INX Digital Security Offering Hits First Hurdle, in the US Currently Investors in 14 States May Participate but Must Adhere to Suitability Rules

Last week in a release, INX Limited said it had topped its $7.5 million offering hurdle for the initial public offering of its digital security. INX added that it is now accepting payments in Bitcoin (BTC), Ether (ETH) and USD Coin (USDC) as of this past Monday.

In total, INX hopes to raise up to $117 million in the “first-ever SEC-registered security token IPO.”

The proceeds are expected to be utilized to launch a regulated digital asset marketplace where trading can take place in digital securities and other digital assets as well as their derivates. A bit like an exchange 2.0 including programmables and esoterics.

Of note is the fact that in the US only investors in certain states may participate in the offering due to state Blue Sky laws that mandate the issuer must comply with local rules – even though the offering has been filed with the Securities and Exchange Commission.

As of today, the offering is available in California, Colorado, Connecticut, Georgia, Hawaii, Illinois, Louisiana, Michigan, Minnesota, New York, Texas, Washington, Wisconsin and Wyoming. Investors must adhere to suitability standards with some states requiring an individual to be deemed an accredited investor.

To quote the prospectus:

“Each state has its own securities laws, often called “blue sky” laws, which (i) prohibit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker of such transaction must also be registered in that state.”

The required step highlights the fragmented approach to securities issuance in the US and the need for a more streamlined regulatory environment. The company expects approval in 40 different states by Q2 of 2021 – along with receipt of a broker-dealer license and ATS approval.

 

 

 


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