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Can I raise money through an initial coin offering (ICO) without violating securities laws in Alaska? What are the requirements?

Requirements for Raising Money through an ICO in Alaska

If you are planning to raise money through an initial coin offering (ICO) in Alaska, you must comply with the securities laws to avoid violating them. The Alaska Securities Act regulates the offer and sale of securities in Alaska [4]. ICOs may be considered securities offerings, and therefore subject to securities laws, depending on the facts and circumstances of each case [1].

To determine whether your ICO is subject to securities laws, you should consider the Howey test, which is used by the Securities and Exchange Commission (SEC) to determine whether a transaction involves an investment contract [1]. Under the Howey test, a transaction involves an investment contract if it involves an investment of money in a common enterprise with the expectation of profits solely from the efforts of others [1].

If your ICO meets the definition of an investment contract, it must be registered with the Alaska Division of Banking and Securities or qualify for an exemption from registration [4]. The Alaska Securities Act provides several exemptions from registration, including the intrastate offering exemption, the private placement exemption, and the crowdfunding exemption [4].

To qualify for the intrastate offering exemption, you must meet the following requirements [4]:

  • The offer and sale of securities must be made only to residents of Alaska;
  • The issuer must be organized under the laws of Alaska and have its principal place of business in Alaska;
  • The issuer must not use general solicitation or advertising to offer or sell the securities; and
  • The securities must not be resold to non-Alaska residents for a period of nine months after the sale.

To qualify for the private placement exemption, you must meet the following requirements [4]:

  • The offer and sale of securities must be made only to accredited investors or no more than 35 non-accredited investors;
  • The issuer must not use general solicitation or advertising to offer or sell the securities; and
  • The securities must be restricted securities, meaning they cannot be resold to the public without registration or an exemption from registration.

To qualify for the crowdfunding exemption, you must meet the following requirements [4]:

  • The offer and sale of securities must be made through a registered crowdfunding portal;
  • The issuer must comply with the disclosure requirements for crowdfunding offerings;
  • The aggregate amount of securities sold to all investors in the offering cannot exceed $5 million in a 12-month period; and
  • The amount sold to any individual investor cannot exceed certain limits based on the investor’s income and net worth.

In summary, if you are planning to raise money through an ICO in Alaska, you must comply with the securities laws and determine whether your ICO meets the definition of an investment contract. If it does, you must register the offering or qualify for an exemption from registration. The Alaska Securities Act provides several exemptions from registration, including the intrastate offering exemption, the private placement exemption, and the crowdfunding exemption.

Source(s):
Jurisdiction

Alaska