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SEC Hammer Affects Cryptocurrency Airdrops and Bounty Campaigns

Cryptocurrency

The supervisory inquiry over ICOs has led to the advent of free tokens or token “airdrops,” in exchange for some few marketing exertions. However, a new ruling by the SEC (Securities and Exchange Commission) may end this enhancing form of generating hype for numerous crypto projects within the U.S.

SEC Not Captivated

A U.S. SEC filing, dated August. 14, disclosed that Tomahawk, a digital asset startup got a lifetime ban and a $30,000 fine and for apparently employing “fraudulent marketing methods” to amp up its fundraising exertions.

A cease-and-desist directive was later revealed and crypto communities were quick to notice a key element of the SEC’s directive: “Free” tokens were seen as securities.

The issuance of Tomahawk’s token was said to have violated the Securities Act, Sections 5(a) and 5(c) by “trading TOM tokens without a registered declaration.” The court emphasized Tomahawk’s use of bounty promotions and other advertising activities which were “designed to foster the firm’s economic interests” in addition to possibly manipulating the market for its tokens.

The lack of regulations means crypto moguls have been proposing airdrops and bounty campaigns insusceptible to security laws. Nevertheless, the filing reveals quite the opposite:

“On the 27th of July 2017, this is a response to the DAO Report of the Commission, Tomahawk circulated an article online termed ‘Tomahawkcoin ICO Adjusts to the SEC, by Lawfully Sidestepping Them.’ That article inaccurately indicated that Tomahawk’s ICO was going to be exempted from securities directive because the Firm was ending its plan to be cited on the OTC market.”

Airdrops to be Prohibited Soon

Some cryptocurrency fanatics have discovered that the SEC’s issue is not about cryptocurrencies, but the rebellious process of token dissemination. In this regard, Mashable stated on the blockchain-based ride-sharing app in Jun 2017, describing the firm’s enterprising incentive of digital “shares” to riders via the platform.

Furthermore, the SEC came in to change the firm’s core business morals, putting in an official request to move from a digital share-rewards scheme to a cash-based enticement process.

Now that ICOs and token issuers are viewed as forbidden by the U.S. legislators–it is probable that airdrops and bounty campaigns will face similar legal action and assured levels of scrutiny.

The airdrop case deteriorates when blockchain capitalists themselves describe the procedure in a sarcastic manner.

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