This document discusses different structures and legal considerations for token sales. It covers: - Onshore and offshore structures for issuing tokens, with onshore being issued by a company in its home jurisdiction and offshore issued in a different jurisdiction. - How securities laws and the Howey test are applied to determine if a token is a security, looking at factors like usability, expectation of profit from others' efforts, and secondary markets. - If a token is deemed a security, it may be subject to regulations like Regulation Crowdfunding, Regulation A+, or Regulation S. - Other legal issues to consider regarding tokens include whether they constitute currencies, loans, Ponzi schemes, or fraud, as well

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COLLECTIVE
INVESTMENT
SCHEMES
CROWD
FUNDIN
SECURITIE
OFFERING
“CHARACTERISING” ATOKEN SALE

3. TOKEN SALES – STRUCTURE
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- Two big picture options: onshore structure and an offshore structure
- Onshore Structure: Tokens are issued by a company within the jurisdiction in which it is
based
- Offshore Structure: Tokens are issued in a jurisdiction by a company incorporated in a
different jurisdiction that is usually more crypto friendly
- Crypto “friendly” countries
- Countries that have banned cryptocurrencies
- Countries that are crypto “neutral”

4. TOKEN SALES – THE LAW
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- Global nature of offering
- The applicability of securities law
- What is a security?
- The Substantive Approach: American Law
- Securities and Exchange Commission v. W. J. Howey Co
- Test for determining what constitutes an ”investment contract”, and hence,
what constitutes a “security” under the Securities Act

5. TOKEN SALES – THE LAW
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How is the Howey Test applied to Crypto-currencies?
- (1) whether the tokens are immediately usable,
- (2) the buyers' expectation whether the tokens will rise in value,
- (3) whether an expected rise in value will be derived from the efforts of others,
- (4) whether there will be a secondary market for the tokens,
- (5) how the ICO offering is advertised, and
- (6) how the proceeds of the ICO are to be used
- And, if it is a security?
- Reg. Crowdfunding
- Reg A+
- Reg S

6. TOKEN SALES – THE LAW
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- The Prescriptive Approach: Most common law countries
- Defines “shares” as ‘an interest of a shareholder in the company measured by a sum of
money, for the purposes of liability in the first place, and of interest in the second, but also
consisting of a series of mutual covenants entered into by all the shareholders in
accordance with (now sec33(1) of the Companies Act 2006).’ (UK Law)
- Similar approach in India, HK, Cayman, Australia and Singapore.

7. TOKEN SALES – THE LAW
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Crypto-Licences?
- The curious case of Estonia, Japan and Switzerland
Regulatory Sandboxes?
- The UK, Canada and Germany

8. TOKEN SALES – THE LAW
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- Other Securities Law Issues
- Is it a mutual fund?
- Is it a loan?
And, if it is not a ‘Security”, what is it?
- is it currency / (il)legal tender?
- Is it a Ponzi scam?
- Is it fraud?
- Are there any protections offered under consumer protection laws?

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TOKEN SALES -
DOCUMENTATION
WHITEPAPE
TERMS OF
TOKEN
SALES
TERMS AND
CONDITION
OFTHE
PLATFORM

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