Money Management

The SEC says many cryptocurrencies are actually securities. Find out how the security vs. commodity debate could impact your crypto investments. 

I read the Securities and Exchange Commission’s (SEC) complaint against Binance on Monday with mounting horror. Not only does the regulator make some pretty serious allegations about how this popular crypto exchange handles our money, it also labeled several top cryptos — including Solana, Cardano, and Polygon — as securities.

To be fair, the SEC has been hinting for some time that it considers most cryptocurrencies to be unregistered securities. But this week’s charges up the ante considerably. So what’s all the fuss about? And what does it mean for your portfolio?

Security vs. commodity: The big debate

There are various types of securities. These include equity securities such as stocks, and debt securities such as bonds. If an asset is classified as a security, there are strict rules about how they can be traded and how they share information. Until now, most cryptocurrencies have fallen outside of the SEC’s remit. They have been treated as commodities, bringing them under the jurisdiction of the Commodity Futures Trading Commission (CFTC).

But the SEC thinks it should be in charge of regulating many existing cryptocurrencies and cryptocurrency platforms. The chief reason it thinks most cryptos should be treated as securities is something called the Howey Test. This defines any project as an investment where there is “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” In its complaints against Binance and Coinbase, it details the way various listed cryptocurrencies fit this definition.

The SEC says these 19 cryptocurrencies are securities in recent filings

In the past few years, the SEC has said several specific cryptos are actually securities. The highest profile of these is Ripple’s XRP token. The SEC filed a lawsuit against Ripple in 2020, and the court case — which hinges on whether XRP is a security — is ongoing.

Most recently, the SEC labeled the following 19 cryptocurrencies as securities in its filings against Binance and Coinbase:

Solana (SOL)Cardano (ADA)Polygon (MATIC)Filecoin (FIL)The Sandbox (SAND)Axie Infinity (AXS)Chiliz (CHZ)Flow (FLOW)Internet Computer (ICP)NEAR Protocol (NEAR)Voyager Token (VGX)Dash (DASH)Decentraland (MANA)Algorand (ALGO)COTI (COTI)Cosmos (ATOM)BNB (BNB)Binance USD (BUSD)Nexo (NEXO)

What to do if the SEC thinks your cryptos are securities

If you own Solana, Cardano, Polygon, or any of the other cryptos listed above, be prepared for potential price drops and issues with liquidity. CoinGecko data shows XRP fell over 60% following the lawsuit announcement. Plus, a number of crypto exchanges delisted the token. As such, there is a chance your crypto exchange could delist these projects in an attempt to avoid SEC sanctions.

That said, it is early days and it’s important not to panic. Things have changed a lot since the SEC brought its case against Ripple. Not only that, but XRP is still one of the top 10 cryptos by market capitalization and the project is still going strong.

Here are some moves to consider.

1. Diversify your investments

Cryptocurrencies are high-risk investments and there is a lot we don’t know about how the industry will evolve. Many experts suggest crypto make up no more than 5% of your portfolio. That way you benefit if prices again go to the moon, but a crypto collapse won’t devastate your wealth-building plans. If you don’t currently own stocks or other assets, now may be the time to start building a more diversified portfolio. Check out our list of top stock brokers for more.

2. Avoid cryptos that could be labeled securities

If you’re worried about SEC controls, consider putting a higher proportion of your crypto holdings into Bitcoin (BTC). Arguably the most decentralized of all cryptos, Bitcoin is the only crypto SEC Chair Gary Gensler has said is definitely not a security.

Ethereum (ETH), the second biggest crypto, wasn’t named in the recent filings. However, Gensler hasn’t ruled out the possibility that Ethereum’s switch to proof-of-stake might make it a security.

3. Move your crypto assets to a wallet you control

If you hold significant amounts of crypto in a custodial wallet with a centralized exchange, your assets are more at risk from platform failure, hackers, or SEC actions. There are risks to keeping everything in a crypto wallet you control — for example, if you lose your seed phrase you might never be able to access your assets again. Even so, if you’re concerned a platform might delist a token you own, it’s worth learning more about how crypto wallets work.

4. Hold and wait out the storm

Buy-and-hold investors might opt to do nothing and let any SEC actions play out. As long as any action from the SEC doesn’t change your long-term thesis about these projects, that’s a viable strategy.

