#SECGuidelines

U.S. Federal law requires the creation of a legal framework under which digital assets are treated as securities, under the federal securities act.

The main foundation for this is the Howey Test that determines whether an asset is associated with an investment contract. If a crypto token meets the Howey Test then the token is considered a security and has to satisfy registration, disclosure, and anti-fraud requirements under the SEC.

The SEC is fairly clear that transparency and investor protection are what they mean. Projects offering crypto tokens must provide detailed information about the structure, governance, and use of funds offered. Failure to fulfill these requirements will result in enforcement actions, including fines.

SEC also reminds investors to be choosy and note risks such as volatility, fraud and/or lack of regulation in specific areas. Companies and investors should be keeping up-to-date with SEC statements, no action letters, and Public Advisories so they are always compliant with regulations as well as avoid any issues with the law.