From Uncertainty toward Regulatory Clarity: Senior SEC Officials Provide Regulatory Clarity for Digital Assets

Summary is below, please click here for the full alert narrative.

On June 14, 2018, the Director of the Division of Corporation Finance of the Securities and Exchange Commission delivered a speech outlining the framework used by the SEC Staff in evaluating whether a given token sale qualifies as a securities offering.  The Director clarified that a token sale may qualify as a securities offering but subsequent sales of the same token may constitute non-securities based on a facts-and-circumstances analysis.  Later statements by the Chairman of the SEC and SEC Staff confirmed that the SEC will consider the factors outlined in the Director’s speech when evaluating token sales.  These factors include, among  other things, whether:

  • a sponsor or promoter’s efforts play a significant role in the development and maintenance of the token or token network;
  • a sponsor or promoter retains a stake or interest in the tokens such that the person or entity is motivated to expend efforts to cause an increase in value of the token;
  • purchasers are motivated by a financial return when purchasing the token; and
  • persons or entities other than the promoter or sponsor exercise governance rights or influence.

The SEC Director also commented that the SEC is “happy to help promoters and their counsel work through . . . issues . . . [and] . . . stand[s] prepared to provide more formal interpretive or no-action guidance about the proper characterization of a digital asset in a proposed use.”

For questions regarding these developments and how they might apply to you or your business, please contact experienced counsel.

 

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Photo of J. Dax Hansen J. Dax Hansen

J. Dax Hansen helps innovators transform and adopt technology and financial services. He is a technology transactions and regulatory attorney who has pioneered blockchain, digital currency, payments, and fintech law.

Photo of Jesse P. Kanach Jesse P. Kanach

Jesse Kanach is a partner in the firm’s Investment Management practice, where he represents asset managers on virtually all aspects of their investment business.

Photo of Tom Ahmadifar Tom Ahmadifar

Thomas Ahmadifar primarily advises clients on regulatory issues under federal and state securities, commodity, and banking laws. He counsels broker-dealers on matters before the SEC, FINRA and other SROs, including business expansions, changes of control, membership applications and the trading practice rules. In…

Thomas Ahmadifar primarily advises clients on regulatory issues under federal and state securities, commodity, and banking laws. He counsels broker-dealers on matters before the SEC, FINRA and other SROs, including business expansions, changes of control, membership applications and the trading practice rules. In his funds practice, Thomas advises clients in both the registered and private funds spaces.