It is early days

The SEC’s moves come at a time when lawmakers are considering a wider crypto regulatory framework. We don’t know what it will decide. For example, Washington may instead give the CFTC more power in crypto regulation. It might create different controls for digital assets. It might give more power to the SEC.

We also don’t know how the SEC’s case will play out in court. Two and a half years on, and the Ripple case is still ongoing. Coinbase CEO Brian Armstrong tweeted that he sees the case against the exchange as an opportunity. “We’re proud to represent the industry in court to finally get some clarity around crypto rules,” he said.

If the SEC is able to categorize many top cryptos as securities, it could change the landscape for crypto investors. Just remember, it isn’t all doom and gloom. Sure, it could change the way ordinary Americans buy and sell crypto. But a stronger regulatory framework could also build trust and actually benefit the industry in the long term.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has positions in Algorand, Bitcoin, Cardano, Chiliz, Cosmos, Decentraland, Ethereum, Filecoin, Near Protocol, Polygon, Solana, The Sandbox, and XRP. The Motley Fool has positions in and recommends Bitcoin, Cardano, Cosmos, Ethereum, Polygon, and Solana. The Motley Fool has a disclosure policy.

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After I bought my house, my HOA dues began increasing rapidly. Here’s why I was worried it would come back to haunt me. 

Recently, I listed my home for sale.

I want to buy a new house, but I had to sell my existing property first. I was eager to sell because I wanted to get the money from the sale to use as a down payment so I could qualify for a mortgage when I find a new house I love. But, I was also concerned I wouldn’t find a buyer for my property.

There’s a very simple reason why I was concerned my house would get stuck on the market for a long time — and why I feared finding an interested buyer would be a big challenge.

This issue can be a dealbreaker for many buyers

The biggest concern I had when listing my house was that the monthly homeowners association dues were extremely high.

When I bought the house, I knew there were HOA dues. But, in the 18 months that I lived in the property, the dues went up significantly after a change in management companies and some budget shortfalls.

By the time I was ready to sell the house, we were paying three different sets of HOA dues that collectively added up to more than $650 per month. That is a lot of money for a potential buyer to commit to paying — especially since having such high dues would likely affect the amount they were allowed to borrow from a mortgage lender. Many lenders include HOA dues when determining if someone is within the allowable debt-to-income ratio to purchase a home.

In addition to being concerned that buyers might shy away from committing to such huge monthly dues, I was also concerned about the recent spike in HOA dues.

I was worried that potential buyers would see the costs had gone up and fear the price would continue to rise, which would obviously be a major deterrent. I was also afraid a ton of my neighbors would soon be listing their properties because they might not want to make these substantial monthly payments either.

Here’s how I overcame the challenge

The good news was, while there were justifiable reasons for my concern about the high dues, I was still able to sell my house pretty quickly. And I think the big reason for that is because I focused a lot on what the HOA dues buy.

Rather than trying to downplay the HOA fees or hope that buyers would not notice, I devoted an entire section in my MLS description to explaining that the monthly fee covered lawn service, high-speed internet, and even a $75 per month food credit at the local on-site restaurant. I also included some pictures of neighborhood amenities, like a swimming pool with a lazy river.

By showing people this money actually bought them items of value, I was able to put buyers at ease even when they saw the high HOA fees. While there was still some sticker shock, ultimately it wasn’t as big of an obstacle as it could have been. Still, the lesson I learned is that HOA dues can increase a lot in a short time, so it’s important to look at the neighborhood’s history and the bylaws before moving into a neighborhood where you must pay a fee to live there.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Although I don’t often check bags or require upgrades to first class, I still got an airline credit card. Read on to learn how it benefits me anyway. 

Last year, I signed up for an airline credit card. The card has a pretty hefty annual fee of $450, but it offers a ton of features including free checked bags, priority boarding, and loyalty points that can eventually entitle you to get upgrades to first class if they’re available.

I don’t use many of these features, since I typically have to fly first class. My dog and baby travel with me, so I need the space that the larger seats provide. Since I already get a free checked bag and priority boarding, and the available upgrades don’t benefit me, it may have seemed silly to sign up for a travel rewards card that costs so much.

