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Tyler Kirk and Amy Caiazza are associates, and Robert Rosenblum is a partner, at Wilson Sonsini Goodrich & Rosati (WSGR). 

This article is not legal advice and should not be relied upon as such; it only reflects the views of the authors and not those of WSGR or any other attorney there.

There has, apparently, been significant shock and surprise over recent reports that the Securities and Exchange Commission (SEC) has issued a large number of subpoenas to initial coin offering (ICO) issuers and to ICO gatekeepers who may have been involved in token transactions that potentially did not comply with the federal securities laws.

To a large extent, this shock and surprise is shocking and surprising.

The SEC has been as clear as it knows how to be that virtually all tokens (and simple agreements for future tokens, or SAFTs) are securities for purposes of the federal securities laws.

It is true that the SEC’s initial forays into the crypto space were comparatively gentle. Instead of bringing an enforcement action in the DAO case, the SEC instead opted to issue a report.  The SEC also simply told Munchee Inc. to stop its unregistered token offering, and did not bring any further actions against it.

Some participants in the crypto community apparently mistook these actions as suggesting that the SEC would continue to be gentle, perhaps by essentially “grandfathering” pre-existing token sales, regardless of their lack of compliance with the federal securities laws, or by pursuing only the most egregious violations of federal securities laws, such as those involving token issuers engaging in garden-variety fraud.

That was an unfortunate misreading of the clear signals that the SEC intended to send.

Unsubtle hints

The SEC Chairman Jay Clayton’s repeated statements that virtually all token offerings are securities, for example, should have been a clear signal to the market about what was likely to happen. The fact that the SEC had created a cryptocurrency task force headed by members of its Division of Enforcement should have

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