SEC’s investigative report sends clear message that virtual transactions using innovative technologies are subject to the application of securities laws.

Introduction -

On July 25, 2017, the US Securities and Exchange Commission (SEC) issued a Section 21(a) report (Report)1 under the Securities Exchange Act of 1934 (Exchange Act) to publish its investigation of whether The Decentralized Autonomous Organization (The DAO) violated the US federal securities laws. In the Report, the SEC, for the first time, addressed whether digital coins or tokens offered and sold in an initial coin offering (ICO) using distributed ledger technology may be securities. The Report also analyzed and demonstrated the application of federal securities laws to the particular facts and circumstances of The DAO’s offer and sale of the tokens (DAO Tokens).