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Can I raise money through an initial coin offering (ICO) without violating securities laws in Rhode Island? What are the requirements?
Rhode Island Securities Laws and ICOs
Rhode Island, like other states, has its own securities laws that govern the sale of securities within its borders. The Rhode Island Uniform Securities Act (RIUSA) regulates the offer and sale of securities in the state.
Initial Coin Offerings (ICOs) and Securities Laws
ICOs are a relatively new way for companies to raise capital by issuing digital tokens or coins to investors. The question of whether an ICO involves the sale of securities is a complex one that depends on the specific facts and circumstances of each case.
The U.S. Securities and Exchange Commission (SEC) has issued guidance on the application of federal securities laws to ICOs. The SEC has stated that ICOs can be securities offerings and subject to federal securities laws, including registration requirements.
Rhode Island Securities Laws and ICOs
Rhode Island has not issued specific guidance on the application of its securities laws to ICOs. However, the RIUSA defines a security broadly to include “investment contracts.” An investment contract is an investment in a common enterprise with the expectation of profits to be derived from the efforts of others.
Whether a particular ICO involves the sale of investment contracts and thus securities under the RIUSA would depend on the specific facts and circumstances of the ICO.
Requirements for Selling Securities in Rhode Island
If an ICO involves the sale of securities under the RIUSA, the issuer would need to comply with the registration and disclosure requirements of the Act.
Under the RIUSA, securities must be registered with the state unless an exemption applies. The Act provides several exemptions from registration, including exemptions for certain types of offerings and certain types of investors.
If an issuer wishes to sell securities in Rhode Island, it should consult with legal counsel to determine whether the securities must be registered and whether an exemption from registration is available.
Conclusion
The question of whether an ICO involves the sale of securities is a complex one that depends on the specific facts and circumstances of each case. If an ICO involves the sale of securities under the RIUSA, the issuer would need to comply with the registration and disclosure requirements of the Act. Issuers should consult with legal counsel to determine whether their ICO involves the sale of securities and whether they must comply with the RIUSA.
Note: This response is for informational purposes only and does not constitute legal advice. Issuers should consult with legal counsel to determine their obligations under the RIUSA.
Source(s):
Jurisdiction
Rhode Island