How Can State Virtual Currency Laws Impact Initial Coin Offerings?

July 25, 2019

In this segment, Vincent Russo, Partner, Robbins Ross Alloy Belinfante Littlefield LLC, discusses how token issuers can use state legislation to complete an Initial Coin Offering (ICO) and how that might impact federal securities regulations.


Dara Albright: It's interesting because we're starting to see a lot of companies, well some companies, that are in the token space, token offering space, filing to do a reg, and more on a national level. And the SEC is yet to qualify. We probably are there taking some time doing that. And I wonder, and maybe it would be interesting to get your insights on this. Do you think similar to what Ground Floor had done, we’re testing out the interstate crowdfunding exemption in Georgia? Do you expect to see companies doing something similar? They may want to test out the waters on an interstate level because we're starting to see some interesting legislation being introduced on a state level, too. As far as the token offerings, they are a concern. Do you see a similar path happening there?

Vincent Russo: I surely see a similar opportunity for states to be on the front end and to implement laws or possibly regulations that will allow blockchain companies or companies that are in the crypto space. That might attract them to those states to help develop their economies around it. And if they are successful, they can build out their businesses. I think Colorado, Miami and Arizona have all passed legislation in one form or another to address some of the issues around securities and tokens as well as their money transmitter laws.

I see at some point the SEC or Congress will control or pass their laws. I'll do what needs to be done to allow an ICO to work through the regulatory process and get approval. But in the meantime, these companies can use state law. My understanding from speaking with the state of Georgia is that there's a company last year that used states to invest in Georgia’s exemption to do an interstate ICO, a company called Graham Marie Media. And so it is possible states have just to be able to be prepared to move quickly to address any unforeseen issues that come up. Because you want to avoid the negative media around that, which could happen, of course. But you also want to create an environment that allows your business and residents to thrive. So I have no doubt that there will be states that will be on the forefront and ultimately benefit by bringing in good companies that would have otherwise been in another state.

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