Token Taxonomy Act of 2019: The Digital Token Exclusion

A Brief Summary of §§ 2(a) & 2(b) of H.R. 2411

Background

On April 9, 2019, H.R. 2411, a bill widely referred to as “The Token Taxonomy Act,” was reintroduced by U.S. Representative Warren Davidson of Ohio. This was the second iteration of the bill, which had previously been introduced on December 20, 2018.

Looks like Bill is taking a little trip to Washington, D.C. — let’s hope he makes it safely!

Scope of this Article

The 2019 version of the bill proposes changes to several U.S. securities laws and regulations as well as the taxable treatment of virtual currency under the Internal Revenue Code. This article focuses solely on the bill’s exclusion of “digital token” from the definition of a “security” under the Securities Act of 1933, and is really not much more than an annotated version of the bill, with attempts to simplify and clarify where practicable.

I hope to provide analysis as well as present and discuss other parts of the bill in subsequent articles, but this is designed to be a starting point for discussion among lawyers and non-lawyers in the crypto and blockchain space as I believe this bill will have an enormous impact if passed in its current form. I have included the entirety of §§ 2(a) & 2(b) of the Act at the end of the article for reference.