Are Digital Asset Transactions Always Securities Offerings?
By Andrew Massey and Evan Glover
On June 14, 2018, William Hinman, Director of the Division of Corporation Finance at the United States Securities and Exchange Commission, shared his views on whether digital assets (such as tokens or coins) that were originally offered in a securities offering can be subsequently sold in a manner that does not constitute a securities offering. CLICK HERE for the full remarks.
In some cases where a central enterprise is no longer being invested in, or where the digital asset is used for consumption (to purchase a good or service available through the network it was created), Hinman believes such an asset would not be considered a security. However, labeling a digital asset a “utility token” does not automatically cause the digital asset to become something that is not a security. Although the Supreme Court has stated that if someone is purchasing something for consumption, it is not a security, Hinman emphasized the Supreme Court’s stance that economic substance, not labels, of the transaction guides the legal analysis.