The U.S. Securities and Exchange Commission has released an investigative report with important implications for issuers and sponsors of initial coin offerings and token sales that raise funds for cryptocurrency ventures. Prompted by the recent proliferation of such activity, the report concluded that tokens offered to purchasers in a 2016 token sale were securities regulated by the Securities Act of 1933 and the Securities Exchange Act of 1934. As a result, absent an exemption, such offerings must be registered with the Commission, similar to other public offerings.
The press release accompanying the report notably quotes the new Commission chairman and the new heads of the Corporation Finance and Enforcement divisions. This combined statement gives the report unusual weight and makes clear that its contents describe senior officials’ current thinking on cryptocurrency regulation. While the Commission declined to take enforcement action at this time, the report and press release convey a clear warning to those engaged in similar activities that unregistered sales of cryptocurrency coins and tokens may constitute illegal public offerings of securities.
This article was posted with permission from The Banking Law Journal. It originally appeared in the journal's November/December 2017 issue.
Read the article here.