Securities and Exchange Commission (SEC) Chair Paul S. Atkins outlined the SEC’s approach to Project Crypto during a speech today. The SEC’s approach mirrors the recently published draft Senate legislation, in that a token sold under an investment contract is not presumed to be a security. A key aspect of the SEC’s approach will be to separate the nature of the asset or the token taxonomy from the investment contract.
Much of the litigation around crypto assets has been tied to investment contracts under the Howey test. Atkins highlighted that the legal case involved the Howey orange groves, where the investor profits were to come from Howey harvesting oranges. Today that land hosts golf resorts and residential neighborhoods as an illustration of how an investment contract can evolve.
“Commissioner Peirce has rightly observed that while a project’s token launch might initially involve an investment contract, those promises may not remain forever. Networks mature. Code is shipped. Control disperses. The issuer’s role diminishes or disappears. At some point, purchasers are no longer relying on the issuer’s essential managerial efforts, and most tokens now trade without any reasonable expectation that a particular team is still at the helm,” said Atkins.
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