Reed Smith Client Alerts

On July 25, 2017, the U.S. Securities Exchange Commission issued an Investigative Report detailing its investigation of an initial coin offering of digital tokens representing interests in a decentralized autonomous organization through the Ethereum blockchain. The SEC also released a related Investor Bulletin on ICOs, and warned that some digital “tokens” or “coins” may qualify as “securities” subject to the SEC’s jurisdiction that must be offered and exchanged in compliance with the securities laws and regulations. The SEC places this subset of digital assets within the catchall category of securities known as “investment contracts” and will use a facts and circumstances test to determine whether a given product must be offered in conformity with the federal securities laws. The SEC’s Report and Investor Bulletin should be welcomed as positive guidance for the industry. These documents provide helpful clarity and acknowledge ICOs as an acceptable method for raising capital.

Authors: Herbert F. Kozlov Kari S. Larsen Michael Selig

Type: Client Alerts

On July 25, 2017, the U.S. Securities Exchange Commission (“SEC”) issued an Investigative Report (the “Report”) detailing its investigation of an initial coin offering (“ICO”) of digital tokens representing interests in “The DAO,” a decentralized autonomous organization (“DAO”), through the Ethereum blockchain. The SEC also released a related Investor Bulletin on ICOs, and warned that some digital “tokens” or “coins” may qualify as “securities” subject to the SEC’s jurisdiction that must be offered and exchanged in compliance with the securities laws and regulations.1 The SEC places this subset of digital assets within the catchall category of securities known as “investment contracts” and will use the facts and circumstances test set forth in SEC v. Howey2 to determine whether a given product must be offered in conformity with the federal securities laws.