On July 25, 2019, staff of the Securities and Exchange Commission (“SEC”) granted its second no-action letter in the digital asset space to Pocketful of Quarters, Inc. (“POQ”), permitting POQ to sell digital tokens (“Quarters”) recorded on the Ethereum blockchain without satisfying registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934 (the “Acts”). Like the SEC’s prior no-action letter to TurnKey Jet, Inc. (“TKJ”), which permitted TKJ to sell digital tokens pegged to $1.00 for the limited purpose of purchasing air charter services, Quarters will also be sold at a fixed price and limited to a purely consumptive purpose within the Quarters platform.
Due to these similarities, the POQ letter does little to clarify the SEC staff’s most recent guidance, released with the TKJ letter on April 3, 2019, that lists characteristics of a digital token that may affect its classification as a “security” under the Acts (the “Framework”). The POQ letter merely reemphasizes that projects where the platform is already fully developed and the digital asset is subject to extensive restrictions on secondary trading, like TKJ, are more likely to fall outside the scope of federal securities laws.
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