On Thursday, the Securities and Exchange Commission filed a civil action in San Diego Federal court over the digital assets known as “NASGO Tokens” and “Sharenode Tokens.” The action is significant because it is one of several where the SEC has asserted that the digital assets in question constitute “securities” under Federal law– and are thus under its jurisdiction. The complaint provides that “[t]his case involves the offer and sale of digital asset securities, which are investment contracts, and, thus, securities under Section 2(a)(1) of the Securities Act [15 U.S.C. § 77b] and Section 3(a)(10) of the Exchange Act [15 U.S.C. § 78c].”

In 2019, the SEC brought suit against Kik Interactive Inc., asserting that its “Kin” tokens were securities under Federal law and that Kik violated Section 5 of the Securities Act of 1933 by offering and selling the tokens without filing a registration statement. The SEC obtained a judgment prohibiting Kik from selling securities without a registration statement, and ordering it to pay a $5,000,000 fine.

As detailed here, the Federal government’s efforts to regulate digital assets are the source of some public controversy. Currently, the SEC is involved in a high-profile lawsuit with Ripple Labs over its use of the XRP cryptocurrency, and the outcome of that suit could have important ramifications for the future of Crypto.