SEC Issues First-Ever No Action Letter For Digital Token Sales
The Securities and Exchange Commission, in an unprecedented move, has given its blessing to a private jet startup to sell digital tokens without SEC oversight.
In an April 3 letter, the SEC confirmed it would not take enforcement action against TurnKey Jet Inc. if the West Palm Beach, Florida company sells “tokenized” jet cards that its members can use to purchase air charter services.
The no-action letter, the first for a token sale, provides limited guidance for startup businesses that are looking to sell digital tokens without registration under the Securities Act. The SEC’s assurances did, however, come with a number of conditions, including restrictions on the profit element of the tokens, which may make the path outlined by the letter unappealing to many startup businesses.
TurnKey, which has conducted flight operations since 2012, is seeking to launch a token membership program, selling tokens to members on a private blockchain network for prepaid, on-demand air charter services. TurnKey told the SEC the token program will help reduce costs and led to greater efficiencies, and it plans to offer the program “as soon as practical.”
The commission in its letter highlighted six features of the TurnKey tokens. Among other things, it emphasized that token sales won’t be used to develop TurnKey’s platform or network, which will be operational when any tokens are sold. The agency also noted the tokens will be immediately useable, and the transfer of tokens will be restricted to TurnKey’s platform.
Further, if TurnKey offers to repurchase the tokens, it will only do so at a discount to the face value of the tokens. The Commission also noted the token is marketed in a way that emphasizes its functionality, not the potential for an increase in the market value of the token.
“Based on the facts presented, the Division will not recommend enforcement action to the Commission if…TKJ offers and sells the Tokens without registration under the Securities Act and the Exchange Act,” the commission wrote in a letter to TurnKey.