ICO and IEO

Blockstack wins first-ever SEC approval for a token offering under Reg A+ listing

Quick Take

  • The Security and Exchange Commission approved Blockstack’s token offering under Reg A+, an accelerated path for smaller companies to raise money publicly
  • This is the first approval the SEC gave for a token offering, after a series of crackdowns the regulator led against unregistered ICOs it deems as securities

The Securities and Exchange Commission (SEC) gave blockchain startup Blockstack the go-ahead today to conduct a $28 million digital token offering under Regulation A+, the first token offering of its kind ever approved by the SEC, according to the firm.

The SEC has launched a series of crackdowns on unregistered initial coin offerings (ICOs), with the latest including a dispute with messaging app Kik over its $100 million ICO. Still, Reg A+ offerings have had their own headaches. 

Reg A+ is a fast track for smaller companies to publicly raise money with less strenuous accounting and disclosure standards than a regular initial public offering (IPO) requires. Even so, Blockstack founder Muneeb Ali told the Wall Street Journal that the process is still very long and costly since the SEC had to devise a brand new protocol for token offerings under Reg A+, something the regulator had never done before. 

Recent poor performances and fraud concerns surrounding some of the Reg A+ IPOs have discouraged Nasdaq and the New York Stock Exchange from Reg A+ listings. Against this backdrop, having the SEC’s approval on a Reg A+ token offering may shed light on a new path for blockchain companies to raise funds under regulation, according to Blockstack. 

Blockstack is a blockchain builder that has raised $47 million through a previous token offering under Reg D, a different provision that does not require SEC approval but is only limited to accredited investors. In comparison, Reg A+ is open to all companies and individuals, adding its value as the financing accelerators for smaller firms. 

The company announced in April that it was working with the SEC on the Reg A+ token offering framework. At the time, Blockstack also disclosed that Harvard University’s endowment fund Lux Capital, Foundation Capital, and other investors had agreed to purchase around 96 million tokens at price between $0.12 and $0.30 each.

According to a company statement, the tokens, named Stacks, can be used to register digital assets, create and process smart contracts, and pay for transaction fees, among other things. 

62 million of Stacks will be sold at a price of $0.3, while 78,333,333 Stacks Tokens will be offered at a discounted price of $0.12. The company also announced in a statement that, as a part of the offering, an additional $12 million in tokens will be allocated to reward the developers who create the top-ranked applications within the Blockstack ecosystem. 

“It is a truly groundbreaking day for decentralized technology and, by extension, digital rights. No company on the internet should have so much power that it can debate if it should treat users in the right way or not. By building technology that can’t be evil, trusting centralized organizations to make the right choice is replaced by mathematical proofs,” Ali said in a company statement.

Now that Blockstack has successfully forged this new path for blockchain companies to raise capital, more firms may be encouraged to seek SEC approval for their token offerings rather than arguing against the regulator that their tokens are not securities.