ICO and crypto players should brace for an aggressive SEC
2018 was a roller-coaster year for securities tokens, including ICO subpoenas and several arrests, as issuers tested the boundaries of SEC enforcement. Regulators have clearly explained that the federal securities laws apply to the token space.
The issue is sure to continue in the next year, with several major developments on tap.
The SEC will keep working to gain control over the distribution of improperly issued tokens. As regulation has clarified, we’ll likely see more subpoenas and more arrests. Issuers now realize they are subject to the federal securities laws, and will likely avail themselves of regulations that allow them to legally issue free trading tokens available to all types of investors in the United States, such as Reg A+.
There will also be strict enforcement on new unregulated, extrajudicial offerings. Extrajudicial is just a fancy way of saying outside the law. The SEC has shown leniency thus far in the punishments its pursued against entities that violated federal securities laws prior to the DAO Report. Now that tokens have been declared securities, and any regulatory ambiguity has been eliminated, companies that continue to flout the federal securities laws will likely receive much harsher punishments going forward.
The SEC will also approve the first secondary market for securities tokens. SEC-qualified venues for the secondary trading of securities tokens are really inevitable. There is huge demand for it, and it is just a matter of when the SEC will approve an ATS for secondary trading of securities tokens. Such a trading venue is a condition precedent to securities tokens reaching the mainstream.
And blockchain technology will begin to be used in mainstream consumer applications. The power and flexibility of the blockchain is proven. We will start to see the benefits of this distributed ledger technology for consumer applications in the banking sector, consumer services, entertainment and many other areas.