The status of Bitcoin and Ether as securities has been a hotly debated topic and a great source of angst among the community due to a lack of guidance and regulatory clarity from the SEC.
Now, however, the SEC’s Director of Coporate Finance, William Hinman, announced at the Yahoo Finance All Market Summit: Crypto at the NASDAQ Entrepreneurial Center in San Francisco on Thursday that the SEC would not deem Ether a security.
The news is sure to bring investors and crypto-anarchists alike a sigh of great relief.
Ultimately, this policy resonates with statements from Jay Clayton that Bitcoin is not a security and that the SEC would not change longstanding definitions to accommodate it as such.
“Strictly speaking the token, the coin, whatever the digital information packet is being called all by itself, we don’t think is a security. Just as oranges in the Howey case were not securities. Essential to determining whether a security is being offered, however, is how it’s being sold and a reasonable expectation of purchasers. When someone buys a housing unit to live in it’s probably not a security but under certain circumstances, the same asset could be offered and sold in a way that could cause investors to have a reasonable expectation of profits based on the efforts of others. If the housing unit is offered with a management contract or other services where purchases are encouraged to invest rather than reside, it could be a security. Case law tells us that,” Hinman explained during his speech.
Although these statements provide relief and clarity to investors, developers, and crypto-enthusiasts, now the real work in case law begins. While Bitcoin and Ethereum are off the hook, many other ICOs and tokens might not be so lucky.
“‘Can a digital asset that was originally offered in a securities offering ever be later sold in a manner that does not constitute an offering of a security?’ In cases where the digital asset represents a set of rights that gives the holder a financial interest in an enterprise, the answer is likely ‘no.’ In these cases, calling the transaction an initial coin offering, or ‘ICO,’ or a sale of a ‘token,’ will not take it out of the purview of the U.S. securities laws,” the director indicated.