SEC's Hinman Says Some ICOs May Be Eligible for 'No-Action' Relief

Startups that conducted initial coin offerings years ago may be eligible for relief from potential enforcement actions by the U.S. Securities and Exchange Commission, an agency official said Friday.

For the last year and a half, the regulator has been filing cases against projects that raised money by selling tokens without registering them as securities.

In his opening remarks at the agency's FinTech Forum in Washington, D.C., SEC Director of Corporation Finance William Hinman said that cryptocurrencies are capable of shifting from being a potential security to very clearly not being one.

As one such example, he cited TurnKey Jets, which secured a no-action letter earlier this year, reassuring the firm that the SEC staff would not recommend taking enforcement action against it.

Hinman explained that the company's token, network and use case were all fairly mature when the letter was issued, meaning the token had a functional use case and the network was fully developed.

Notably Hinman said that even if some aspect of the project was not fully developed, the SEC may have still been willing to provide no-action relief.

"If they needed more relief on the secondary market for that token, that would not be outside the realm of a possible no-action letter," he said.

Taking this example one step further, Hinman posed a hypothetical: What if a startup with TurnKey's eventual model existed three years earlier, without a mature network or functional token?

Stephen Palley, an attorney with Anderson Kill who attended the forum, told CoinDesk that, in his view, Hinman was indicating that a token which resembled an investment contract could turn into something akin to a utility token.

In his remarks, Hinman noted that the SEC's actions to date have been conducted in accordance with its existing statutes and rules.