SEC Chairman Issues Major Statement on Cryptocurrency and ICOs

December 20, 2017

On December 11, 2017, SEC Chairman Clayton issued an important public statement outlining his views on cryptocurrencies and ICOs. In his statement, Chairman Clayton provided a clearer view of the SEC’s stance and offered the industry much awaited guidance on what, in the SEC’s view, constitutes a security in the context of rapidly evolving digital assets. Chairman Clayton’s remarks put the cryptocurrency and ICO community on notice that there will likely be further SEC enforcement activity in this area.

The year 2017 has seen increased focus on cryptocurrencies and ICOs from the SEC. On July 25, 2017, the SEC issued an investigative report (The DAO Report) concluding that a digital token, which was issued by The DAO as part of an ICO to raise capital for innovative projects, was a “security” within the meaning of the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 based on the application of existing securities law principles. Most recently, the SEC shut down ICOs by each of PlexCorps and Munchee Inc. (Munchee). On December 1, 2017, the SEC filed a complaint seeking a temporary restraining order and preliminary injunction to halt PlexCorps’ ICO, alleging that PlexCorps had promised purchasers “outlandish rewards” in connection with its offering of PlexCoin tokens. On December 11, 2017, the SEC issued a cease-and-desist order (Order) against Munchee to halt its ICO.

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