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