Securities Attorney for Crypto & Digital Assets
SEC Compliance for Cryptocurrency, Blockchain, and Digital Asset Companies
The SEC has made digital asset enforcement a priority. Cryptocurrency and blockchain companies face unique disclosure obligations around the Howey test, token classification, exchange registration, and the rapidly evolving regulatory framework. Securities counsel with enforcement experience navigates these complexities.
The Howey Test and Token Classification
The foundational question in digital asset securities law is whether a token constitutes a security under the Howey test established by the Supreme Court in 1946. The SEC has consistently applied Howey to token offerings, finding that most tokens sold to raise capital involve an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. The classification of a token as a security triggers registration requirements, disclosure obligations, and potential liability under the Securities Act and Exchange Act.
Token Offering Compliance
Companies conducting token offerings must either register the offering with the SEC or rely on a valid exemption such as Regulation D or Regulation A. The SEC has brought enforcement actions against companies that conducted unregistered token offerings, including actions resulting in disgorgement of proceeds, civil penalties, and undertakings requiring token buybacks. Securities counsel structures token offerings to comply with applicable registration or exemption requirements and ensures that offering documents accurately disclose the risks of digital asset investment.
Exchange and Platform Registration
Companies operating platforms for the trading of digital asset securities may be required to register as national securities exchanges or as broker-dealers operating alternative trading systems. The SEC has brought enforcement actions against platforms that facilitated trading in digital asset securities without proper registration. The regulatory framework for digital asset trading continues to evolve, and companies operating in this space must monitor developments in SEC guidance, rulemaking, and enforcement policy.
Frequently Asked Questions
Are cryptocurrency tokens securities?
Whether a cryptocurrency token is a security depends on the Howey test: whether there is an investment of money in a common enterprise with an expectation of profits derived primarily from the efforts of others. The SEC has taken the position that most token offerings involve securities, with limited exceptions for tokens that function as pure currencies or utilities without investment characteristics.
What SEC compliance do crypto companies need?
Crypto companies whose tokens are securities must either register the offering with the SEC or qualify for an exemption. Companies operating exchanges or trading platforms for security tokens may need to register as exchanges or alternative trading systems. Ongoing disclosure obligations depend on the registration status and the nature of the tokens.
How does the SEC view DeFi and staking?
The SEC has indicated that many DeFi protocols and staking arrangements involve the offer and sale of securities. Yield-generating mechanisms, governance tokens with profit expectations, and liquidity pool arrangements are all subject to Howey test analysis. The regulatory landscape is rapidly evolving, and companies operating in DeFi must monitor SEC guidance and enforcement actions closely.
Questions about your specific situation?
Frederick M. Lehrer is a former SEC Enforcement Attorney with over 30 years of issuer-side securities law experience. All consultations are confidential. Flat-fee engagements.