A path for consumer tokens – the SEC and CFTC analysis

The demand for funding of innovative technologies has challenged financial supervisors around the globe to formulate where digital assets sit within their regulatory frameworks. Stephen P Wink, David L Concannon and Yvette D Valdez outline how consumer token transactions in the United States intersect with securities and commodities laws.

Stephen P Wink (stephen.wink@lw.com), David L Concannon (david.concannon@lw.com) and Yvette D Valdez (yvette.valdez@lw.com) are partners in the New York office of law firm Latham & Watkins. Miles P Jennings (miles.jennings@lw.com) is an associate in Latham’s Silicon Valley office, while Cameron R Kates (cameron.kates@lw.com) and J Ashley Weeks (ashley.weeks@lw.com) are associates in the New York office.

Increasing regulatory scrutiny of digital assets has raised the question of whether the issuance and sale of ‘consumer’ or ‘utility’ tokens – those designed for use by consumers on a distributed platform and not intended to constitute securities – will ever be possible in the United States. Recent statements of senior officials at the US Securities and Exchange Commission (the SEC) indicate a viable regulatory pathway may exist for issuing tokens that are not ‘securities’ subject to SEC oversight. However, issuers and intermediaries seeking to navigate the securities pathway must also remain mindful of commodities law considerations to avoid regulatory enforcement.