First Federal Court Decision Suggesting that ICO May Not be a Security

December 11, 2018

Introduction

In the ongoing case of SEC v. Blockvest, the U.S. District Court for the Southern District of California denied the Securities and Exchange Commission’s (SEC) request for a preliminary injunction against Blockvest, LLC and its founder (Blockvest).1 The ruling is the first of its kind in that the court held that the SEC failed to show that the digital assets offered by Blockvest were “securities” within the meaning of the federal securities laws. Although the ruling is not a final decision on the merits and the case will now proceed to discovery, the decision is important for issuers of initial coin offerings (ICOs) because it emphasizes that the manner in which digital assets are marketed and sold is key to the determination of whether the assets are a security.

Read: First Federal Court Decision Suggesting that ICO May Not be a Security