Last September, the Wall Journal Journal reported that the SEC started investigating Uniswap for violation of securities regulations. Since then, Gary Gensler at the SEC has repeatedly called for more regulation of cryptocurrencies, even suggestively stating that an outright ban is “up to Congress”.
Meanwhile, in the crypto world, the focus has been on circumventing securities regulation by framing tokens to avoid the “security” designation. However, few have considered whether this new technology warrants an entirely new approach to securities regulation.
Modern securities laws begin in the 1930s on the heels of the 1929 stock market crash. Prior to the Securities Act of 1933 in the U.S., there were few laws that enforced the nature and scope of disclosures. As a result, during the bull market of the 1920s, fraud was rampant and difficult to enforce.
Since only a few institutions at the time controlled the issuance and trading of securities, the most obvious legislative response was to centralize the nature of security disclosures. Today, public securities offerings not only require accurate and complete disclosures, but they must go through a costly registration process with the SEC.
But equity-like tokens reflect an entirely new reality for two reasons:
- Issuance and distribution of tokens are almost free. This opens the door to new compensation models that are more equitable to contributors and limit…
