The U.S. Securities and Exchange Commission has issued a no-action letter to Pocketful of Quarters (PoQ), a gaming startup looking to issue tokens on the ethereum blockchain.
PoQ may legally sell its Quarters tokens to consumers, the SEC Division of Corporation Finance wrote in its second no-action letter to a company seeking to launch a token sale. (The first was granted in April to TurnKey Jet, a business-travel startup.)
Quarters are built according to the ERC-20 standard – the first such token to receive U.S. regulatory approval.
In the July 25 letter, Jonathan Ingram, chief legal officer for the SEC’s FinHub wing, wrote:
“Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that the Quarters are not securities, PoQ offers and sells the Quarters without registration under Section 5 of the Securities Act and does not register Quarters as a class of equity securities under Section 12(g) of the Exchange Act.”
“The thing that’s notable here, this is the first ERC-20 public blockchain token,” said Lewis Cohen of DLX Law, which worked with PoQ to secure the letter.
The token is a stablecoin, with PoQ setting the price of the Quarters as the only seller, PoQ CEO George Weiksner said. This is part of the company’s compliance requirement with the SEC. (A smart contract prevents tokens from being sent to unapproved accounts, thereby restricting secondary trading.)
PoQ also raised money through a registered securities sale using an investment token, which will remain separate from the Quarters sale.
The two-token system is meant to ensure that users conduct transactions with Quarters,