September 9, 2022

🥛 Are the finance police cracking down on crypto?

GM. This is the Milk Road. The newsletter that helps you stay on top of the crypto industry. We’re like a bunk bed. Always on top.

Here's what's on the menu:

  • The SEC says “99% of tokens are securities”

  • YC Demo Day: What are the most interesting crypto companies to watch?

  • Funding Friday


Let’s set the stage. 

The SEC (Securities & Exchange Commission) is like the police force for finance. 

And Gary Gensler is the chief of the financial police station.

Yesterday he delivered a harsh take about crypto: “99% of tokens are securities” 

Why does this matter? 

Securities are things like stocks, bonds, or shares in startups. You can’t just go sell them on facebook. There are strict rules around selling stocks. For example, a CEO can’t go on TV and just say “go buy my stock! It’s going up babyyy! I gur-ann-tee it” 

Basically, you can’t sell securities willy nilly. If you do, you’re gonna end up sharing a jail cell with a guy named Rico. 

But things like Gold, Bitcoin, or Diamonds have different rules. They are not considered securities (they are commodities). 

For the past 5 years, crypto projects have launched their tokens (remember the ICO craze?) and many of these tokens are now worth billions of dollars. 

But are they securities? If they are, then a bunch of people could end up in big trouble. 


There’s a test called the HOWEY test to determine if something is a security. 

Here’s how it goes. 

  1. Is there an investment of money? 

  2. Into a common enterprise (eg. a company)

  3. With an expectation of profit 

  4. Derived from the effort of others

With this test, you can see why a startup's shares are a security, but something like gold (there's no company driving up the value of gold) isn’t. 

Fun fact: the reason it’s called the “Howey” test is because a company called Howey Co got sued in a supreme court case for selling land and promising investors they would share in the upside of fruit sales from fruit grown on the land. 

Gary also had a few other good one-liners:

  • “These are not laundromat tokens” 

  • “No honest business need fear the SEC.” Sounding like a southern preacher


YCombinator (YC) is like “Harvard for Startups”. It’s a 3 month program to help startups figure their sh*t out. YC has produced companies like Airbnb, DoorDash, Dropbox, and Reddit. No big deal. 

They also had some big crypto wins. Coinbase and OpenSea both are YC graduates. 

  • YC invested $200k into Coinbase in 2012 which was worth $600m+ at the time of IPO 

  • The $120k check YC put into OpenSea in 2018 is now worth more than $200m 

Despite the bear market, there are 30 crypto companies in the current YC batch.

We put them all into a thread right here.

It made us think… who’s got the potential to be the next OpenSea or Coinbase?

Here are a few we’re keeping an eye on: 

  1. Notebook Labs Trying to build an anonymous way to do KYC and Credit Scoring

  2. Coinbooksquickbooks for crypto companies (disclosure, we are investors)

  3. – they are trying to build a decentralized exchange for trading carbon credits


I feel alive. And it’s all thanks to one thing…

Football SZN. Last night's first Football game had the blood pumping & flowing. 

And guess what? There are 13 more games coming this weekend. 

I’m adding a little twist, I’m gonna be playing…DraftKings Reignmakers – where fantasy football meets NFTs. 

They’re having a special tournament where you can win some $$ while enjoying the first Sunday full of games. It’s called the RMF Core 100k Fiat Frenzy

Here’s how it works:

  • Trade & collect NFT player cards (officially licensed by the Players Association) to build your dream team

  • Enter a team with 5 players into the Fiat Frenzy Tournament. You’ll earn points based on how well those players do

  • There’s $100k+ in cash prizes this week. Hint: if you place in the top 19,450 of all contestants, you’ll win some prizes!

Wanna take your shot at huge prizes while watching your favorite team/games? Click here to start your Reignmakers team and claim your FREE pack.

Legal Disclaimer: Must be at least 18 years or older. Higher age limits may apply in some states. Not available in HI, ID, LA (select parishes), MT, NV, OR, and WA. No purchase required for Starter Packs (1 per customer). Reignmaker Starter Pack NFTs are ineligible for resale. Number of NFTs needed to fill the roster varies by contest. Prizes include real money. Winning a contest on DraftKings depends on knowledge and exercise of skill. Contest eligibility depends on NFTs held. Not a gambling website. For entertainment purposes only. See for information regarding responsible gaming. Void where prohibited. See terms at


Each Friday, we give you a rundown of Web3 companies that got funded.

This week we saw ~$560M get invested into crypto companies. Here’s who got the money: 

Mysten Labs got $300m to build web3 infrastructure for the Sui Layer 1 blockchain. Sui is a proof of stake blockchain with it’s own programming language. got $25m to build a crypto investment product. The firm has over $3b under management and Cathie Wood is a board member. 

Internet Game got $7m to build a web3 mini-game battle royale. We’re investors in this one!

Credix got $11.2m to build a decentralized credit platform. 

Slide got $12.3m to build web3 infrastructure for dApps. With a only few lines of code dApps can offer NFT purchases with fiat and a non-custodial wallet. 

If you wanna check out the full database of companies that have raised money in 2022, we got 'em for you right here.



That's a wrap for today, see ya tomorrow!

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.