Are DAO tokens securities?

Are DAO tokens securities?

Answer:

Yes, according to US law, DAO tokens are securities. In a July 2017 ruling the Security and Exchanges Commission, classified The DAO’s tokens after its ICO (Initial Coin Offering) as securities and thus subject to the laws and regulations that apply for this class of financial asset. More recently in 2021 the SEC prevented a DAO registered in Wyoming from registering two tokens as securities.

The regulations that affect DAOs and other crypto assets are still unclear but many countries including the US are working towards building regulations.

On July 25, 2017, the Securities and Exchange Commission (SEC) issued a long-awaited (by securities lawyers like myself, at least) ruling on initial coin (token) offerings, specifically a token offering launched in May 2016 by an organization called The DAO (decentralized autonomous organization). The SEC’s decision regarding the DAO is not surprising from a traditional securities law perspective, although their analysis and supporting statements carry significant insights into where this innovation vs. regulation battle is headed.