A United States federal court has ruled in favor of ICO (Initial Coin Offering) project Blockvest in its case against the US SEC (Securities and Exchange Commission).
Blockvest ICO Not Security
In his statements the chief legal officer and president for Blockchain, Mark Santori said that the SEC had filed an enforcement action against the ICO project with the allegation that it was a securities offering. The SEC had asked the court to order a freeze of the ICO project’s assets so that the case could be heard.
The ruling stated that the SEC had failed to show that Blockvest ICO was indeed a security. The court also refused to accept the labeling of the digital token as a security on the sole basis of its distribution method.
This unexpected decision that has been arrived at by the federal court in however not a complete win for the crypto sector nor a loss for the SEC. this is because, as was pointed out by the chairman of the commission Jay Clayton, most ICOs taking place in the United States are deemed as securities by the current US regulations.
Method Of Token Distribution Not Relevant
Nevertheless, the decision made by the federal court has established a precedent for the crypto sector as more ICOs could now have grounds for challenging the SEC in court, But this would only be successful in the event that the ICO projects have sufficient evidence to challenge the SEC before a legal court.
Although this decision also makes it a bit more complicated for the SEC and investors to file a lawsuit against an ICO project. A court will require the plaintiff to describe in entirety why the asset should be considered as security without roping in the method of introduction or distribution to the market. Both parties would, therefore, have to be extra cautious when considering this step.
Santori, who is the operator for the most used wallet platform in the globe, stated that the federal court had gone out of its way to declare the argument put forth by the SEC as null. The court stated that the mere act of distribution could not warrant a token to be declared a security when the token itself was not a security.
This ruling that has been arrived at by the federal court has made it harder for the SEC as well as investors to challenge the issuers of tokens in an ICO. It has also made it harder to argue that a digital token is indeed a security regardless of what the current laws state.
Major Precedence Set By Ruling
Santori added that the ruling made in the Blockvest case has established a higher standard to be met by any plaintiff seeking to challenge an ICO project in court. He said that although the SEC received what it was after when it comes to Blockvest, the precedence of the case would be one that would last adding that going after ICOs would henceforth be more complex than initially thought.