Altcoin News: SEC Released the First “Letter of Inaction Guarantee” in Relation to the Startup Tokens

April 5, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

The US Securities and Exchange Commission (SEC) issued the first “No-Action” to TurnKey Jet, Inc. According to the document, startup tokens are not securities.

Regulatory approval will continue as long as the company uses tokens under certain conditions:

The tools generated by the token cannot be used to develop a company’s platform (for example, an application);

Tokens can be used immediately after release;

TKJ tokens will always be sold at a fixed price of one US dollar;

Tokens can only be used for charter flights (a startup specializes in business travel);

Redemption of tokens will be made only at a discount;

TurnKey Jet will not position tokens as a potentially profitable investment.

TurnKey Jet is a charter and air taxi service based in the United States and operating in West Palm Beach since 2012. A letter from the SEC on April 3 was sent in response to a request from TurnKey Jet attorney James P. Curry. The letter of inaction guarantee was signed by Jonathan A. Ingram from the SEC Corporate Finance Division.

In the letter, the SEC requires that tokens also not be transmitted: “TKJ will restrict transfers of Tokens to TKJ Wallets only, and not to wallets external to the Platform.” A person familiar with the news told CoinDesk,

“Many in the industry have asked how the commission might give some relief in a case where folks are trying to bring this technology into a real-life use case, and the no-action letter simply says the division will not recommend an enforcement action.”

Industry experts also rushed to express their position on the SEC letter. Cryptocurrency and finance lawyer Joshua Ashley Klayman of Klayman LLC said: “It is the sort of guidance that the market needs and has been looking for.” Kleiman noted that the SEC letter is based on the opinion of a TurnKey lawyer.

Other legal experts did not find this case remarkable, given the many limitations that the SEC imposes.

“The issue most coin offerings undertaken to date will face is that they possess many elements common to products that, in the past, courts have found to be security-like,” Preston Byrne, a lawyer at Byrne & Storm, P.C. said. “Although the no-action letter is a new development, I don’t see it creating a viable issuance pathway within the United States for the crypto-token products most enterprises are hoping to build.”

The head of the SEC last year stated that the doors of the SEC are open for cryptocurrency startups, especially for those who produce their own tokens. To this end, the agency launched a new Fintech-focused business unit with a clear intention to build links with ICO startups. At that time, industry experts noted that start-ups should get so-called “letters with a guarantee of inaction” or “No-Action” letters, in which the SEC confirms that it will not oppose the company because of its business model.

In mid-March, it also became known that FinHub SEC will hold meetings with cryptocurrency start-ups in several US states. The purpose of this trip is to enable individuals or teams to meet with agency staff to ask questions or get an opinion on the release of tokens or other issues related to the competence of the regulator.

Author: Marko Vidrih