Reaction from Exempt Token Offer Broker-Dealer on SEC Comments: Ether NOT a Security

In an announcement at Yahoo Finance’s All Market Summit: Crypto in San Francisco on Thursday, the U.S. Securities and Exchange Commission Director of Corporate Finance William Hinman said that the commission would not be classifying ether or bitcoin as securities.

Reaction from Jim Dowd, CFA, CPA, founder and CEO of North Capital.

Three Things:

  1. The original sale of ETH was not an illegal sale of securities, which lays to rest any concern about the original transfer or secondary transfers that have occurred since.  This question had been weighing on the market, especially in regard to ETH.
  2. Future transfers of ETH or BTC do not require compliance with SEC rules on secondary securities trading / transfers; if ETH and BTC are not securities, they are currencies or property, which have less prescriptive rules on transfers.
  3. These comments provide a pathway for other decentralized crypto currencies or crypt utility tokens, whose attributes are like BTC or ETH, to establish that they are not securities, based on the facts and circumstances.  The SEC has always said that whether a digital asset is a security depends on the facts and circumstances, but there has never been a dispositive set of facts and circumstances to reference.

What does this mean for investors?

Overall this should be better for investors.

What does it mean from a broker-dealer perspective?   

“If we are not subject to securities rules with respect to ETH, it paves the way for the use of smart contracts to settle securities token transactions. It also provides some guidance on how we should be viewing BTC and ETH as a regulated entity that is in the business of securities dealing.”

North Capital provides comprehensive solutions to transact exempt token offerings, supporting ICO issuers and advisors, funding platforms, and other broker-dealers. Through North Capital Investment Technology and its registered broker-dealer North Capital Private Securities Corp., the firm also provides technology-enabled escrow, streamlined investor vetting (including KYC/AML and accredited investor verifications) and a wide range of other broker-dealer services. For more information, visit