others; (2) public good tokens such as “Alice’s Small Cap AI Safety Impact” (ASCAISI) that is initially owned only by the respective regrantor, Alice in this case; (3) funders who place buy limit orders on the ASCAISI/USDC market and all the other *SCAISI/USDC markets on Serum at whatever prices they think are fair, (4) random EAs who analyze the regranting networks to see what happened and how successful they think they were. Grantors would be held to keep a small share – Justin suggests the square root – of their tokens for themselves for their efforts. (Others could base airdrops on a Page Rank–like analysis of the regranting network since it’ll be public.)

That would (1) save the overhead of setting up a central regranting bureau, (2) outsource the auditing to people who have no reason to be biased about the system, and (3) give grantors an incentive to optimize hard for the tradeoff between making many grants and making good grants so the funders are happy to pay more for the tokens either because successful “hits-based” grants or because of successful conservative grants, (4) maybe “gamify” the process for regrantors in that they can compete to regrant such that they have the most highly-valued token, (5) keep the system open to any small donors who want to contribute by also buying some tokens too, (6) maybe even keep the option open that the system will attract speculators whose funding counterfactual is much lower than that of the funders.

But that would come at the price of a last-minute veto option of the regranting bureau. Funders would have no way to selectively not make certain grants other than to withdraw their orders from the market of the original regrantor.

Legal Situation in the US

I’ve briefly looked into the legal constraints on charities and individuals with a bit of a focus on the US. I’m not confident at all in these findings.

Charities

US nonprofits can issue securities and may be able to apply for an exception from a SEC registration, but there are various requirements that they have to fulfill at the federal and the state level. (One source even said there may be requirements at the municipal level.)

Some of these requirements only restrict stock buybacks, which may be avoided by asking a big donor to do them instead or burning tokens the charity still holds and thereby reducing the fully diluted supply instead of the circulating supply, which could also have an effect on the price.

But other requirements seem to restrict transferability (same source): “In numerous subsequent no-action letters, the SEC staff has consistently agreed that memberships that entitle the members to no share in the profits and are not transferable do not constitute securities under the Securities Act.” (Italics mine.) I see no way to realize charity shares while restricting transferability.

The “Regulation Crowdfunding” legislation is probably not applicable because it requires that the sale goes through a registered intermediary, which Serum is not.

Projects

By projects I mean such things as Ajeya Cotra’s work on AI timelines. They cost money that needs to come from somewhere but they’re unincorporated.

One entity that can automatically come into being by operation of the law and that is common in common law systems is the trust. This should be relevant to a number of countries, the US and parts of the UK among them. I can’t quite pin down who the settlor, trustee, and beneficiaries are in our case because it depends on whether the corpus of the trust is the money used to purchase the share in the impact, the share in the impact, or the material form of the impact.

Another possibility is that the sale forms an unincorporated association because the terminal purpose of the project is to generate positive impact and not profit. However, individual investors may invest into the project for the purpose of generating a profit. I don’t know whether that prevents the whole of the project from being an unincorporated association.

It seems less likely to me that the sale forms a general partnership or joint venture because the investors are generally anonymous and there is no expectation that they agree to be liable for any debts of the project.

If future impact can be considered property, project shares may also simply be a case of co-ownership. And finally, all these legal entities seem to be particular, somewhat standardized forms of contracts, so there may not be any way to narrow down what is happening legally further than to call it a contract sui generis.

In each of these cases the question becomes whether such a project trust or project association or project partnership requires registration in a given jurisdiction and is subject to any relevant restrictions.

Investors

As mentioned above, the “Regulation Crowdfunding” legislation is probably not applicable because it requires that the sale goes through a registered intermediary, which Serum is not. Outside of this exceptional case, it seems that only “accredited investors” are allowed to buy securities, i.e. millionaires, some businesses, people with a high income, or those who have particular licenses.

One option might be to start or partner with such an intermediary which could custody shares on behalf of US citizens, but it is unrealistic for me to attempt that, since I’m not a US citizen or resident.