SEC Focuses on Initial Coin Offerings: Tokens May Be Securities Under Federal Securities Laws

September 12, 2017

The U.S. Securities and Exchange Commission (SEC) has recently taken several actions to make clear that it is focused on and actively monitoring the rapidly growing market for so-called “token sales” or “initial coin offerings” (ICOs).

  • On July 25, 2017, the SEC issued: an investigative report; an investor bulletin; and a joint statement by the Divisions of Corporation Finance and Enforcement regarding their conclusion that certain ICOs may be securities under federal securities laws, and cautioning issuers and investors with respect to investments in ICOs.
  • On August 24, 2017, the SEC contacted an ICO issuer regarding that issuer’s ongoing token sale. According to the issuer’s website, the issuer subsequently determined to cancel the ICO and refund all proceeds raised.
  • On August 28, 2017, the SEC issued an investor alert, warning about companies making ICO-related claims. The investor alert reports that the SEC imposed trading halts on four companies in connection with claims regarding investments in ICOs or other coin- or token-related news.
  • On September 5, 2017, Steven Peikin, Co-Director of the SEC’s Division of Enforcement, in remarks to a conference at New York University, stated that the SEC has a number of ongoing investigations into potential fraudulent activities by companies in the blockchain and digital currency space.

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