In the U.S., in general, securities
offered must be registered with the SEC unless an exemption applies, for instance
if offered to accredited investors. But how to determine if a token is a security?
A token can be an investment, and according to the Securities Act, an
investment contract is a security. The U.S. Supreme Court established a test called
the Howey test to determine whether an arrangement involves an investment
contract. It must be an investment of money in a
common enterprise with the expectation of profits predominantly from the
efforts of others. What else do we have? We have several statements of SEC
chairman Jay Clayton. He stated for instance that tokens and offerings that
feature and market potential profits contain the hallmarks of a security under
U.S. law – which to date, ICOs largely have been. With that being said,
it’s possible that an operational utility token which for instance confers
a right to access or license a system, or use a system or its outputs does not
qualify as a security. However, a utility token presale will most likely qualify
as a security because these investments are usually pursued with the expectation
of profits. So this is where the Simple Agreements for Future Tokens called
SAFTs come in. These agreements for future tokens are offered to accredited
investors. Telegram just recently raised 1.7 billion with these agreements. In
order to comply with securities laws, they filed a D form. That’s a notice for
an offering exempted from registration requirements. To conclude, in the U.S.
today, token offerings usually trigger registration requirements
unless the ICO is structured so that an exemption applies.