US SEC clamps down on cryptocurrency airdrops and bounty campaigns
Token airdrops emerged as ICOs (Initial Coin Offerings) came under regulatory scrutiny. But the good days seem to be over for the cryptocurrency projects in the US as a recent ruling by the Securities and Exchange Commission (SEC) may clamp down this method of practices.
Digital asset startup Tomahawk was fined $30,000 and a lifetime ban for allegedly using 'fraudulent market techniques' to push its fundraising, according to the SEC filing dated August 14.
The cease and desist order was made public. The crypto community observed that SEC considered 'free tokens' as securities.
Tomahawk's token issuance has reportedly violated sections 5(a) and 5(c) of the Securities Act because the company sold TOM tokens without a registered statement. The court noted Tomahawk's free tokens and bounty campaigns were "designed to foster the company’s economic interests”.
It is generally assumed that crypto entrepreneurs were offering airdrops and bounty campaigns unaffected by security laws considering the absence of regulations. But the filing reads quite the opposite.
“On July 27, 2017, in response to the Commission’s DAO Report, Tomahawk published an article online titled ‘Tomahawkcoin ICO Adjusting to the SEC, by Legally Avoiding Them.’ That article incorrectly stated that Tomahawk’s ICO would be exempt from securities regulation because the Company was abandoning its plan to be quoted on the OTC market.”
According to some people in the crypto space, SEC is concerned about the token distribution and not cryptocurrencies in general.
Blockchain-based ride-sharing app Juno, which offers digital shares to riders using the platform, was asked by SEC to give rewards as cash-based incentives instead.
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