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Fnord666 writes:

On Tuesday, the SEC announced that tokens that are sold off in crowdfunding events known as Initial Coin Offerings (or ICOs) in ethereum may be considered securities in some circumstances, and are therefore subject to US securities law. Tokens are digital assets that investors may purchase during ICOs, and they usually have some sort of bespoke functionality—in some cases, voting rights or profit dividends—in the app the investor is buying into.

[...] As for which tokens constitute securities, the SEC concluded that the tokens people bought in 2016 to participate in the DAO—a crowd-directed investment fund that imploded after being hacked that same year—were securities. The SEC notes in its report on the DAO that token-holders purchased the tokens with the expectation of profit "derived from the managerial efforts of others," which qualified them as securities.

Since the people behind the DAO didn't register its token sale with the SEC, it was technically illegal, but the commission stated that it has decided not to bring charges against them.

Going forward, according to the SEC, companies that are issuing tokens as part of an ICO (if they are considered securities) need to register with the commission. This will force companies to comply with regulations that ask them to reveal their financial position and the identities of their management. The SEC also concluded that online exchanges where tokens are bought and traded may have to register as security exchanges.

[...] Needless to say, things are about to get very interesting on the lawless digital frontier.

Source: vice.com

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