But, there was a simple reason why doing so made sense. Here’s what it is.

The airline card offered a perk I couldn’t pass up

The reason I signed up for this airline credit card was because while I wouldn’t use all of its features, there’s one membership perk it offered that I absolutely will be taking advantage of.

That perk is airline lounge access. Since I’m a cardmember and I regularly fly on the airline that issued the card, I can spend my pre-flight time in the lounge rather than sitting at a crowded airline gate.

I travel quite a lot, flying around 12 times per year or more. That’s a lot of airport trips, and a lot of time spent in airports — which becomes a whole lot more pleasant when I’m able to relax in a lounge rather than fighting for a seat at the gate.

Why lounge access is worth paying for

Lounge access is absolutely worth it for me, even though I’m paying a lot for it. And that’s not just because it makes me more comfortable and ensures I have plenty of space to sit with my whole crew before getting on a plane (including my husband, two kids, and the aforementioned dog).

The airline lounge offers complimentary food and beverages, and the fact that we can eat and drink at the lounge essentially ends up paying the card’s annual fee. While we might otherwise have had to buy a meal and a drink for all four members of our family both on our departing flight and our returning flight, we can now eat and drink at no cost by simply taking advantage of the free food and beverages the lounge offers.

Aside from the fact that we end up saving around $40 to $50 on food for every trip, the lounge also offers great business-friendly amenities including chargers and free wifi. This means I’m sometimes able to work before getting on the plane, which would be a lot more difficult at a crowded gate without these features. This further offsets the cost of the credit card.

The bottom line is, lounge access does have a lot of value — particularly if you can avoid buying unhealthy airport food and make some extra cash working while sitting in the airline lounge. If you travel regularly, it may be worth finding a card that offers it even if that’s the only real perk you enjoy.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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A writer had a surprising experience making a Costco return. Read on to learn more. 

My Costco membership is something that easily pays for itself. I spend $120 a year on an executive membership, which gives me 2% back on all Costco purchases, the same way your credit card might give you 2% cash back in select categories (or, if you have a great rewards program, most or all purchases).

Not only do I more than make up the cost of an upgraded membership via the money I get back on Costco purchases, but I save more than $120 a year on groceries alone by virtue of shopping at Costco. So all told, paying for a membership is an easy call for me.

One of the reasons I love Costco — aside from the savings opportunities — is that its customer service is really outstanding. Any time I’ve had an issue with something I’ve bought, I’ve been able to return it without a hassle. And that includes half-eaten food.

A really flexible policy

Costco says on its website that it will “guarantee your satisfaction” on every product it sells. And so if there’s a quality issue with a food product you’ve purchased, you shouldn’t hesitate to bring it back — even if it’s already opened and partially consumed. I learned this a few years back when I went to return a half-eaten supply of feta cheese.

I’d purchased a two-pack of feta because it’s a cheese I use often in things like salads and omelets. My family enjoyed the first pack of cheese just fine, but by the time we got ready to open the second pack, we saw mold in it. That was surprising, because the second package was completely sealed, and it was a good two or three weeks before its printed expiration date.

When I took the moldy package of feta back to Costco, I explained that I was looking for a 50% refund on that item — the logic being that I’d gotten to enjoy 50% of the product without an issue, but the other 50% was clearly not safe to consume. But what happened next surprised me.

Instead of issuing me a 50% refund, the customer service representative at Costco gave me all of my money back — despite me insisting that that wasn’t necessary. As that representative then explained, Costco insists that all customers be totally satisfied with their purchases. So they don’t do partial refunds in situations like this — they do 100% refunds.

A return policy you shouldn’t abuse

Clearly, you can return partially eaten food to Costco without an issue — but only within reason. The general rule of thumb is that if you’re returning food, you have to bring back roughly half of the item to get your money back. So in my case, I did just that — I brought back one of two packages of cheese that were sold together.

Meanwhile, let’s say you buy a giant package of salad greens at Costco, eat about 40% of them, and see that they’re wilted the next day when they’re supposed to last three days more. At that point, you can bring the item back for a refund. But if that salad is 90% gone, you can’t bring it back and expect a refund.

All told, Costco’s return policy is more than generous and reasonable. And that’s just one of the many reasons I enjoy shopping there.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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