[EGreg]

For the statutory law, I have found after many years of experience that it’s very worth it to take 8-16 hours and read the actual statutes. Such as the Securities and Exchange Act, Reg S and the recent JOBS Act changes should be required reading for startup CEOs raising money. Sure, you won’t get all the case law nor the later additions, but you’ll understand what the overall framework is. Then you can discuss specifics with a lawyer. Also if you’re a startup, some lawyers may take an advisor equity in exchange for 4 hours a month or so.

What led me to this conclusion is that after years and years of asking random questions while lawyers set everything up, I kept discovering new things about the exchange act until I just read it.

There are standard docs these days on docracy and other sites for most things. The JOBS Act has simplified fundraising quite a bit for startups. Especially if you use rule 506b for friends and family, you can later choose to go the VC route OR use rule 506c or Reg CF for access to liquidity using public solicitation.

EXPERIMENTAL SECTION:

A final note about security tokens. An obscure but very useful fact is that non-equity securities do not have a limit on how many investors you can have, before you must become a publicly reporting company. And selling to NON US investors they may be able to trade your securities after 40 days. However, their local jurisdiction may have other ideas, and this is one of those areas where you can either try to abide by all local laws in theory, or in practice take advantage of the fact that, in early stages, governments of foreign jurisdictions aren’t going to waste too much political capital on long-arm actions to go after US corporations because they failed to prevent an overseas investor from selling their securities early.

I am not a lawyer!!

[zekevermillion]

Hey Greg. Securities law is an area where a lot of lawyers have limited focus. A typical startup lawyer (such as myself, before retiring) may be knowledgeable about common exemptions for private offerings but less so when it comes to the larger universe of securities. The SEC's position on p2p assets is best put in this write-up by the corporate finance head William Hinman [1]. The SEC is not concerned so much with the details of how a token works, but rather in how it is offered on a case-by-case basis. Keep in mind that in the US, we do not focus on the security but on the offering.

Also a token that is offered in a securities offering may later be traded in a way that is not an offering of securities, for example if the protocol becomes sufficiently decentralized at a later date.

For myself, I would steer well clear of anything that looks at all like a securities offering of p2p assets b/c I like to keep my life as simple as possible. But I realize that is not advice everyone wants to follow.

The SEC is not the biggest threat here -- as you can see with projects such as Tezos, the bigger threat is the private securities bar which will go after any token offering that leaves a deep pocket. Even if the SEC and state regulators aren't concerned with your offering, the private bar will go after anything that plausibly is an illegal securities offering, provided that the pot of money is worthwhile target. This is exactly the kind of hazard that p2p protocols are perfect for avoiding, so why bother making a new p2p protocol that is vulernable to this kind of risk???

I'm a retired lawyer and this is NOT legal advice for anyone. :))

[1] https://www.sec.gov/news/speech/speech-hinman-061418