US SEC working on “supplemental guidance” on crypto-fundraising efforts, says Commissioner Hester Peirce

The U.S. Securities and Exchange Commission (SEC) is working to offer additional guidance to help people determine if their token offerings fall under securities laws.

According to a transcript of a recent speech by the SEC Commissioner Hester Peirce:

“The [SEC] staff is working on some supplemental guidance to help people think through whether their crypto-fundraising efforts fall under the securities laws.”

Back in 2017, the SEC published an investigative report stating that "Initial Coin Offerings" or "Token Sales", which involves offers and sales of digital assets, may be subject to the requirements of the federal securities laws.

“When the tokens are not being sold as investment contracts, however, they are not securities at all. Tokens sold for use in a functioning network, rather than as investment contracts, fall outside the definition of securities,” Peirce clarified.

Currently, the Supreme Court’s Howey Test is used for determining whether or not something is an investment contract, a type of security which includes some token offerings. To that end, Peirce emphasized, “…we need to tread carefully. Token offerings do not always map perfectly onto traditional securities offerings.”

Further, referring to the crypto project Basis, which announced its plans to shut down and return $133 million to investor due to the difficulty of complying with securities regulations, Peirce said:

“I am not going to comment on what I think about the merits of any particular project or how the securities laws apply to it, but my antennae will go up when apparently legitimate projects cannot proceed because our securities laws make them unworkable.”

She also said that the regulator is also considering if it needs to come up with a new regulatory framework to better regulate the crypto space.

“If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the objectives of our securities laws—protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets,” Peirce said.