SEC: US Securities Laws ‘May Apply’ to Token Sales

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The US Securities and Exchange Commission said today that the offering and sale of digital tokens “are subject to the requirements of the federal securities laws”.

The agency, in its statement, revealed that it had been investigating the issuance of tokens connected to The DAO, the ethereum-based funding vehicle that collapsed dramatically last summer following an exploit of a flaw in its code.

Per the SEC, those “DAO tokens” constitute securities, though the agency said that it was not going to pursue any charges in connection with the project, but is releasing its finding “to caution the industry and market participants”.

Stephanie Avakian, co-director of the SEC’s Enforcement Division, said in a statement:

“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets.”

In tandem with the DAO report, the SEC published an investor bulletin about initial coin offerings, or ICOs. Among the items included was a warning about the risks of fraud for those who opt to participate.

“Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities laws, your ability to recover may be significantly limited,” the bulletin read.

The move comes months after the SEC was formally petitioned to issue guidance on blockchain assets and ICOs. It ends a period of doubt as to what approach the SEC would take.

The full SEC report can be found below:

SEC Report by CoinDesk on Scribd

Image via Shutterstock

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1 CRYPTO

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Ticker

1 BTC = $62999.04 USD  (via Coinbase)
1 ETH = $2436.46 USD  (via Coinbase)
1 LTC = $274.26 USD  (via Coinbase)
Quotes delayed up to 2 minutes.

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