#exemptions

SEC Allows ICOs?! Proposal to exempt tokens from securities laws

As you may have heard, SEC Commissioner Hester Pierce recently proposed an exemption for certain token sales from the federal securities laws. She introduced this proposal by comparing the blockchain founder’s dilemma to the time she drove through New Jersey on a stormy night while dangerously low on gas. In New Jersey, it’s illegal to pump your own gas. Initially, she was relieved by this arcane law, but the gas attendant decided that given the weather, he would not pump her

Breakdown of the SEC's Lawsuit Against Kik

In my last post, I talked about how Kik responded when the staff of the SEC notified Kik that it would recommend the SEC file an enforcement action against them. Since that post, ETHNews uncovered a YouTube video that was uploaded live during a talk that Ted Livingston, CEO of Kik, gave in San Francisco in June 2017. Kik's Wells Submission Kik made three arguments to the SEC. One of them was the sale of Kin tokens were not securities under the Howey test because it fails thre

SEC Gives First ICO a Green Light

You may have already heard of the big news from the SEC last week. First, the SEC gave a green light to a company that is looking to do an ICO in the form of a "no-action letter" and second, the SEC published a plain English framework for companies looking to do ICOs. This article will focus on the no-action letter. The SEC’s no -action letter to a company named, TurnKey Jet, Inc., is the very first no-action letter that the SEC has ever issued to a company looking to do an I

SEC Framework for ICOs

You may have heard by now that the SEC published a framework for ICOs. This is meant to provide guidance on when ICOs are subject to the federal securities laws. The framework goes through the Howey test--the test that the SEC uses to determine whether an ICO is considered, an “investment contract”-- and gives a list of factors the SEC considers when determining whether ICOs are securities. It also includes an example of when an tokens are likely to be securities and when the

Gladius: A Company that Reported Its Non-Compliant ICO to the SEC

Recently, the SEC settled charges against a company named Gladius Network LLC for raising money with an ICO without registering nor qualifying for an exemption from registration. Gladius raised $12.7 million with an ICO from October 2017 to December 2017, after the SEC published the DAO Investigative Report (“DAO Report”). The DAO Report was the SEC’s first warning to the ICO industry that the securities laws apply to them. One of the warnings in the DAO Report was that the s

What Most Lawyers Won't Tell You About Financing Your Company

I once had a conversation with a lawyer where we discussed how to advise a client on raising capital. When you raise money for your company--for example by selling shares or debt in your company--you must comply with the securities laws. This can be at the state level, the federal level, or both. Under the securities laws, you have to register your offering with the SEC, which costs a lot of money or you can use an exemption, which is a lot less expensive. The most popular ex

How the SEC is Regulating ICOs

Last week, I was invited to the Den to give a lecture on the SEC's regulation of ICOs. By now, it's not a mystery that ICOs are regulated by the SEC, but how did we get to where we are today? This lecture takes us through: How companies raised money before ICOs; How Congress attempted to address the problems of small and emerging business fundraising with the JOBS Act; Why ICOs developed despite the JOBS Act's attempt to make capital raising easier; How ICOs gave an example o

How Will Kik's YouTube Video Affect Its Fight With the SEC?

How Kik is Responding to the SEC

Kik, the Canadian company which created the Kik messaging app, raised close to $100 million in its ICO, making their ICO one of the most successful ICOs ever. It completed its ICO around September 2017, but as indicated by recent events, the SEC is reaching out to companies that had completed ICOs post-DAO and charging them with violating the securities laws. In November 2018, the staff of SEC (the "Staff") recently notified Kik that it would recommend that the SEC file an en

What You Need to Know if You’re Asking Your Friends and Family For Money

Today, I want to talk about what you need to know when you fund your company with the help of your friends and family. People advise against taking money from friends and family for various reasons, including that it’s something that can ruin a good relationship, but we’re not talking about that today. We’re talking about what you have to think about from a legal perspective when you raise money from friends and family. A potential rift in your relationship with your friends