SEC Issues 2nd No-Action Letter For Digital Token Sales
The Securities and Exchange Commission recently issued a no-action letter to Pocketful of Quarters, allowing the gaming startup to sell digital tokens in an unregistered offering.
The Division of Corporation Finance in a letter dated July 25 assured PoQ it would not recommend that the SEC take enforcement action should the company offer and sell digital tokens, called Quarters, without registering them as securities.
PoQ is a Connecticut-based company founded by a middle school student and his father, G. Michael Weiksner. It has proposed selling Quarters as a type of universal gaming token, to be used by players across different online video games.
In its no-action letter the Division of Corporation Finance, or Corp Finance, highlighted several factors that were considered in its decision. They were:
PoQ will not use any funds from Quarters sales to build the Quarters Platform, which has been fully developed and will be fully functional and operational immediately upon its launch and before any of the Quarters are sold;the Quarters will be immediately usable for their intended purpose (gaming) at the time they are sold;
PoQ will implement technological and contractual provisions governing the Quarters and the Quarters Platform that restrict the transfer of Quarters to PoQ or to wallets on the Quarters Platform;
gamers will only be able to transfer Quarters from their Quarters Hot Wallets for gameplay to addresses of Developers with Approved Accounts or to PoQ in connection with participation in e-sports tournaments;
only Developers and Influencers with Approved Accounts will be capable of exchanging Quarters for ETH at pre-determined exchange rates by transferring their Quarters to the Quarters Smart Contract;
to create an Approved Account, Developers and Influencers will be subject to KYC / AML checks at account initiation as well as on an ongoing basis;
Quarters will be made continuously available to gamers in unlimited quantities at a fixed price;
there will be a correlation between the purchase price of Quarters and the market price of accessing and interacting with Participating Games; and
PoQ will market and sell Quarters to gamers solely for consumptive use as a means of accessing and interacting with Participating Games.
This marks the second no-action letter the SEC has issued to a company with respect to a digital token sale. In April, the SEC gave similar assurances to TurnKey with respect to “tokenized” jet cards that TurnKey members can use to purchase air charter services.
The SEC also recently approved a $28 million digital token offering under Regulation A+.