Registered ICOs: SEC Clears First Reg A+ Token Offering
It looks like a token issuer finally crossed the public offering goal line – at least when it comes to clearing Corp Fin’s review process. This Morrison & Foerster memo has the details. Here’s an excerpt:
“On July 10, 2019, Blockstack Token LLC (“Blockstack”), a wholly-owned subsidiary of Blockstack PBC, a Delaware public benefit corporation, became the first company to have an offering of digital assets qualified by the U.S. Securities and Exchange Commission (“SEC”) under Regulation A.
Blockstack is a technology company that offers an open-source blockchain-enabled network for developers to build and publish their own decentralized applications. According to Blockstack’s website, over 165 applications have been built on the Blockstack platform. Purchasers of Blockstack’s tokens (“Stacks Tokens”) will be able to use the tokens on its platform.
Token offerings have been under increasing scrutiny, especially with respect to whether or not tokens are securities. In its offering circular disclosure, Blockstack acknowledges that the Stacks Tokens are characterized as investment contracts under the Howey test, while noting that the Stacks Tokens “will not have the rights traditionally associated with holders of debt instruments, nor…equity.” The disclosure, in its discussion about the nature of Blockstack’s decentralized network, also references the SEC’s recent guidance on evaluating whether digital assets constitute securities for purposes of the Securities Act of 1933.”
Although there have been a boatload of Reg D token offerings, this is the first one that’s cleared SEC review. Here’s a copy of the company’s preliminary offering circular. As to how long the process took, the answer is about 3 months.
It appears that the initial Form 1-A filing was made on April 11, 2019. At least one substantive amendment to the filing was made in May, but the filing history is a little convoluted, because the deal originally involved a subsidiary entity & was converted to an offering by the parent company shortly before the SEC issued its qualification order. The subsidiary ultimately withdrew its filing, but the back & forth between two filers makes it difficult to determine how much of the time between filing and qualification was attributable to the Staff’s review process.
-John Jenkins, TheCorporateCounsel.net July 24,2019
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