A year has passed since the SEC issued its groundbreaking DAO Report, in which the SEC, for the first time, unambiguously asserted its regulatory authority over initial coin offerings (“ICOs”)—in which investors typically invest in a blockchain-based enterprise in exchange for digital tokens—and ICO-issued digital tokens.  

In doing so, the SEC classified ICO tokens as securities subject to existing securities laws. Since the SEC issued the DAO report, it has aggressively stepped up its public warnings against, and regulation of, these novel fundraising vehicles. ICO proponents have responded in varying ways, whether by exploring creative products that they believe do not trigger SEC regulation, seeking SEC approval or challenging the SEC’s position in court.  Now, in United States v. Zaslavskiy, the U.S. District Court for the Eastern District of New York will decide the first direct challenge to the SEC’s classification of ICOs as securities offerings subject to SEC regulation.

The SEC’s Foray into Cryptocurrency Regulation