The SEC's Division of Corporation Finance issued both a "Framework for 'Investment Contract' Analysis of Digital Assets" and a no-action letter relating to a blockchain-based consumptive token on April 3, 2019.  The Framework is intended to be a plain English description of how the SEC staff applies the so-called Howey test to determine if a digital asset is a security under the federal securities laws.  It also adddresses the concept of mutability of a digital asset whereby a digital asset initially issued as a security later converts to a digital asset that is not a security because of the digital asset's use on a fully-functional platform, among other things.

The Division also issued a no-action letter to an air charter services company, TurnKey Jet, Inc.  The no-action letter permits TurnKey to issue a consumptive/utility token, subject to the criteria set out in the letter.

AirFox has taken the next step on the Path to Compliance laid out in its settlement with the SEC last year over allegations relating to the company's 2017 ICO.

A California federal district court has reversed its own order denying a preliminary injunction against a token issuer and its founder in an action arising from the offer and sale of alleged security tokens.  In a November 2018 order on the Securities Exchange Commission’s motion for a preliminary injunction, the court held that the SEC had failed to establish that the tokens were securities under the Howey test in what was seen as a setback to the agency’s claim of jurisdiction over initial coin offerings under the securities laws.  In last Thursday’s ruling, however, the court agreed with the SEC’s alternative theory that the defendants had engaged in the offer of securities in violation of Section 17(a) of the Securities Act because of false statements in the Defendant’s promotional material.  Accordingly, the court granted the SEC’s motion for reconsideration, in part, and entered a preliminary injunction.          

A federal district court in New York granted Coinbase's motion to compel arbitration by applying Second Circuit precedents from cases involving Amazon and Uber.

On January 2, 2019, the Texas Department of Banking issued revised guidance on the application of the Texas Money Services Act to virtual currency transactions.  Updating the Department’s 2014 guidance, the revised guidance offers new perspectives on the application of Texas law and regulations to certain stablecoins and Bitcoin ATMs. 

A federal court sitting in New York and applying that state’s long-arm statute lacked personal jurisdiction over a U.S. company not based in New York.  Accordingly, the court dismissed a breach of contract lawsuit brought against the company by an overseas consultant retained to assist with the company’s initial coin offering.  See ICO Servs., Ltd. v. Coinme, Inc., No. 18-cv-4276, 2018 WL 6605854 (S.D.N.Y. Dec. 17, 2018) (Schofield, J.).  The court held that the one-shot consulting agreement was not the type of on-going relationship courts consider in evaluating personal jurisdiction; and the alleged existence of New York-based customers, investors, and business activity had no alleged connection to the underlying dispute.  Coinme illustrates – in the context of an ICO – contract-related activity that will and will not support personal jurisdiction in federal court.

A purchaser of tokens in an initial coin offering adequately alleged that the tokens are securities, a district court judge has held.  See Solis v. Latium Network, Inc., No. 18-10255 (SDW) (D.N.J. Dec. 10, 2018).  Accordingly, the court denied a motion to dismiss a putative class action alleging that a blockchain-based company and its co-founders violated Sections 12 and 15 of the Securities Act of 1933.  The decision breaks no new ground, but adds to a growing body of district court decisions rejecting, at the pleading stage, the argument that tokens are not “securities” subject to the federal securities laws.  The issue has not been addressed by a federal court of appeals or definitive guidance from U.S. regulators.