Developing a framework for consumer tokens -

With the rapid growth in the development of blockchain technology, virtual currencies and token sales (sometimes referred to as initial coin offerings, or ICOs) in 2017 and beyond, ICOs came under increased regulatory scrutiny, particularly in the United States. The question on the minds of many entrepreneurs and their counsel during this period, has been whether the issuance and sale of “consumer” or “utility” tokens – those designed for use by consumers on a distributed platform and not intended to constitute securities – is possible in the United States. Based on recent statements of senior offi cials at the US Securities and Exchange Commission (the SEC), it appears there may be a viable regulatory path to the issuance of consumer tokens that would not necessarily be viewed as “securities” subject to SEC oversight. In this chapter, we discuss the legal issues surrounding such issuances under the US federal commodities and securities laws.

Originally published in GLI – Blockchain & Cryptocurrency Regulation 2019, First Edition.