U.S. judge classifies ICO token as a security

28 Jun, 2018
by Matthew Kim
U.S. judge classifies ICO token as a security

A Florida district court recently published a report that includes an analysis on the categorization of cryptocurrency tokens as securities. The report was written for a legal case regarding the Floyd Mayweather-endorsed Centra Tech crypto startup.

In the report, Andrea Simonton, a magistrate judge of the Southern District of Florida, argues that the Centra’s CTR token is a security because the token satisfies all three pillars of the definition of an “investment contract”.  To Simonton, the CTR token undoubtedly was an investment asset through which investors could benefit or suffer from the success or failure of the founding company.

In her own words, Andrea Simonton said:

"Because the success of Centra Tech and the Centra Debit Card, CTR Tokens, and cBay that it purported to develop was entirely dependent on the efforts and actions of the Defendants, the third prong is satisfied. Therefore, the offering of Centra Tokens was an investment contract under the Securities Act, such that the Defendants sold or offered to sell securities by virtue of the Centra Tech ICO."

Although this specific court case will not set in stone the classification of ICO tokens as securities, the decision could still be momentous for the future of ICOs. The decision by the federal trial judge could potentially set a binding precedent for future cases. According to one lawyer, the power of reference that previous decisions give to future cases is what lawyers call “persuasive authority”.

The cryptocurrency community might want to keep an eye on this trial.

Centra_6_25 by CoinDesk on Scribd


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