Legality of Basic Attention Token and Other ICOs Called Into Question

Legality of Basic Attention Token and Other ICOs Called Into Question

At the start of June, Brave Software raised $35 million USD in 30 seconds, selling out their Initial Coin Offering (ICO) in record time. With recent reports indicating that the United States Securities and Exchanges Commission will be taking steps toward developing regulations for ICOs, questions have surfaced as to whether or not pre-sale token distribution fundraisers are comprising the illegal sale of unregistered securities.

Also Read: SEC Eyes Initial Coin Offerings for Regulatory Oversight

Brave’s BAT Pre-Sale ICO May Have Comprised the Sale of Unregistered Securities

A discussion pertaining to the legality of ICOs is overdue. With a flood of new projects entering the markets recently, developers are seemingly printing money out of thin air in the form of cryptographic tokens on a weekly basis, which are then passed onto greedy investors seeking to find the next big crypto. With ICOs raising almost half a billion USD in the last 2 years, it is unsurprising to see the SEC taking an interest in the current ICO landscape.

A recent article posted on Medium has sought to argue that Brave’s BAT pre-sale ICO and others like it may comprise the sale of unregistered securities, and are thus illegal.

Legality of Basic Attention Token and Other ICOs Called Into Question

When a company has completed its development and is distributing coins to investors, it can do so legally because the cryptocurrency tokens have use-value outside comprising a money commodity/expression of value, and can be considered to be app tokens. Under these circumstances shouldn’t be any legal dilemma, and the company should be free to conduct an ICO.

If a company is raising money in order to fund token development, and are pledging to distribute tokens at a future date, then such would be considered to comprise a token presale, which may be seen as selling securities under US regulations, and thus require adherence to SEC guidelines and legislation. “Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption.”

The purpose of the SEC regulations is to prevent companies from issuing tokens on the basis of a promised service or platform that is never delivered. Without such regulation, anybody could produce whatever I.O.U. they liked, and begin distributing such to investors with no intention of delivering on their end of the agreement.

For many within the cryptocurrency community, the regulatory guidance of institutions like the SEC is no longer needed. Relations between individuals are mediated through immutable smart-contracts, with judge, jury, and executioner manifested as the cold, rational laws of mathematics.

There Is Little Agreement Among Nations Upon How to Legally Classify Bitcoin and Other Major Crytocurrencies

The debate pertaining to whether or not crowdfunding conducted through token pre-sales comprises the unlawful sale of unregistered securities highlights the need for unique regulatory apparatus to be created for bitcoin and cryptocurrency – as trying to retrofit existing legislation designed for mainstream asset classes has proved to be challenging at best.

Legality of Basic Attention Token and Other ICOs Called Into Question

There is little agreement among nations upon how to legally classify bitcoin and other major cryptocurrencies. The unique peculiarities of bitcoin and altcoins have prompted some experts to call for the creation of a new asset class for cryptocurrency, whilst others have demanded no regulation whatsoever. The speed and dynamism with which the cryptocurrency economy has evolved poses an additional challenge to lawmakers, as does the fluidity of the cryptocurrency ecosystem.

Whatever the outcome of the growing curiosity on the part regulators regarding ICOs, it is clear that the hype and momentum surrounding many ICOs is only intensifying.

Do you think that the SEC will regulate ICOs? Share you thoughts below!

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  • sandwich

    I’m against regulation but the hype around ICOs is being taken advantage of by scammers. They are selling vaporware and this shady practice will tarnish the efficacy of crypto as a whole if we allow it to continue. Due to the decentralized nature of smart contracts, scams will always exist. But we can stop promoting them, so crypto media outlets and block explorers and crypto ad networks should stop promoting ICOs unless they meet certain qualifications. Anyone that pushes an ICO for money is a leach and doesn’t believe in the long term value of crypto, and should be boycotted.

    • concerndcitizen

      And the answer to this is to let foolish investors lose their money. They will eventually run out of money and you won’t have the scam ICO’s. Everything will self-correct.

