Latham & Watkins provides an in-depth look at the intersection of CFTC and SEC regulatory jurisdiction in the crypto context.
With the rapid growth in the development of blockchain technology, virtual currencies, and token sales (sometimes referred to as initial coin offerings, or ICOs), token offerings came under increased regulatory scrutiny, particularly in the US. Since the US Securities and Exchange Commission (SEC) first started taking action with respect to token offerings, the question on the minds of many entrepreneurs and their counsel 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 US. While there appears to be a viable regulatory path to the issuance of consumer tokens that would not necessarily be viewed as “securities” subject to SEC oversight, the framework remains unclear.
In this article, originally published in 2019 and fully revised for Global Legal Insights’ Blockchain & Cryptocurrency Regulation 2020 issue, Latham & Watkins lawyers discuss the legal issues surrounding such issuances under the US federal commodities and securities laws. The article reflects our most current and up-to-date thinking and analysis regarding the development of consumer token sales.