ICO Law: Interested in Securing Regulation A+ Exemption for Your ICO?

August 8, 2019

The SEC has blessed token investments. Earlier this month, the United States Securities and Exchange Commission qualified two crypto-token offerings under Regulation A+. Would your startup qualify?

What is Regulation A+?

Since 1933, the SEC has required companies offering financial securities to register or qualify for an exemption under Regulation A.

Typically, only very wealthy parties could satisfy either requirement.

Fast forward to 2012 when legislators ratified the Jumpstart Our Business Startups Jobs Act. Lawmakers restructured and expanded exemptions so smaller companies could access capital more easily. The new standards, adopted in 2015, are commonly referred to as Regulation A+ or Reg A+.

Without Reg A+, only accredited investors could participate in fundraising rounds. Now, thanks to the expanded exemptions, companies can entertain a larger pool of potential investors.

Keep in mind, however, that Reg A+ exemptions are only for companies based in the United States and Canada. Other restrictions also apply, so it’s best to work with a cryptocurrency lawyer when prepping to qualify for Regulation A.

What’s the Difference between Tier 1 and Tier 2?

Both token companies that qualified for exemptions opted for Tier 2 instead of Tier 1 classification under Regulation A.

Tier 1 status allows companies to offer securities up to $20 million in 12 months. Tier 2 ups that amount to $50 million. However, Tier 2 companies must comply with more reporting requirements throughout the year. Plus, with Tier 2, there is “a limitation on the amount of securities non-accredited investors can purchase … of no more than 10 percent of the greater of the investor’s annual income or net worth.”

Two Blockchain Companies Qualified for Regulation A+ Exemption

Blockstack PBC and the Props Project are the two lucky blockchain startups to secure Regulation A+ exemptions. The status affords the freedom to raise funds from unaccredited sources. Both companies said they worked closely with the SEC to ensure they met qualification standards.

Blockstack: Crypto Regulation A+ Qualified

Company Name: Blockstack PBC

Headquartered: New York

Token: Stacks

Approved for Regulation A+ Exemption: July 2019

Face of the Company: Muneeb Ali, co-found and CEO

Company Summary: Blockstack is a decentralized computing network that partners with affiliates to develop peer-to-peer, open-source applications using blockchain technology. Currently, 165 programs use the platform.

Company Funding Summary: Currently, non-U.S. residents own 40 million tokens acquired through a private placement exempted under Regulation S. As a result of the company’s Reg A+ qualification, it has started a $28 million global cash offering round that includes “a small number of geographical restrictions.”

Props Project: Crypto Regulation A+ Qualified

Company Name: Props Project

Headquartered: New York

Token: Props

Approved for Regulation A+ Exemption: July 2019

Face of the Company: Adi Sideman

Company Summary: The Props Project was conceived as a platform to reward content creators. According to its website: “Props is an open-source project intended to tokenize the digital economy.” At the time of this writing, YouNow, a live streaming video platform that advertises 40 million users, is the company’s biggest draw.

Company Funding Summary: In a statement, Props explained that receiving an exemption under Reg A+ allows it “to grant Props to both accredited and unaccredited Props Network users in the United States and around the world.”

Connect with an ICO Lawyer

Gordon Law Group works with blockchain companies and startups that want to use ICOs as a fundraising tool. We’ll make sure you’re compliant and keep the IRS and SEC at bay.

We also defend individuals and businesses who’ve been contacted by the IRS or SEC about cryptocurrency or ICO investigations or lawsuits.

Our track record is solid. Moreover, we have the tools and team to ensure the best possible outcome.

Get in touch today. Let’s talk about how we can help you.

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