From Initial Coin Offerings to Security Tokens: A U.S. Federal Securities Law Analysis


Cryptocurrencies and initial coin offerings (ICO) are all the rage in startup financing. Until mid-2017, these ICOs existed in a wild west environment, a regulatory limbo, with some companies raising hundreds of millions of dollars in days and others crashing and burning in the same amount of time. Like Wyatt Earp in Dodge City, the Securities and Exchange Commission declared its jurisdiction over these ICOs, laying down the law in the “DAO Report” with the legal equivalent of a double barrel shotgun. The SEC was right to do so. There is no doubt that the overwhelming majority of ICOs involve the sale of securities and companies who ignore this conclusion do so at their own risk. Yet the law of ICOs and digital token financing is by no means final or clear, and with little official guidance to go on, startups are left to fend for themselves in a sea of self-declared experts. Few scholarly articles to date have addressed the regulatory status of these ICOs from a securities law perspective. This article provides a legal framework and method for analysis in the aggressive, case-by-case approach laid down by the SEC in the DAO Report, and recommends best practices for companies considering an ICO to follow.


Stanford University Stanford, California
  • 22 Stan. Tech. L. Rev. 52 (2019)
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