On July 25, 2017, the Securities and Exchange Commission (SEC) issued its first guidance on how it will interpret token issuances or “Initial Coin Offerings” (ICOs) under relevant securities laws.
The headlines—“SEC Finds DAO Tokens are Securities”—come from Release No. 81207, “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO” (July 25, 2017), in which the SEC determined that the tokens issued in association with the Distributed Autonomous Organization (DAO tokens) in April-May 2016 were securities and explored the various implications of that determination. (See Steptoe’s analysis of this report here.)
However, the real news may be the other document released on July 25, a notice to investors titled “Investor Bulletin: Initial Coin Offerings” (July 25, 2017). In that document, the SEC sets out several areas of concern regarding ICOs—framed as advice to investors—from which the reader can discern the SEC’s initial expectations with respect to ICOs. Much of the guidance is not surprising, but the SEC’s statement paves the way for more certainty for companies considering ICOs.
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