,,,Initial Coin Offerings as Investment Contracts: Are Blockchain Utility Tokens Securities?

Abstract

Current American jurisprudence on digital assets (e.g. Bitcoin) is woefully underdeveloped due to the rapid development and adoption of blockchain technology—creating an intellectual gold rush with agencies, attorneys, and techies all shouting their positions (on securities laws, particularly) into the wind. This Comment enters the ether in an endeavor to counter prevailing federal agency narratives about the role of securities laws regarding “ICOs”—introducing the reader to the most pertinent features of blockchain technology and Initial Coin Offerings, introducing the U.S. Securities and Exchange Commission’s (the “SEC”) current regulatory approach, and applying the seminal Howey is-it-a-security test. Initial Coin Offerings (ICOs) are the online sale of cryptographic assets used to launch a cryptocurrency, finance a blockchain application development project, or sell access to features of a blockchain application.1 ICOs, also called Token Sales or Token Generation Events, are financing mechanisms popularly viewed as a hybrid of a Wall Street Initial Public Offering of Stock (IPO),2 venture capital,3 and crowdfunding (like Kickstarter).4 ICOs can be used to facilitate a broad range of