After long wait, The Securities and Exchange Commission (SEC) finally came up with its statement on ICO/token sale. An investigation was conducted in the New York office by members of the SEC's Distributed Ledger Technology Working Group (DLTWG) supervised by Lara Shalov Mehraban.
The SEC's Report of Investigation found that tokens offered and sold by a "virtual" organization known as "The DAO" were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt.
With a press release on July 25, 2017, The Securities and Exchange Commission (SEC) issued an investigative report cautioning market participants that offers and sales of digital assets by "virtual" organizations are subject to the requirements of the federal securities laws.
Whether a particular investment transaction involves the offer or sale of a security – regardless of the terminology or technology used – will depend on the facts and circumstances, including the economic realities of the transaction.
"The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets," said Stephanie Avakian, Co-Director of the SEC's Enforcement Division.
SEC Chairman Jay Clayton said that, "The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us. We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected."
The SEC's Office of Investor Education and Advocacy today also issued an investor bulletin educating investors about ICOs. It is not wrong to say that SEC is not against cryptocurrency. Even after the rejection of Bitcoin ETF, SEC seek public opinion about Ethereum ETF in May 2017.