Arizona State Legislature Debates Measure Defining When ICOs Are Securities
Arizona’s state legislature is debating a new measure which aims to define exactly when initial coin offerings (ICOs) should be regulated under the same legal framework as financial securities.
Arizona state representative Jeff Weninger introduced a measure to the state legislature to amend the current definitions of the state’s legal framework for regulating securities, adding terms to the existing law governing securities transactions to feature sections on “virtual currencies” and when “virtual currency offerings,” or ICOs, should be considered securities.
Weninger’s proposed amendments state that any “virtual coin offering” issuer “elects to treat” the ICO “as a security” when the ICO meets the definition of a security as laid out in the state law. This amendment would mean that nearly all ICOs conducted on the territory of Arizona would be treated as securities offerings, with a few notable exceptions.
Exceptions for when ICOs will not be treated as securities would be made when the ICO “has not been marketed by the issuer as an investment” and when the ICO is offered as a Software-as-a-Service (SaaS). Specifically, if the purchaser of the tokens from an ICO is granted a “right to use, contribute to the development of or license the use of a platform using blockchain technology,” then this type of ICO would also not be defined as a security under the proposed amendment.
Weninger’s proposed amendments define a "virtual coin" as "a digital representation of value that can be digitally traded and that functions as a medium of exchange, unit of account and store of value."
The proposed amendments to Arizona state securities law comes in the wake of comments by US Securities and Exchange Commission (SEC) Chairman Jay Clayton, who said that “every ICO [he] has ever seen is a security” and that he hopes to regulate ICOs “like we regulate securities offerings” during a testimony to the US Senate Banking, Housing and Urban Affairs Committee last Tuesday.
State representative Weninger has high hopes for Arizona to become a US leader in blockchain technology. On February 8, the Arizona state legislature passed a bill introduced by Weninger into law which would allow Arizona residents to pay their state taxes using Bitcoin and other cryptocurrency.