Just going to post this here, some additional clarity and guidance regarding the security issue as the SEC has ruled that Ethereum is not a security
, and offered guidance to other projects to help make the determination, and also is offering to work with projects to determine a status.
“In cases where there is no… central enterprise being invested in or where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created,” that digital asset is “out of the purview of U.S. securities laws”, according to William Hinman
, the director of the division of corporation finance at the U.S. Securities and Exchange Commission.
And here are the criteria by which they have stated that they are evaluating:
Is there a person or group that has sponsored or promoted the creation and sale of the digital asset, the efforts of whom play a significant role in the development and maintenance of the asset and its potential increase in value?
Has this person or group retained a stake or other interest in the digital asset such that it would be motivated to expend efforts to cause an increase in value in the digital asset? Would purchasers reasonably believe such efforts will be undertaken and may result in a return on their investment in the digital asset?
Has the promoter raised an amount of funds in excess of what may be needed to establish a functional network, and, if so, has it indicated how those funds may be used to support the value of the tokens or to increase the value of the enterprise? Does the promoter continue to expend funds from proceeds or operations to enhance the functionality and/or value of the system within which the tokens operate?
Are purchasers “investing,” that is seeking a return? In that regard, is the instrument marketed and sold to the general public instead of to potential users of the network for a price that reasonably correlates with the market value of the good or service in the network?
Does application of the Securities Act protections make sense? Is there a person or entity others are relying on that plays a key role in the profit-making of the enterprise such that disclosure of their activities and plans would be important to investors? Do informational asymmetries exist between the promoters and potential purchasers/investors in the digital asset?
Do persons or entities other than the promoter exercise governance rights or meaningful influence?