The Securities and Exchange Commission recently brought its first two enforcement actions against issuers of non-fungible tokens (NFTs), resulting in cease-and-desist orders, penalties and other remedies, finding that the NFTs were investment contracts and that each of the issuers had engaged in an offering of securities without registration in violation of Section 5 of the Securities Act of 1933. These enforcement actions create legal ambiguity and risk for NFT developers regarding the marketing, transferability and royalty generating capacity of NFTs.Continue Reading SEC’s First Two NFT Enforcement Actions Cast Shadow of Ambiguity
Ethereum
First Ever SEC Registered Digital Token IPO May Bring Clarity to Blockchain Asset Industry
On May 3, 2021, blockchain-based trading platform operator INX Ltd. announced it had completed its initial public offering of digital tokens, raising approximately $85 million in the IPO from over 7,200 institutional and retail investors. The INX IPO is the first SEC registered offering of digital tokens, and represents another major milestone for blockchain asset…
Telegram TRO Sends Strong Message to Digital Token Issuers
On October 11, 2019, the Securities and Exchange Commission (the “Commission”) announced it filed a complaint and obtained a temporary restraining order against Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. (collectively, “Telegram”) relating to Telegram’s offering of tokens without registration in violation of the Federal securities laws. The action sends a strong…
First S-1 Filing for an ICO: Going Legit or Just a Crypto Head Fake?
Initial coin offerings so far have gone through two major phases in their brief lifespan. The initial phase flew under the regulatory radar in an explosion of deals that raised billions of dollars seemingly overnight and without either registering the offerings with the SEC or complying with an exemption from registration. The ICO atmosphere changed…
Is a Utility Token ICO a Sale of Securities?
Bloomberg reported on October 16 that over $3 billion dollars have been raised in over 200 initial coin offerings so far this year. It remains to be seen whether the pace of ICOs will slow down in the face of regulatory headwinds such as the outright ICO bans in China and South Korea. Here…