When it Comes to Token Offerings and Digital Assets, Does the SEC Need New Legislation from Congress or Can it Work Within its Existing Regulatory Framework?

July 31, 2019

In this segment, Dina Ellis Rochkind, Of Counsel, Paul Hastings, discusses some of the obstacles that have stood in the way of approving a Reg A+ Token Offering; what issuers and their providers can do to make regulators to increase the comfort level of regulators and how Congress could be helpful in this effort.

Note: this video was recorded 6 weeks prior to the SEC qualifying Blockstack’s Reg A+ token offering, the nation’s first Reg A+ token offering.


Dara Albright: What can we or issuers do in order to get the SEC or regulators more comfortable so that they can start qualifying some of these as either ETFs or as Reg A+ tokenize offerings?

Dina Ellis Rochind: There are thousands of investors who are holding tokens that are questionable. I think the SEC is not comfortable moving forward and creating any more exposure to retail investors until it resolves those underlying issues. In terms of moving forward with a Reg A+, you're going to have to see that remediation with investors who are holding questionable tokens and then going forward on a Reg A+. It seems that you're going to need to do high-level discussions within the SEC.

When I say high level, people who are the commissioners themselves or at the very senior levels of the SEC. You also may need to talk to your members of Congress to put pressure on the SEC. Other folks who are interested in doing a Reg A+ could also work together to have Congress put pressure on the SEC to give an answer, because what's going on now is a lot of players in the space are not getting any kind of answer. They're not getting a yes or no. And at the very least, issuers should be getting some kind of response from the SEC.

DA: Do we need new legislation being introduced, or are we okay with what we have? What is your sense there?

DER: I think a Reg A+ there's a lot to work with there. Every two years, the SEC has the opportunity to increase the limit when it comes to Reg A+. And there's no limit on what they could lift it. Last time, Jay Clayton sided with the two Democrats at the SEC and did not lift the limit. So I think this next time the limit should be lifted. I also think it's a shame that you don't have preemption on Tier One Regular Pluses. It's a very difficult lift on Capitol Hill to get blue sky regulations.

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