ICO NEWS: LAUNCH OR INVEST IN ICO IN US – 10 THINGS TO KNOW

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on Feb 19, 2018

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KEY POINT: Only ICOs that offer a ‘working’ token that powers the use of a pre-existing product are (probably!) exempt from SEC regulation.
In 2017, the SEC ruled that digital assets CAN be classed as securities and therefore subject to SEC regulation.
Federal Securities Law applies to all who sell securities in the US, including ‘decentralised autonomous organisations’, whether funded by FIAT money or ‘virtual currencies’. Just because cryptos are involved does not mean an ICO offering can’t and won’t be labelled a security. Be aware!
ICO organisations must provide a ‘working product’ (or at least a detailed outline of a soon-to-be-launched working product, though a plan won’t by any means guarantee that an offering isn’t classed as a security) in exchange for the money (crypto or otherwise) raised, even if some investors intend to simply flip the token when it goes public. This is a key distinction.
There are two types of ICO that can go ahead without fear of getting kicked off crypto exchanges: ICOs registered with the SEC and ICOs that offer working tokens, not mere investment vehicles.
If an ICO is launched before any product exists, it is in serious danger of being labelled a security because investments are purely speculative with no real-life quantifiable basis. There’s no tangible evidence that organisers will deliver.
‘THE HOWEY TEST’ – to ensure a token isn’t dubbed a security by the SEC, it must pass the ‘Howey Test’. To do this, it must meet these three specifications: An investment of money; In a common enterprise; With an exception of products predominantly from the efforts of others.
If in doubt, opt out. Many ICO organisers choose to exclude US investors altogether for fear of having their offering classed as a security by the SEC.
Investors: be weary of tokens not for sale in the US. This suggests organisers are not confident that their offering won’t be deemed a security by the SEC and, as such, they may not deliver on promises.
For in-debt analysis, read the Galebach guide which can be found here.

Cryptocurrency ICOs

ICO NEWS: LAUNCH OR INVEST IN ICO IN US – 10 THINGS TO KNOW

KEY POINT: Only ICOs that offer a ‘working’ token that powers the use of a pre-existing product are (probably!) exempt from SEC regulation.

In 2017, the SEC ruled that digital assets CAN be classed as securities and therefore subject to SEC regulation.

There are two types of ICO that can go ahead without fear of getting kicked off crypto exchanges: ICOs registered with the SEC and ICOs that offer working tokens, not mere investment vehicles.

If an ICO is launched before any product exists, it is in serious danger of being labelled a security because investments are purely speculative with no real-life quantifiable basis. There’s no tangible evidence that organisers will deliver.

‘THE HOWEY TEST’ – to ensure a token isn’t dubbed a security by the SEC, it must pass the ‘Howey Test’. To do this, it must meet these three specifications: An investment of money; In a common enterprise; With an exception of products predominantly from the efforts of others.

If in doubt, opt out. Many ICO organisers choose to exclude US investors altogether for fear of having their offering classed as a security by the SEC.