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Robert A. Schwinger Robert A. Schwinger

Cryptocurrency and token offerings present a regulatory paradox. The Securities and Exchange Commission contends that in various circumstances many cryptocurrency and token offerings constitute “securities” that must comply with securities laws. See generally R. Schwinger, “Blockchain Law: SEC Takes Aim at Digital Tokens and Smart Contracts,” 1/18/19 N.Y.L.J.; see also Framework for “Investment Contract” Analysis of Digital Assets (S.E.C. April 3, 2019). Yet the SEC has also suggested that a digital asset that was “originally offered in a securities offering” possibly could “be later sold in a manner that does not constitute an offering of a security,” and that “the analysis of whether something is a security is not static and does not strictly inhere to the instrument.” See W. Hinman, Dir., SEC Div. of Corp. Fin., Speech, Digital Asset Transactions: When Howey Met Gary (Plastic) (June 14, 2018) (contending that in present circumstances Bitcoin and Ether are not “securities”); CFTC Rel. No. 8051-19 (Oct. 10, 2019) (CFTC chairman characterizing Bitcoin and Ether as “commodities”). But how and when can a cryptocurrency or token offering transform from a security into a commodity or something else that is not subject to the securities laws?

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