Skip to Content

Allison Baker Shealy quoted in Bloomberg BNA on CFTC position on Token Sales

October 17, 2017

Allison Baker Shealy, member of the White Collar, Securities Enforcement, and Government Investigations practice group at Shulman Rogers, was quoted in the October 17, 2017 Bloomberg BNA article titled, “Coin Offering ‘Tokens’ Can Be Regulated by CFTC, Agency Says.”

A note from Allison:

For the last several months, there has been a growing interest in initial coin offerings.  Initial coin offerings can provide a mechanism for growing businesses to raise much-needed capital while preserving equity.  Doing so may implicate the federal securities laws.  In order to avoid regulation as a “security” by the Securities & Exchange Commission (“SEC”), many businesses are looking at alternatives.  By creating bespoke tokens that narrowly avoid the definition of “security,” however, companies may be creating products that are within the jurisdiction of the U.S. Commodity Futures Trading Commission (“CFTC”).

The CFTC recently issued a white paper, “A CFTC Primer on Virtual Currencies.”  In the white paper, the CFTC stakes out its position that it has jurisdiction over Bitcoin and other cryptocurrencies.  But, it also points out that tokens more generally may be subject to CFTC jurisdiction. 

Depending on the unique rights and obligations associated with the non-security token, the CFTC may attempt to exercise jurisdiction generally over the token as either a commodity, future or swap.  The platforms by which such tokens are exchanged may also be subject to CFTC jurisdiction.  Several firms have already registered with the CFTC and National Futures Association (“NFA”) as swap execution facilities (“SEFs”) for the purposes of trading Bitcoin.  As the token market grows, we may see these SEFs expanding into other cryptocurrencies and tokens and new SEFs coming on board as well.

The Shulman Rogers Token Sales Team is made up of professionals with backgrounds in assisting with raising venture capital, securities regulation, and commodities and derivatives regulation to assist with all aspects of initial coin offerings and token sales.

Read the full Bloomberg BNA article here.