SEC report sheds light on blockchain token status

Author: John Crabb | Published: 22 Aug 2017

The market has backed the findings of a Securities and Exchange Commission (SEC) July report warning organisations selling or offering digital tokens using distributed ledger or blockchain technology that they are subject to federal securities regulations.

The Commission’s enforcement division report focuses on an organisation known as DAO (for decentralised autonomous organisation) asserting that the tokens it offered were securities under the stipulations of the Howey test, which was created by the Supreme Court to determine whether certain transactions qualify as investment contracts, and therefore securities.

Rather than set a precedent, however, market participants have said that this outcome was to be expected, and back the SEC’s conclusion that while tokens can be securities, under analysis it is clear that this is only the case under certain circumstances.

Debevoise & Plimpton partner Lee Schneider echoed the position that not all tokens are securities.

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