The SEC crypto proposal rests on a term no one can define
Davis Polk partner Joe Hall authored “The SEC crypto proposal rests on a term no one can define” in Law360. In the article, Joe discusses how the concept of “essential managerial efforts” being included in the framework of the SEC’s Regulation Crypto Assets could present problems in an otherwise strong proposal.
He points out that this phrase has not been made a dependable rule to guide prospective conduct and yet it is part of every point of the framework, including entry, disclosure, reporting, exit and third-party reliance.
Instead, Joe proposes, “The commission should regulate the developer’s own capital raise under Regulation Crypto Assets’ startup or fundraising exemption, subject to the prescribed disclosure and applicable anti-fraud laws, but without requiring an admission that an investment contract exists.”