“The SEC argues that nearly every token should be registered under U.S. securities laws,” commented a16z crypto’s general counsel Miles Jennings.
The crypto arm of venture capital firm Andreessen Horowitz (a16z crypto) is warning startup co-founders to stay out of the United States market when conducting token sales.
“Public sales of equity and tokens outside the U.S. and private sales of equity and tokens can all be done in a compliant manner without being subject to the registration requirements of securities laws,” wrote Miles Jenning, a16z crypto’s general counsel and head of decentralization. “Public sales in the U.S. are an own-goal, avoid at all costs.”
Jennings explained that initial coin offerings (ICOs) often met all conditions of the U.S. Securities and Exchange Commission (SEC) ’s Howey test for determining whether a financial asset should be classified as a security. The Howey test is defined as “a contract, scheme or transaction in which there is an investment of money in a common enterprise with a reasonable expectation of profits based on the managerial or entrepreneurial efforts of others.”
