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What Lessons Can Token Issuers Learn

from Recent Federal / State Securities Enforcement Activity?

18 July 2019

Clifford Chance New York Partner David Felsenthal and Associate Jesse Overall have written an article for CrowdfundInsider.com. The article discusses a number of lessons that we believe issuers of digital tokens can draw from recent enforcement actions brought by federal and state securities regulators.

There has been a veritable explosion of U.S. regulatory activity in the blockchain-based digital assets space over the past two months. We are going to focus on enforcement actions brought by U.S. state and federal securities regulators.  In a subsequent article, we plan to analyse developments in commodities and derivatives regulation and the recent activities of the CFTC.

Also, we won’t discuss the remarks that CoinDesk reports that SEC Chairman Jay Clayton recently made at Princeton University, where he largely reaffirmed existing positions. While he did state that a token can evolve from a security into a non-security, which is novel, he did not elaborate regarding the circumstances under which this might occur, leaving market participants without any guidance on how to achieve this.

Finally, because we are focused primarily on issuers of tokens, we will not discuss the New York Attorney General’s (NYAG’s) recently announced Virtual Markets Integrity Initiative, which the NYAG inaugurated by sending questionnaires concerning trading policies and procedures to 13 cryptocurrency exchanges.  We restrict our scope to issuers in order to avoid losing focus – exchanges and other financial intermediaries are a whole different ballgame, so to speak.

You can read the full analysis and article at: CrowdfundInsider.com