In a flurry of activity and confluence of developments, the SEC, FINRA and a Brooklyn federal judge have commenced actions and made rulings that continue to define the regulatory framework and obligations surrounding the sale and trading of digital securities, whether they are labeled as cryptocurrencies or tokens. Continue Reading
On August 14, 2018, the U.S Securities and Exchange Commission (“SEC”) issued a cease and desist order (the “Tomahawk Order”) against Tomahawk Exploration LLC (“Tomahawk”) and David Thompson Laurance (“Laurance”) for their actions in connection with an initial coin offering of digital assets called “Tomahawkcoins” or “TOM” (the “Tomahawk ICO”). Tomahawk and Laurance’s actions were problematic for the same reasons cited by the SEC in other recent orders related to digital assets (e.g. the Munchee Order). Consistent with such orders, the SEC determined that Tomahawkcoins are securities because they constitute investment contracts under the “Howey” test. However, what makes the Tomahawk Order particularly noteworthy are the lessons to be gleaned regarding cryptocurrency “airdropping.” Continue Reading
The regulatory landscape surrounding cryptocurrency continues to evolve. Most of the activity to date has involved regulatory enforcement actions brought by the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) and focused primarily on exposing fraud rather than providing guidance. Some people have questioned whether the CFTC has jurisdiction in this space. A federal district court in New York has ruled that they do. Continue Reading
The United States Securities and Exchange Commission (“SEC”) has indicated that nearly all initial coin offering (“ICO”) filings they have seen are securities offerings. Based on this expansive view, it may be more likely to find a Unicorn than an ICO that is not a securities offering. Ironically, a recent lawsuit was filed against Unikrn, a block-chain based betting platform, primarily focused on esports betting. Continue Reading
Blockchain is a rapidly emerging technology and has the potential to bring transformative changes to many industries. As more companies become aware of and study this technology, many questions arise. These questions relate to what blockchain technology is, how it works and what about it is so different. Blockchain is often associated with the financial services industry, but it is applicable to all industries. Many people in the life sciences industry have been asking if blockchain is relevant to them and, if so, how is it applicable? This paper addresses these and other frequently asked questions about blockchain technology and its applicability to the life sciences. Continue Reading
The Major League Baseball Players Association (MBLPA) signed an exclusive deal with the crypto-collectibles startup, Player Tokens. This is believed to be the first professional athlete-based crypto-collectible offering. The partnership is intended to introduce baseball fans to blockchain technology and blockchain enthusiasts to Major League Baseball (MLB). The tokens will feature 73 All-Stars and players from all 30 MLB teams. Each Player Token has a unique ID that is recorded to the blockchain to prove the authenticity of each asset. Continue Reading
The SEC has been busy over the past couple of weeks addressing blockchain and crypto-related issues.
The SEC rejected, for a second time, a request by the Winklevoss brothers for a Bitcoin exchange-traded fund. The primary reason given by the SEC was that the submission did not sufficiently explain how the ETF would prevent manipulation and fraud. The SEC has previously expressed additional concerns with crypto ETFs over liquidity, price manipulation and custody. Interestingly, the SEC Commissioner Hester M. Peirce voiced a strong dissent to the rejection, saying the rejection “sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin eTPES.” Continue Reading
Apple’s App Store Review Guidelines have been updated to address various aspects of cryptocurrency. Some of the relevant provisions include the following.
One of the provisions relates to prevents an app from including ads that run background processes such as crypto mining. This is a tactic that has arisen, unbeknownst to many users. The relevant provision recites:
2.4.2 Design your app to use power efficiently. Apps should not rapidly drain battery, generate excessive heat, or put unnecessary strain on device resources. Apps, including any third party advertisements displayed within them, may not run unrelated background processes, such as cryptocurrency mining. Continue Reading
The SEC has formally announced that Ether is not a security. The U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities. Other comments of note include that if a cryptocurrency network is sufficiently decentralized and purchasers no longer have expectation of managerial stewardship from a third party, a coin is not a security. Also, labeling an investment opportunity as a “coin” or a “token” does not make something not a security. The facts and circumstances matter.
James Gatto and Hean Koo published an article titled, “Open Source Software in M&A and Finance,” on June 5, 2018 in Thomson Reuters Westlaw.