On April 3, 2019, the U.S. Securities and Exchange Commission published a framework aimed at assisting in determining whether a digital asset is a security. Alongside the Framework, the SEC also published a no-action letter for TurnKey Jet, Inc., the first ever no-action letter for a digital asset enterprise.

This is an important development for any parties interested in developing, selling or investing in digital assets, as it is the most robust analysis yet published on how the SEC sees these assets and finally provides concrete information on how to avoid an SEC enforcement action in an industry that has recently suffered from regulatory uncertainty. The Framework and the conditions the SEC notes in advising TurnKey that it will not recommend an enforcement action, however, lead to the conclusion that, in the eyes of the SEC, digital assets cannot be used to raise capital without implicating U.S. securities laws. Furthermore, many of the Framework’s considerations go beyond the traditional test for determining whether an asset is a security. A thorough understanding of the SEC’s position as reflected in these documents is essential for any party interested in dealing with digital assets.

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