A roadmap for the Eastman Kodak Company’s much anticipated initial coin offering (ICO) of its KodakCoin token has been released, but the document fails to provide a determination for the legal status of KodakCoin.
WENN Digital, the company set to launch the KodakCoin under license from Kodak, released a ‘light paper’ to investors that provided additional details on plans for KodakCoin. However, the document did not take a clear position on whether or not KodakCoin would be classified as a security token or a utility token, a determination which would have far-reaching implications for the planned ICO.
In the so-called light paper, WENN Digital said that although the company “intends for the KODAKCoin issuable under the SAFTs to be classified as utility tokens rather than securities tokens, WENN Digital will be required to make a final determination of the tokens’ status as one or the other prior to the time that the KODAKCoin are issued.”
SAFT is an acronym for “simple agreements for future tokens,” which are used by some startups conducting ICOs as investment contracts.
The US Securities and Exchange Commission (SEC) has taken an active approach to regulating ICOs in 2018, proposing new rules that require ICOs to register with the SEC as securities offerings, but are exempt if they meet certain criteria. One notable exemption to this rule are ‘utility tokens,’ or tokens which grant users future access to a company’s product or service and which, if properly structured, are not classified as an investment.
WENN Digital’s light paper acknowledged that KodakCoin’s desired status as a utility token has not been confirmed by the SEC and that the regulator may determine that KodakCoin is in fact a security token. If this determination were to happen, it would force the company to register the KodakCoin ICO with the SEC as a securities offering, complicating the already beleaguered ICO.
Kodak announced its ICO on January 9, promising a blockchain-based product that will enable photographers to protect the rights to their work. The company hopes to sell 100 million KodakCoins under SAFT agreements to accredited investors.