The DAO Report: SEC's Landmark Ruling on Crypto Assets and Trading Platforms

BACKGROUND

II. BACKGROUND ON CRYPTO ASSETS AND CRYPTO TRADING PLATFORMS

E. The DAO Report

78. On July 25, 2017, the SEC issued the Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (the “DAO Report”), advising “those who would use … distributed ledger or blockchain-enabled means for capital raising[] to take appropriate steps to ensure compliance with the U.S. federal securities laws,” and finding that the offerings of certain crypto assets identified therein were offerings of securities. 79. The DAO Report also advised that “any entity or person engaging in the activities of an exchange must register as a national securities exchange or operate pursuant to an exemption from such registration” and “stress[ed] the obligation to comply with the registration provisions of the federal securities laws with respect to products and platforms involving emerging technologies and new investor interfaces.” The DAO Report also found that the trading platforms at issue therein “provided users with an electronic system that matched orders from multiple parties to buy and sell [certain crypto asset securities] for execution based on nondiscretionary methods” and therefore “appear to have satisfied the criteria” for being an exchange under the Exchange Act.