Colony Pulls ICO as it Fears Token will be Deemed a Security by SEC

Colony and its forthcoming Initial Coin Offering has been shelved, at least for the time being.

In an interesting blog post regarding the Colony token sale, co-founder Jack du Rose shares an intriguing internal discussion as to why he and his team decided to pull the plug on their ICO days before it was scheduled to launch.

Colony is a company that is striving to redefine the nature of the firm by reducing the friction between transactions and labor. The white paper is available here. There is a shortened explanation here, but in brief, Colony seeks to be a network based on the Ethereum blockchain for task management, decision making, ownership and more. One of the co-founders previously helped to launch Zirtual, the virtual assistant platform providing some unique perspective in distributed work environments.

So back to the debate between whether to do the ICO or not, Colony was given legal advice that the SEC would be inclined to label their Token a security because the Colony Network is not yet live. This is due to the possibility that before their app (or dApp) is live the digital coin, CLNY, is speculative in nature. While the creators are certain the token is a utility coin after the network is launched they were not so certain while the platform was still being developed.

If you are considering an ICO and want to better understand some of the gray surrounding the determination as to whether or not an ICO could be regulated this blog post is a good read. This polemic highlights some of the questions being asked by attorneys in the space – right now.

The good thing about the Colony situation is that once their network is live then they will move forward with issuing CLNY.

All this being said, the SEC has been slow to go in hot on questionable offerings that may be Utility Tokens or maybe not. They have their hands full going after outright frauds. Just read about the RECoin saga here.