Danger—Roadblocks Ahead: Lessons Learned From Early Crypto Token Securities Class Actions
Plaintiffs are increasingly focused on pleading claims specifically to surmount challenges and token developers and platforms are increasingly focused on reducing their ties to the United States.
August 29, 2022 at 10:00 AM
10 minute read
In the past two years, plaintiffs from around the world have filed dozens of class-action lawsuits in U.S. federal and state courts contending that crypto token developers and platforms have sold unregistered securities in violation of the Securities Act of 1933. Defendants in these cases have successfully relied on applications of an array of Supreme Court and appellate court precedents to crypto trading to defeat claims at the pleading stage, generally before addressing the Howey test for whether a token is a security to which the Securities Act applies. SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). Recent decisions demonstrate that defendants' positions are especially strong—and generally insurmountable—if the crypto token developer or platform on which the plaintiff purchased is based abroad. But even cases that have stronger ties to the United States are subject to important limitations under the federal securities laws. Recognizing this, plaintiffs are increasingly focused on pleading claims specifically to surmount these challenges and token developers and platforms are increasingly focused on reducing their ties to the United States.
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