Reuben Bramanathan has already done the hard work of creating a Blockchain Token Securities Law Framework.
The Framework has been prepared in collaboration with Coin Center, Union Square Ventures and Consensys. It is open source and free to use.
Reuben is a Blockchain Lawyer and Product Counsel @coinbase. Thanks Reuben and those who sponsored and backed it.
It is open source, so I have reproduced it below. It is a huge step forward in the mission of creating a Self Regulatory Code of Conduct for ITO ICO.
A Securities Law Framework for Blockchain Tokens
A blockchain token is a digital token created on a blockchain as part of a decentralized software
There are many different types of blockchain tokens, each with varying characteristics and uses. Some blockchain tokens, like Bitcoin, function as a digital currency. Others can represent a right to tangible assets like gold or real estate.
Blockchain tokens can also be used in new protocols and networks to create distributed applications. These tokens are sometimes also referred to as App Coins or Protocol Tokens. These types of tokens represent the next phase of innovation in blockchain technology, and the potential for new types of business models that are decentralized - for example, cloud computing without Amazon, social networks without Facebook, or online marketplaces without eBay.
However, there are a number of difficult legal questions surrounding blockchain tokens. For example, some tokens, depending on their features, may be subject to US federal or state securities laws. This would mean, among other things, that it is illegal to offer them for sale to US residents except by registration or exemption. Similar rules apply in many other countries.
The Framework focuses on US federal securities law because these laws pose the biggest risk for crowdsales of blockchain tokens. In many jurisdictions, there may also be issues under anti-money laundering laws and general consumer protection laws, as well as specific laws depending on what the token actually does.
This document is a general guide for developers and users of tokens.
Part 1 is designed to estimate how likely a particular token is to be a security under US federal securities law.
Part 2 sets out some best practices for crowdsales.
Part 3 is a detailed securities law analysis by Debevoise & Plimpton LLP.
As more fully set forth in the component parts of this document, the document does not constitute legal advice and should not be relied on by any person. Developers and users should consult their own counsel in connection with their initiatives in this area.
You should not rely on this Framework as legal advice. It is designed for general informational purposes only, as a guide to certain of the conceptual considerations associated with the narrow issues it addresses. You should seek advice from your own counsel, who is familiar with the particular facts and circumstances of what you intend and can give you tailored advice. This Framework is provided “as is” with no representations, warranties or obligations to update, although we reserve the right to modify or change this Framework from time to time. No attorney-client relationship or privilege is created, nor is this intended to be attorney advertising in any jurisdiction.
December 7, 2016