SEC focuses on initial coin offerings: tokens may be securities under federal securities laws

Abstract

Purpose

To explain the recent determination by the US Securities and Exchange Commission (SEC) with respect to so-called “token sales” or “initial coin offerings” (ICOs) that some tokens may be securities under federal securities laws and to address other recent actions by the SEC with respect to ICOs.

Design/methodology/approach

Reviews the SEC’s determination that some tokens issued in an ICO may be securities under federal securities laws as outlined by the SEC’s Division of Enforcement in a “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO.” Provides overview of SEC Investor Alert, Investor Bulletin, and recent comments and actions of the Staff regarding investment in ICOs and provides guidance to those interested in participating in an ICO as an investor or issuer.

Findings

These actions by the SEC make it clear that the SEC is closely monitoring the market for ICOs, and that it wants potential investors and issuers to be aware that it is watching and may take action if it believes the securities laws have been violated.

Originality/value

Practical overview of recent developments and guidance from experienced securities and financial services lawyers.

Citation

Senderowicz, J.I., Grafton, K.S., Spangler, T., Brown, K.D. and Schaffer, A.J. (2018), "SEC focuses on initial coin offerings: tokens may be securities under federal securities laws", Journal of Investment Compliance, Vol. 19 No. 1, pp. 10-14. https://doi.org/10.1108/JOIC-02-2018-0017