Mutability in Crypto and Recent Moves by the SEC by Scott Kupor (a16z)

The recent series of SEC actions against Block.one, Nebulus, and Telegram offer some insight into the government agency’s stance on cryptocurrencies. Scott Kupor, managing partner at Andreessen Horowitz, states the settlements reached with Block.one and Siacoin are a clear indication that unregistered public token sales before network launch violate U.S. securities laws. But the SEC did not require either network to cease operations, leading to the assumption EOS ($EOS) and Siacon ($SC) reached a sufficient level of decentralization and their native tokens were no longer deemed securities.

This introduces the concept of token mutability: “A pre-network security may change to a post-network non-security if the network is sufficiently decentralized” such that investors or users are no longer relying on the coordinated efforts of a single company. While promising, the precise level of decentralization considered acceptable remains undefined and is currently at the “sole discretion of the SEC.”

The Telegram filing is more curious in that $GRAMs were only sold to accredited investors. However, the SEC supports its motion to halt the issuance of GRAMs by stating that the token has no utility since the network is not yet operational and that the Telegram founders still control the Telegram Foundation and allocation of investor funds. The question that remains is: How will TON (or any pre-launch network) achieve an acceptable level of decentralization and native token utility if the project is never allowed to launch?