Initial Coin Offerings

According to a recent report, the new chair of the CFTC, Heath Tarbert, has declared that he believes that ether is a commodity. He also anticipates ether futures trading on U.S. markets in the near future. The CFTC has previously taken the position that bitcoin also is a commodity.  He further indicated that he agrees with the SEC that bitcoin and ether are not securities. He also opined that similar assets should be treated similarly. 
Continue Reading CFTC Chairman Says Ether Is a Commodity

Last week we reported that FinCEN had issued new guidance addressing cryptocurrency and other convertible virtual currency. The need for compliance was reinforced this week. In a speech by Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence, during blockchain week in NY, a stern warning was issued. The message was clear. Regulatory compliance is not an option and you must do it right from the start – not just after you got a call from regulators or law enforcement.
Continue Reading FinCEN – We Will Identify Where Compliance Is Not Taking Place And Take Appropriate Action

FinCEN has issued  2 new guidance documents addressing cryptocurrency and other convertible virtual currency (CVC). The guidance does not establish any new regulatory expectations. Rather, it consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency, and applies the same interpretive criteria to other common business models involving CVC. FinCEN’s rules define certain businesses or individuals involved with CVCs as money transmitters subject to the same registration requirements and a range of anti-money laundering, program, recordkeeping, and reporting responsibilities as other money services businesses. It also warns of threats posed by virtual currency misuse.
Continue Reading FinCEN Updates Guidance on Crypto

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 Airdrop of Crypto Tokens Hits Regulatory Flak

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 Is there a Unicorn Among ICO Issuers?

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 Apple Updates Cryptocurrency Aspects of App Store Review Guidelines

Much uncertainty exists throughout the world on the legality and legal classification of crypto tokens. In the United States, Ripple was sued recently for allegedly selling unregistered tokens (XRP) in a violation of U.S. securities laws.  The US SEC and CFTC have held hearings and are assessing whether to classify certain tokens as securities and/or commodities. Both agencies have issued guidance on this (see, for example SEC and CFTC), but many issues remain.

Some industry experts have commented on the classification of three of the biggest tokens- bitcoin, ether and ripple. Many believe bitcoin and ether are not a security. However, debates exist as to whether ether or ripple are. Over 1500 crypto tokens exist, each with a different set of characteristics, function and purpose. The SEC has said most tokens are likely securities under the Howey Test.
Continue Reading How Crypto Token Function and Transferability Could Impact Classification as a Security

Read the full article here, authored by Richard A. Friedman and Andrea Cataneo.

An excerpt:

“When considering an offering of digital instruments that involves the use of blockchain
Continue Reading Issues to be Considered in Launching an Offering Involving Digital Instruments Based upon the Use of Blockchain

The Commodity Futures Trading Commission’s LabCFTC recently released, “A CFTC Primer on Virtual Currencies.” This primer provides an overview of virtual currencies and their potential use-cases, helps outline the CFTC’s role and oversight of virtual currencies, and cautions investors and users of the potential risks involved with virtual currencies.
Continue Reading CFTC Issues Primer on Virtual Currency, Virtual Tokens and ICOs