Proposal for a State Uniform Token Regulation Act

Abstract

We propose a state regulatory regime that would grant an exemption from the state securities laws to tokens that meet criteria that are not consistent with a traditional security and provide token-specific, robust disclosures to consumers. Our regime maintains appropriate anti-fraud jurisdiction and is more protective of consumers than existing Securities and Exchange Act regulations. It also provides much needed certainty for token projects, some of which are likely not securities under federal or state law. Finally, the existence of an alternative and superior regulatory regime is a factor that weighs against finding that a digital asset is a security under federal securities laws. The existence of such a structure may heighten the SEC’s burden in bringing an enforcement action, and mitigate against a court finding that a digital asset is a security in close cases.