The SEC announced today (Sept. 11, 2018) a pair of enforcement actions, the first of their kind, both in the digital securities or “coin” space. In 2017, the SEC issued its DAO Report, cautioning that offering and selling digital coins or tokens required compliance with the federal security laws, thereby asserting its enforcement jurisdiction over the burgeoning digital coin and token market. The first action charged an entity and its principals with acting as unregistered broker dealers in connection with the buying and selling of digital coins. The second action charged an investment company registration violation against a hedge fund manager based on its investments in digital assets.
The SEC with these enforcement actions makes clear it will treat digital coins and tokens no differently from traditional securities. Parties contemplating the issuance of digital coins or tokens need to ensure strict compliance with securities laws as the SEC increases its scrutiny and enforcement of these offerings.