Floyd Mayweather, a world famous boxing champion, recently used his Twitter and Instagram accounts to help a company raise more than $30 million in an initial coin offering (“ICO”).1 Other celebrities have similarly capitalized on their “influencer” status by promoting digital tokens to their Twitter and Instagram followers. Token issuers raised over $3 billion via ICOs in 2017,2 and while many are concerned about a bubble, there is no sign of a slowdown. Some reports suggest that early stage companies have raised more money via ICOs this year than through traditional early stage venture capital funding.3 This growth in new token issuances has elevated the profile and “coolness factor” of token sales, and celebrities are paying attention. As ICOs continue to grow in popularity, issuers of tokens may increasingly seek to involve celebrities in their advertising and promotional campaigns.
The U.S. Securities and Exchange Commission (“SEC”) responded to this trend on November 1 by issuing a Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others (the “Statement”).4 The SEC issued the Statement out of concern that celebrities are in essence acting as unregistered securities brokers by soliciting investments on behalf of a token issuer.