The Howey test lives on—now in a lesson in what not to do when it comes to token offerings.

Token offerings, also known as “initial token offerings,” “token launches,” “token sales,” “initial coin offerings,” or “ICOs,” represent a new capital-raising method being explored by many emerging companies; venture, hedge, and private equity funds; large and well-established corporations; and others hoping to raise significant amounts of money quickly and from a broad base of potential participants.

Yesterday, the U.S. Securities and Exchange Commission spoke formally on the topic for the first time, disappointing some individuals and issuers that had hoped tokens might fall outside of the definition of “securities” and clarifying that the platforms on which these tokens are traded may need to register as securities exchanges. The SEC also issued an investor bulletin on initial coin offerings as part of its investor-education and investor protection mission.

Read our client alert.