Key takeaways

• Some blockchain industry participants have taken the view that all sales of pre-functional blockchain tokens are “investment contracts” subject to the federal securities laws.
• A bright-line test is not appropriate under governing law and guidance issued by the SEC. Rather, a facts and circumstances analysis should be applied to all token sales.
• Shortcomings of the bright-line test include its failure to distinguish between types of blockchain tokens, its inconsistency with principles underlying Regulation Crowdfunding and its oversimplification of blockchain technology development.