While courts last year recognized that under existing law virtual currencies based on blockchain platforms could qualify as “securities,” see United States v. Zaslavskiy, No. 17 CR 647, 2018 WL 4346339 (E.D.N.Y. Sept. 11, 2018), and/or “commodities,” see CFTC v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018), concern has been growing that these regulatory structures may not be ideal for regulating all digital tokens in all situations. Lawmakers across the country are thus now exploring possible revisions to existing laws and regulations to deal more appropriately with this new asset class.

Background: Securities vs. ‘Utility Tokens’

As noted in the January “Blockchain Law” column, the SEC has brought increasing numbers of proceedings in recent months in connection with cryptocurrencies and other digital tokens on the basis that they qualified as “securities” under federal law because they satisfy the “Howey test” for “investment contracts” under SEC v. W.J. Howey Co., 328 U.S. 293 (1946), and its progeny.

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