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Global business

Feb. 7, 2023

SEC Case is a Warning Governance Tokens May Be Securities

By Arina Shulga, Jeffrey M. Kelly


In an article published by Law360 on February 7, Nelson Mullins FinTech partners Arina Shulga and Jeff Kelly discuss new charges brought by the U.S. Securities and Exchange Commission that raise serious questions for digital assets projects. The latest complaint the SEC filed on Jan. 20, 2023 against Avraham Eisenberg reinforces its position that most tokens are securities and should be designed with care. Shulga and Kelly provide insight and analysis of the case and discuss the implications on the digital asset space.

"The SEC's enforcement action against Eisenberg is not a declaration that all governance tokens are digital asset securities," Shulga and Kelly wrote in the article. "However, it is a reminder that digital assets that are intended to be used as governance tokens – just like utility tokens – may be securities. Therefore, all DAOs that offered and sold their governance tokens to U.S. persons should analyze their internal operations and structure to determine whether they are in compliance with U.S. securities laws."