
SEC v Tomahawk: “Free” ICO tokens constitute a sale of securities - davidgerard
https://davidgerard.co.uk/blockchain/2018/08/14/sec-v-tomahawk-free-ico-tokens-constitute-a-sale-of-securities/
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CryptoPunk
The act in question was not an "airdrop". It was a bounty (payment to parties
in exchange for services rendered).

The tweets in response to the original tweet further criticize the
interpretation that this means airdrops are securities:

[https://twitter.com/cablecarcapital/status/10294388113007534...](https://twitter.com/cablecarcapital/status/1029438811300753408?s=19)

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davidgerard
[author here]

yes, that's a good thread.

yeah, it's not nailed down that airdrops would count as sales.

But (a) that ICOs are securities in the US (b) that "gift" securities for
promotional purposes, were obvious and not news at all to outside observers
really very early on (which is also a theme of that Twitter thread); it was
only crypto people who thought playing semantic games made any difference.

As I say in the article, I’d be amazed if the SEC wasn’t looking into nailing
that one down too - because airdrops are done as a promotional tool.

Put it this way - good evidence against airdrops counting as a sale would be
if airdrop-like distribution of non-crypto quite-definitely-securities had
been clearly found not to be sales. If you know of any such, that'd be super-
useful.

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CryptoPunk
Yea the SEC administrative order includes quite an Orwellian redefinition of
"sale", that attempts to expand its scope far beyond what people commonly
understand the word to mean:

>Rather, a “gift” of a security is a “sale” within the meaning of the
Securities Act when the donor receives some real benefit.

and

>Tomahawk received value in exchange for the bounty distributions, in the form
of online marketing including the promotion of the ICO on blogs and other
online forums. Tomahawk also received value in the creation of a public
trading market for its securities. See Sierra Brokerage, 608 F. Supp. 2d at
940 (“where a ‘gift’ disperses corporate ownership and thereby helps to create
a public trading market it is treated as a sale”).

The latter, "Tomahawk also received value in the creation of a public trading
market for its securities", justification, is alarming. It appears the SEC's
definition of a sale is any issuance that benefits the issuer by any means,
which is inconsistent with what 'sale' means in standard English, which is an
exchange of a good/service for money. The SEC is going beyond just defining a
barter exchange (the "bounty" provided in exchange for promotional services
rendered) a sales transaction, to considering even none-exchanges as sales
transactions.

By the SEC's unbound definition, a charitable issuance of securities that
brings goodwill and thus value to a brand would be a sale.

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davidgerard
> quite an Orwellian redefinition of "sale"

but a definition that has cites to where they won in court with said argument,
which I think does back them up on this one in any practical sense. Disputing
this would require a win in court against said precedent, or a new law.

~~~
CryptoPunk
Yes, it's very well possible that they have a strong legal case - I haven't
looked into the precedent they cited.

The problem I'm alluding to the administrative order's definition of a 'sale'
\- whether that definition stems from statute or precedent, or one they
constructed just for this case - which doesn't conform to the common
definition of the term, leading to a situation where the public is given a
naive impression of the scope of the law that is not in accordance with its
real scope. This mis-impression is the Orwellian aspect of it.