      • sandwich

        I empathize with you, that was my theory regarding long-form advertising in 2005, and yet, it still exists today.

  • chech0

    The sec is a corrupt agency they will try to get their hand on anything where the see a profit, that same agency only a short time ago rejectef several Bitcoin etf, and the IRS declared then as a comodity. Politicians are confused and just want to collect money without doing any work, they are the cancer of todays society. If they ban ICOs they will just go overseas like its happening already. Never forget Bitcoin is a revolution resistance is to be expected without resistance it would not be a revolution.

    • concerndcitizen

      Exactly. No US participants allowed. Everything will move offshore.

  • Crypto Currency Swot

    I bought the tokens and I’m 100% fine with it. Just as fine as when I buy shoes or cars of any brand. The price of the commodity of my pleasure is my right of living. I buy shoes of below 10 USD because I like barefoot, and I buy stupid cars above 200K to impress my friends, so what? Yes, I buy them nice cars too, so my garage is extra happy with me. My car will lose its value, and my shoes won’t be around within 2 years. If my tokens die, I’m 100% fine. I consider it my pleasure to invest in things I love in life, I don’t harm any soul in my life, this I’m quite fucking sure!

    • emmettbrady

      well said.

    • Right, but SEC regulation exists so its somehow possible to investigate fraud, because you have so many regulations and boundaries: What is right and what is not. With ICO there are no regulations, how would it that be possible to judge scammers? It would take hundreds of years to proceed such court cases, image a scammer says in court: I just wanted to have a vacation for couple of years. What do you do than? I believe yes, everything has to be tradable, but you should not count on any government regulation if you aware of what are you buying.

  • emmettbrady

    We do not need interference from government ,let the buyer beware. Plain and simple.

  • emmettbrady

    Anything government get involved in ends up costing a lot more and usually does not work.

  • concerndcitizen

    BAT is most likely an unlicensed money transmitter, based on the way value is stored and delivered from advertiser to publisher. This is the reason why google, facebook, etc. all have 48 state Money Transmitter Licenses for their advertising businesses. The cost of these licenses is about $10-15 million and it can take up to 2-3 years to collect them all. They could move everything outside the US, but they’ll still have the SEC problems of raising money from US persons. Prediction: When the SEC comes down on the ICO’s you will see ICO’s all move offshore, along with the companies and businesses. Companies like Ripple have enough capital to deal with this problem and stay in SF, but BAT is “on the edge” and could get taken down by regulators. The US could become a very difficult place to do business with crypto.

  • Allowed corruption is how the Statist usurps control through a declared cause of protection of the State and its sworn duty to protect the people under the State. Those looking for a quick buck are either con-artists or those with a great exit strategy. ICO or IPO, those at the top exit and profit first even under current regulations. I don’t see the big NEWS, here. You have to wonder how an ICO does not already know how to fund its project without fishing for the slimiest bait.

  • ChanceEGardner

    They should be minimally regulated as penny stocks meaning anybody operating out of their garage can sell some blue sky. Maybe investors should have to sign some form saying the investments are super high-risk and losses can be 100%. Because many ICOs will never have earnings or formal boards, the amendments filed to the SEC should be less than that of of penny stocks. Perhaps the exchanges should be monitored, regulated and the ICOs treated as registered securities that could trade at TD Ameritrade and Schwab.

    Caveat Emptor.

  • Dbt123

    Are you serious? With all the unfettered bribery, payoffs and insider garbage taking place in the highest reaches of governance…now we must protect the masses from ICO’S? Then the author goes on to mention licensing that giant corps pay? Your kidding right? How many of these Corps pay zero tax? Sorry let’s not discuss that topic, let’s just focus on how the peasant is getting too rich on their own, and let’s extinguish new opportunities, unless (we) are in first.

  • Investo

    I am newbie please recommend best and reliable ICO site for me. Thanks.

  • Investo

    Please help me , how can i invest in Ethereum as in the best and cheapest site for ethereum investment.