Late last week, the SEC issued a no-action letter widely hailed as its first on a blockchain-based digital token for private jet services. In its TurnKey Jet letter, the Commission Staff indicated it would not recommend enforcement action over the operation of a private, permissioned, centralized blockchain network and smart-contract infrastructure for clearing and payment using a utility-token effectively functioning as a pre-paid jet card (or streetcar token).
See TurnKey Jet, Inc. (Apr. 3, 2019), here: https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219-2a1.htm
And the request, here: https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219-2a1-incoming.pdf
CoinDesk reports that the no-action process took almost a year, despite the most recent request letter’s April 2, 2019 date: https://www.coindesk.com/secs-first-crypto-no-action-letter-took-11-months-to-secure
The Commission also issued an expanded exposition of its standard Howey evaluation of digital-asset offerings, “Framework for ‘Investment Contract’ Analysis of Digital Assets,” here: https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets
The expanded guidance isn’t so much new as it is a more-granular view of how various operational characteristics of digital-asset offerings fit the Howey analysis (or don’t). Perhaps more significantly, the guidance lists “Other Relevant Considerations” setting out characteristics that militate against a finding that a crypto-coin is a security.
But the Commission long ago took a no-action position on a token plan under which intermediaries purchased tokens for 3% face value for secondary distribution at par with each USD retail purchase. The token holders then could redeem tokens at 2.5% face value, with the token system operator retaining 0.5% for operating the system. The SEC issued that Kash Koin no-action letter 43 years ago, relying on its trading-stamp program no-action position from 1958. See Kash Koin Enterprises, Inc., 1976 SEC No-Act LEXIS 2312 (Sept. 30, 1976), citing Release No. 33-3890 (Jan. 25, 1958). Kash Koin: An old-school token issue.
The technology is new; the analysis, not so much.
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