United States: It's The Fall That's Gonna Kill You

Like Butch Cassidy and the Sundance Kid gloriously diving off a cliff, Telegram is about to take the fall and is trying to take the SEC with it. However, Telegram and supporters are making a number of important arguments in the case about the regulation of digital assets. The Blockchain Association recently filed an amicus brief¹ in the U.S. Court of Appeals for the Second Circuit Court in the Telegram case. In the brief, the association argues the SEC's limited regulatory guidance and public statements encouraged the adoption of the Simple Agreement for Future Tokens (SAFT). While well known for hating the SAFT concept, the editors of the BitBlog were happy to see the Blockchain Association echo concerns originally raised by Polsinelli FinTech and Regulation attorneys several years ago that the SEC has failed to engage in formal rulemaking to address the regulation of digital assets².

Finally, while originally heralded by some members of the FinTech bar, the famous 2018 speech by the Director of the SEC Division of Corporation Finance, William Hinman, was also raised by the Blockchain Association as opening the door to SAFTs. The association argued the Hinman speech encouraged the use of SAFTs because it "emphasize[d] that the analysis of whether something is a security is not static and does not strictly inhere to the instrument [and that he] believe[d] a token once offered in a security offering can, depending on the circumstances, later be offered in a non-securities transaction³.

Footnotes

1. Blockchain Association's Amicus Brief

2. Rulemaking petition regarding the regulation of digital assets and blockchain technology

3. William Hinman, Digital Asset Transactions: When Howey Met Gary (Plastic), June 14, 2018

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