The issuance of digital tokens in exchange for services rather than money still can constitute an offering of securities, according to findings recently made by the Securities and Exchange Commission in a settled enforcement action, In the Matter of Tomahawk Exploration LLC and David Thompson Laurance, Securities Act Rel. No. 33-10530, Exchange Act Rel. No. 34-83839, Admin. Proc. File No. 3-18641 (Aug. 14, 2018). Tomahawk Exploration LLC offered and distributed digital assets in the form of tokens called “Tomahawkcoins,” or “TOM tokens” through an initial coin offering (“ICO“). The company offered a “Bounty Program,” whereby Tomahawk dedicated 200,000 TOM tokens to pay third parties, offering between 10 and 4,000 TOM tokens in exchange for the following activities:

• marketing efforts;
• making requests to list TOM tokens on token trading platforms;
• promoting TOM tokens on blogs and online forums such as Twitter or Facebook;
• creating professional picture file designs;
• YouTube videos, other promotional materials; and
• online promotional efforts that targeted potential investors and directed them to Tomahawk’s offering materials.

Read the full Orrick-published article here.