Law360 Publishes Akin Gump Analysis of SEC Guidance on Initial Coin Offerings
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“New Clarity On SEC’s Approach To Crypto Regulation,” an article by Akin Gump litigation partner Peter Altman, investment management partner Jason Daniel, and litigation counsel and associate, respectively, Nicholas Adams and Kelly Handschumacher, has been published by Law360. The article, which originated as a blog post on AG Deal Diary, recounts a recent announcement by the SEC that it “would not be classifying ether (ETH) or bitcoin (BTC) as securities.
The authors begin by looking at what prompted the decision, writing that the SEC, until recently, “had provided only limited guidance for determining whether coins, such as BTC and ETH, would be treated as securities.” At a congressional hearing last month, the SEC’s co-Directors of Enforcement stated that “whether a coin offering constitutes a securities offering depends on the ‘facts and circumstances’ of each case.”
The article then discusses the meaning of this decision, pointing out that, while a coin offering could be considered a securities offering at the initial launch, “the reverse could also be true – an investment contract could, over time, become a commodity as its engineers and initial sponsors lose control over its value and marketing.”
Altman, Daniel, Adams and Hanschumacher then list some factors for companies considering initial coin offerings (ICOs) that the head of the SEC’s Division of Corporation Finance believes “are indicative of a third party driving expectations of an investment return.” They also discuss the factors “that would indicate that a token is not being offered as a security, but rather as a consumer item.”
The article concludes by observing that, while the ultimate direction of the SEC’s regulatory authority is still not certain, the SEC does intend “to remain active in the digital currency markets, focusing on the ICO marketplace to push issuers within the bounds of existing legal precedent and in concert with their colleagues.”
To read the original blog post, please click here.
