The Incoming Wave of ICO Regulation

As you may know, securities classification analysis in the U.S. today primarily revolves around the Securities Act of 1933 and the SEC v. W.J. Howey Co. Supreme Court case of 1946.

The Securities Act of 1933 was established to require issuers to disclose certain pieces of information to potential investors prior to any public securities offering.

71 years after the citrus groves, the SEC used the Howey Test to determine that the tokens sold in The DAO ICO were securities.

The DAO ICO was an unregistered securities offering.

In their conclusion that DAO tokens were securities, the SEC took no enforcement action against the ICO issuer.

Hinman purposefully "Put aside" ether's ICO and likely believes ether may have been a security at the time of the initial offer.

Statements from SEC staff are not the same as official reports from the SEC. Hinman speaking at a public Yahoo Finance conference is not the same as a report from the full SEC. If Hinman thinks like his colleagues though, ethereum's ICO may very likely be seen as an unregistered securities offering.

If ethereum's ICO was an unregistered securities offering, the list of ERC20 ICOs and tokens built upon its blockchain looks something like a minefield on top of a house of cards.

Liquid crypto asset price movements are highly correlated and many early stage crypto investments share exposure to risk around securities regulation and ethereum as its base blockchain.

Least risky: asset has had no sales - e.g., BTC, XMR, DCR. More risky: asset had a private ICO or sales - e.g., FIL, ZEC, XRP. Most risky: asset had a public ICO - e.g., ETH, EOS, SNT. To minimize risk to future securities regulation, minimize overall exposure to early stage illiquid deals without clear registration and liquid assets in bucket 3.