ICO and STO Regulations

In 2017 and 2018, we saw Initial Coin Offerings take off as companies across the space were excited to take advantage of a new, easy way to raise capital for their projects. Many assumed that since there weren’t any specific regulations regarding token offerings that these were out of the purview of the SEC and other regulators. 

When we started this publication in late 2018, we warned that this was not the case. That all securities offerings, digitized or not, were subject to SEC regulations as long as they passed the four prongs of the Howey Test. This came to pass just as we expected.

We continue to keep a close eye on the evolving attitude toward ‘utility tokens’ and digital assets that can cease to be considered security tokens once the projects have reached sufficient decentralization. 

There are also a number of other DeFi innovations and crypto financial instruments that clearly seem to be securities offerings. The SEC has not turned its attention to them yet, but it undoubtedly will soon enough. So all crypto entrepreneurs and investors should be aware of the risks to come when that happens.