SEC Commissioners Peirce and Roisman Comment on Enforcement Action Regarding Coinschedule

SEC Commissioners Elad Roisman and Hester Peirce have joined together in issuing a public statement on Blotics, a firm formerly operating as Coinschedule, and the enforcement action by the SEC that was revealed today.

As was previously reported, the SEC has settled charges against the UK company Blotics/Coinschedule, a site that apparently promoted digital securities offerings. The settlement included a payment of $43,000 in disgorgement, plus prejudgment interest, and a penalty of $154,434. Additionally, the company has agreed to cease and desist from future violations of US securities law.

Commissioners Roisman and Peirce state that they agree with their colleagues that touting securities without disclosing the fact that you are getting paid transgresses securities law but are “disappointed that the Commission’s settlement with Coinschedule did not explain which digital assets touted by Coinschedule were securities, an omission which is symptomatic of our reluctance to provide additional guidance about how to determine whether a token is being sold as part of a securities offering or which tokens are securities.”

In the past, both Commissioners have publicly stated a desire for greater regulatory clarity in regards to digital assets – an issue that is missing from SEC Chairman Gary Gensler’s policy agenda. Gensler is an expert on blockchain technology and previously taught a class on the subject at MIT.

Roisman and Peirce state:

“There is a decided lack of clarity for market participants around the application of the securities laws to digital assets and their trading, as is evidenced by the requests each of us receives for clarity and the consistent outreach to the Commission staff for no-action and other relief.  The test laid out in SEC v. W.J. Howey Co., 328 U.S. 293 (1946), is helpful, but, often, including with respect to many digital assets, the application of the test is not crystal clear.  Although the Commission staff has provided some guidance,[1] the large number of factors and absence of weighting cut against the clarity the guidance was intended to offer.  Market participants have difficulty getting a lawyer to sign off that something is not a securities offering or does not implicate the securities laws; they also cannot get a clear answer, backed by a clear Commission-level statement, that something is a securities offering.  The industry, through efforts like the Crypto Rating Council’s framework “to consistently and objectively assess whether any given crypto asset has characteristics that make it more or less likely to be classified as a security under the U.S. federal securities laws,”[2] has sought to play a constructive role in providing clarity.  But the Commission has to engage more.”

The two Commissioners lambast the SEC’s tendency to lean heavily on regulation by enforcement as opposed to creating bright-line rules. Roisman and Peirce are of the opinion this is not the best way forward for this sector of Fintech innovation.

The statement by the two Commissioners notes that “decentralized finance is challenging financial products, intermediation, and financial markets, the only certainty we see is that people have questions about how to comply with the applicable laws and regulations.”

Roisman and Peirce ask the Commission to “let us state it clearly in a rule or in an official piece of guidance and work through the implications of that conclusion for trading platforms and market participants engaged in digital asset transactions.”

The SEC has long been vexed by the emergence of digital assets, tiptoeing around the utilization of blockchain technology for securities, as well as digital assets that offer other services or utilities. Gensler may be hoping Congress will provide legislative direction but many industry insiders believe the SEC should move forward and provide greater guidance on what is most likely a huge part of the future of financial services.


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