Earlier in the year the SEC classified ICO tokens as securities and requires regulation to be enforced on the same standards as other securities. One of the requirements the SEC asks of ICO projects or exchanges trading ICO tokens is to register with the US regulator. SEC director, Brett Redfearn, has reported to CNBC that the self-reporting from requested companies has had underwhelming results.
“We’re underwhelmed by the enthusiasm coming within the regulatory structure right now. There are a number of exchanges that are trading ICOs that I would think that we would see more registrations.”
-Brett Redfearn, SEC Director of Division of Trading and Markets
The SEC believes that offering and trading ICO tokens should be under the regulatory board of the SEC and uses the “Howey Test” to classify whether something is a security. The “Howey Test” comes from a 1946 U.S. Supreme Court case that classifies a security as an investment of money in a common enterprise, in which the investor expects profits primarily from others’ efforts.
For the time being, the SEC will not enact regulatory actions against companies who don’t comply with registration but will continue to strengthen their regulatory stance and plan on issuing more definitive statements with in the next coming months. No timeline has been given for when the SEC will start cracking down, but they are said to already be watching a number of US based and international exchanges that have not completed the necessary registration procedure but are servicing US customers.