SEC Director Thinks ICOs Can Be Exempt from Securities Laws

SEC Director of Corporate Finance William Hinman has doubled down on earlier remarks that ICO-financed projects could be exempted from securities laws if they are decentralized enough.

Last June, Hinman said he believed Ethereum is not a security as the network is highly decentralized. He is now suggesting that the same goes with other ICOs, concentrating on the TurnKey Jet example.

TurnKey Jet was the first to obtain a no-action letter from the SEC. Meaning, the SEC does not consider the TurnKey Jet token sale in violation of securities law. Although it seems to be a clear no-action case—the token cannot be stored on external wallets or sold on secondary markets and the network is already established—it does not have to be the case.

Hinman questioned what would have happened say TurnKey had come to the Commission when its network was not yet completely decentralized. He said it would have been considered security.

It suggests the idea that ICO issuers who generated funds in recent years do not have to fear the SEC’s wrath so long as they can prove that their network already satisfies the decentralization standard. However, Hinman’s opinions don’t necessarily reflect those of the SEC.

That could apply in the case of Kik-backed digital currency Kin. Kik CEO Ted Livingston previously maintained that the coin is not a security, saying it would fight any enforcement action from the SEC. But the firm would need to show that Kik no longer controls the currency, which seems to still be the case.

Kin Ecosystem VP of product Alex Frenkel stated in December that the Kin Foundation is still holding a significant percentage of Kin. According to him, the plan is to move towards a DAO-based governance system though it has not been created yet.

Recently, Kik formed an alliance and warchest named “Defend Crypto” to fight against the SEC considering ICOs as securities. However, several other coins might be sitting pretty for as long as they can pass the “TurnKey Test.”