Just the Beginning? Tezos Lawsuits Could Open Doors for ICO Litigation
November 19, 2017 |
David Silver Quote:
ICO investors are following the shaky strategy of “blind gut and luck” investing. Their investments are more about faith than about facts. While it’s good to have faith in life, it’s even better to have facts when investing.
While startups launching initial coin offerings (ICOs) may be all too aware they’re working in a legal gray area, that might not be enough to stop lawsuits that could test their legality.
At issue is that, although the U.S. agency tasked with enforcing securities law – the U.S. Securities and Exchange Commission (SEC) – has voiced concerns about cryptocurrency tokens (even labeling one a security), it has yet to announce much in the way of formal rules.
But while the SEC would have bearing on criminal lawsuits, courts hearing civil suits aren’t necessarily constrained or dictated by the SEC’s lack of a formal position on ICOs. Instead, these courts would make decisions based on their prior rulings and the specific circumstances of a case.
But what would that decision be? That question hinges on another: What makes an ICO a security or something else? Although attempts to interpret existing law have been made, it’s unclear even to those in the know .
Now, following the news that Tezos, one of the largest most visible startups yet to use the ICO funding mechanism, has been hit with two lawsuits , it seems lawyers and litigators are lining up to press the issue, potentially with the aim of a payday in mind.
Sara Hanks, CEO of CrowdCheck, a consultancy that assists entrepreneurs and investors with crowdfunding campaigns, told CoinDesk:
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