top of page
  • Writer's pictureMichael Bacina Binds into Settlement with SEC

Updated: May 2, which conducted a multi-year token sale for the EOS blockchain raising billions of dollars, has announced that it has reached a settlement on a "no-admissions" basis with the U.S. Securities and Exchange Commission (SEC) under which it will pay a USD$24M fine (which is US$6M less than paid for

This is a marked departure from earlier SEC enforcement actions where ICO offerors inside the USA were repaying funds to participants in the offer.

The SEC reported in their press release that under the Howey test the tokens sold were securities for the purposes of US law and that by selling the tokens to US residents, had conducted an unregistered security offering.

The SEC also cited their DAO Report in the press release, saying:

A purchaser in the offering of ERC-20 Tokens would have had a reasonable expectation of obtaining a future profit based upon’s efforts

The SEC highlighted in particular that:

In the course of marketing the EOSIO software, encouraged U.S. purchasers to rely on the founders’ expertise and vision to secure the widespread adoption of the EOSIO software and anticipated launch of one or more EOSIO blockchains had made efforts to geoblock US residents (who still managed to take part in the offer) and was at pains to note in an offer made to the SEC to settle the matter that the company was acting with good governance and there was no suggestion of fraud. In that offer, which is a feature of the US securities regime, in which offered to pay a fine. The SEC has agreed to the offer to end the matter.

The press release from is far more upbeat, noting:

The SEC has simultaneously granted an important waiver so that will not be subject to certain ongoing restrictions that would usually apply with settlements of this type.

The waiver in this case relates to a prohibition which would normally prevent or it's affiliates from conducting Reg A or Reg D exempt offerings of securities in the US. Given the push to use Voice and tokens within that offering, the waiver is important.

In plain english, this means that can conduct future offerings of tokens if they are compliant with US law. This waiver is appears important to, featuring prominently in the formal request for waiver submitted by Cooley, lawyers for

The ongoing SEC action against token issuers is important given the size of the US financial system, and particularly given that other common law jurisdictions have taken a different path to the US, exempting so-called "exchange tokens" or "utility tokens" in many cases from being securities. Australia is yet to have clear guidance on token categories or where the line is drawn (other than the obvious line of financial return).


bottom of page