The SEC and ‘No-Action’ Relief for Some ICOs


The Security and Exchange Commission has been issuing lawsuits against many companies/foundations that issued tokens during ICOs in the 2017/2018 ICO craze as well as some older crypto related companies/foundations.

However, for the first time ever, the SEC has issued a ‘No-Action’ letter that essentially states that the SEC will not pursue legal action against the company that issued the ICO.

The lucky corporation is TurnKey Jets, a private jet startup company that began in 2012. Since it operates in the transportation/aviation industry it is a highly regulated company.

The utility of their token was to allow customers to transfer funds outside of banking hours. Additionally, the distribution and operation of their tokens were sufficiently advanced to not consider them securities of the corporation.

There are also a number of stipulations that the SEC has outlined for TurnKey Jets regarding the token:

  • No funds from the ICO can be used to develop its platform, network and applications.
  • Tokens will be immediately available to purchase air charter services when they are sold.
  • There are 6 stipulations in total in the report.

Bill Hinman from the SEC has been reported saying “decentralization is important, but it’s not the only factor.”

The SEC issued a 13-page document called “Framework for ‘Investment Contract’ Analysis of Digital Assets” where the SEC outlines a detailed explanation of how the Howey Test is being applied to digital assets and how a foundation can avoid being classified as a security.

There are 12 characteristics that help to avoid being classified as a security. Two important points are:

  1. The distributed ledger network and digital asset are fully developed and operational.
  2. The Holders of the digital asset are immediately able to use it for its intended functionality on the network, particularly where there are built-in incentives to do so.

Even though it has only been one corporation, this is still huge news.

The chances that this random company “TurnKey Jets” is able to get a No-Action Letter bodes well for ICOs such as XRP, and Ethereum, which are least likely to be classified as securities (Bitcoin has already been classified as a non-security).

Ethereum has thousands of use cases, is decentralized, has many different companies building on top of it. It was even hinted by the SEC, but not explicitly/officially stated, that Ethereum is unlikely a security.

XRP is highly decentralized and able to be used today within its network. If a company like TurnKey Jets is able to secure a No-Action Letter, then I am confident that Ripple/XRP can obtain the same.

Regarding the rest of the ICOs and cryptocurrencies out there it is a tough call. The cryptos that I think are likely safe are: DAI, BNB, EOS, ADA, Litecoin… I’m not as well versed on some of the others so I cannot say on the others.

Overall this is great news for the cryptocurrency industry!

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Author: Markshire Crypto

Millennial cryptocurrency investor, researcher, and writer. Medical professional, avid reader, proud nerd, and intellectual. Founder of Markshire Crypto. Mark has been into cryptocurrency since 2017, following the industry daily and creating content.

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