Archive: June 22, 2018

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Are Digital Asset Transactions Always Securities Offerings?
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Conference Report – Blockchain and the Law: Towards a Responsible Blockchain Sector

Are Digital Asset Transactions Always Securities Offerings?

By Andrew Massey and Evan Glover

On June 14, 2018, William Hinman, Director of the Division of Corporation Finance at the United States Securities and Exchange Commission, shared his views on whether digital assets (such as tokens or coins) that were originally offered in a securities offering can be subsequently sold in a manner that does not constitute a securities offering.  CLICK HERE for the full remarks.

In some cases where a central enterprise is no longer being invested in, or where the digital asset is used for consumption (to purchase a good or service available through the network it was created), Hinman believes such an asset would not be considered a security.  However, labeling a digital asset a “utility token” does not automatically cause the digital asset to become something that is not a security.  Although the Supreme Court has stated that if someone is purchasing something for consumption, it is not a security, Hinman emphasized the Supreme Court’s stance that economic substance, not labels, of the transaction guides the legal analysis.

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Conference Report – Blockchain and the Law: Towards a Responsible Blockchain Sector

By Anthony R. G. Nolan and Julien E. F. Barbey

On June 14, Cardozo Law School in New York City held a conference entitled “Blockchain and the Law: Towards a Responsible Blockchain Sector.”  The conference was led by a panel consisting of current and former commissioners and staff members of the SEC and the CFTC including Rob Cohen, director of the SEC’s enforcement division.

Among topics discussed was SEC Director William Hinman’s recent speech in which he stated that Ethereum is not a security.  Panelists suggested this may indicate that the SEC would regard a token as being able to change its character over time, such that a token that was once a security can morph into one that is not a security.   This would have important implications for market practices, potentially including the utility of SAFTs.

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