SEC Issues Investigative Report Concluding DAO Tokens Were Securities

https://www.sec.gov/news/press-release/2017-131

The SEC’s Report stems from an inquiry that the agency’s Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for “Ether,” a virtual currency. The DAO has been described as a “crowdfunding contract” but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

This opinion blog post does a good job discussing the implications of this particular enforcement language:

https://www.inc.com/brian-d-evans/sec-report-about-the-dao-ico-being-a-security-is-g.html

As the report goes on, they continue to explain that ICOs that are offering investments must register with the SEC. However, they also point out that certain exemptions may apply. In some cases, if a token is not a security, but instead has an actual utility, then the ICO (Initial Coin Offering) may not have to register with the SEC since that would not necessarily be considered an “investment” or security. They have not released detailed explanations of exactly what would or wouldn’t be considered a security, but only commented on The Dao.

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I work for True Ventures, an early-stage venture capital fund with offices in Northern Virginia, San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth. View all posts by adam →