Three Reasons Why Every Security Token Offering Should Consider U.S. Investors

Before diving in, let me just say that I’m finally starting to see why people still do these blog things in a social media-driven world. ? For me, it’s a handy way to collect those few posts and comments I make that don’t completely suck on other social media platforms but would otherwise get lost in all the noise, like this one…

USA … USA …

If you were a member of the weird social/financial/political cult construct known as “the crypto space” in 2017/2018 and were unfortunate enough to find yourself a citizen, resident or otherwise domiciled in the United States, you may have heard (or even sounded) the following sort of alarm:

Holy sh*tweasels, Cletus! It’s high time we pack up our blockchain/crypto project and vamoose on out of this here Oppressive Regulatory Regime before they round up all of us Free Thinkers and ferry us off to the death camps! We better skedaddle! PRONTO!

Okay, so maybe nobody really said anything quite so stupid … nah, never mind that, I’m sure they did …

Although without question an unwarranted exaggeration, you can’t completely blame someone for being concerned when bombarded with other forms of unwarranted exaggeration, such as…

Uh oh Cletus … ?

Thankfully, if you check your calendar, you will note that this is 2019, the “Official Year of the STO” (or DSO or whatever), so the logic behind AVOID UNITED STATES AT ALL COSTS no longer applies. Here are my top three reasons why instead of fearing SEC Chairman Jay Clayton (pictured above and below), anyone wanting to raise funds via a security token offering really oughta give the guy a second chance. You never know what might happen… ?

What a difference a year makes! ?

1. Rule of Law

Although the US is often accused by crypto space denizens of being an oppressive regulatory environment with confusing laws about securities, I would suggest that once you acknowledge that your token is a security, the rules are very clear. More importantly, you can assume that the rules will be applied fairly.

There are of course many “light touch” jurisdictions – a term that I personally find rather creepy, especially considering the type of person who usually says it ? – that provide greater freedom for entrepreneurs to operate, especially when it comes to raising money for their venture. But whether those regulations are applied fairly or whether you have to provide a little “something something” (?) to the administrators/enforcers of those regulations to benefit from the “light touch” (?) is another matter entirely.

2. Investor Acclimation

Once you acknowledge that your token is a security, there are multiple restrictions that need to be placed on it before it can be offered and sold to US investors (although the US is not the only jurisdiction that has restrictions). But the lack of liquidity that everyone is so worried about really isn’t that big of a deal in the US. That’s because investors in the US are used to dealing with things like holding period restrictions as a result of being–you guessed it–in the US! ? So they are much more likely to invest in your otherwise “oppressively illiquid” security token.

This actually leads to another question that I will have to save for a future post … but if the whole point of calling your token a “utility token” was to avoid US law, once you acknowledge that in fact what you are offering is a “security token,” why would you NOT want to offer it in the US? Isn’t that kind of the whole point? Did I miss something? Anywho … for a future post I guess.

3. I Love You, Mary Jane…

For me, the market for “legal” marijuana in the US is perhaps the strongest argument for why security token issuers should look to the US for investors. That’s because no matter how restrictive or complicated you believe the current legal and regulatory framework in the US is right now for security tokens, it is nothing compared to the complete clusterf*ck surrounding the legal status of marijuana in the US, which has to be the most convoluted in the entire world, and that’s even before you account for the following:

The possession, use and sale of marijuana is illegal in the entire United States according to federal law…

Totally illegal. Totally. And yet, in 2016, the US accounted for an estimated $7.06 billion of a $9.3 billion global legal marijuana market size. And investors here continue to dump money into it. Even though it is technically illegal everywhere in the US. Let that sink in for a moment, please. And then tell me again why you don’t want to offer your security tokens to US investors? #justsaying

In Conclusion

This is neither legal or financial advice, but if you want access to the largest and most sophisticated capital markets in the world (i.e., you want to raise the most money for your project), doesn’t it make sense to at least consider offering your security token to US investors? Feel free to leave your comments below! ?