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The Staff Statement provides clarity that Proof-of-Work crypto mining does not involve securities, reducing regulatory uncertainty and enforcement risks for miners.

By Jenny Cieplak, Zachary Fallon, Stephen P. Wink, Connor Jobes, and Deric Behar

On March 20, 2025, the Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance (the Staff) published a Statement on Certain Proof-of-Work Mining Activities (the Statement). The Statement is the Staff’s second non-binding clarification on how it views the federal securities laws…

SEC

The Staff stated that most meme coins are not subject to federal securities laws or SEC fraud enforcement; who will oversee meme coins remains an open question.

By Jenny Cieplak, Zachary Fallon, Ghaith Mahmood, Yvette D. Valdez, Stephen P. Wink, and Deric Behar

On February 27, 2025, the Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance published a Staff Statement on Meme Coins (the Statement). The Statement is the first tangible clarification of how…

SEC’s motion for a preliminary injunction is granted, prohibiting delivery of Telegram tokens to purchasers.

By Stephen P. Wink, Shaun Musuka, Carolina Bernal and Deric Behar

On March 24, the Court in the Southern District of New York sided with the SEC and granted an injunction prohibiting Telegram Group Inc. and TON Issuer Inc. (together, Telegram) from delivering Telegram’s digital token, “Grams,” to 175 entities and high-net-worth individuals (Initial Purchasers).

As we previously discussed after the SEC filed its complaint, Telegram entered into agreements with the Initial Purchasers (Gram Interest Agreements), where, in exchange for US$1.7 billion from the Initial Purchasers, Telegram provided a promise to deliver Grams to the Initial Purchasers upon the launch of its blockchain (TON Blockchain).

In two recent articles, Latham & Watkins lawyers examine the SEC’s guidance on the application of securities regulations to digital assets and the questions that remain unanswered.

By Stephen P. Wink, Witold Balaban, John J. Sikora, Miles P. Jennings, Emanuel V. Francone, Cameron R. Kates, and Shaun Musuka

Digital Asset Regulation: Howey Evolves

In this article, the authors provide a comprehensive look at the SEC’s evolving guidance that aims to clarify when sales of digital assets (also known as tokens) are securities transactions. The authors discuss the Commission’s early application of the Howey test to digital assets, its pronouncements and enforcement actions, and the response of commentators. They then turn to the SEC’s Framework, issued in 2019, and other current SEC actions. They close by addressing steps the SEC should take to provide market participants with greater clarity on the application of the securities laws to digital assets.

The regulators attempt to clarify their position on the possible custody of digital assets by broker-dealers, but questions remain.

By Stephen P. Wink, Cameron R. Kates, Shaun Musuka, and Deric Behar

The SEC and FINRA recently released a joint staff statement (Joint Statement) addressing the custody of digital asset securities by broker-dealers. For some time, registered broker-dealers and applicants have sought to facilitate digital asset transactions and the accompanying custody of such assets. However, their efforts have been stymied, in part due to a lack of interpretive guidance from the SEC and FINRA regarding how to custody digital assets in compliance with the relevant regulations. The Joint Statement is an initial step by the SEC and FINRA toward clarifying their positions on these issues. It makes clear that broker-dealers that do not seek to custody such assets but seek to otherwise engage in brokerage activities with digital assets (e.g., private placements or if the broker-dealer matches buyers and sellers who conduct settlement between themselves) should be permitted to do so. The bottom line, however, is that the regulators “are just not ready”[i] to approve broker-dealers to custody digital assets.

The online document generator helps startups raise capital with customizable market standard terms and optional digital token provisions.

By David L. Concannon, Yvette D. Valdez, Stephen P. Wink, Miles P. Jennings, and Shaun Musuka

In collaboration with ConsenSys and OpenLaw, Latham & Watkins recently launched the Automated Convertible Note Generator, a complimentary tool designed to assist startups with capital raises. The Automated Convertible Note is a potential solution for capital formation that also addresses future token sales in a manner compliant with US securities and commodities regulations.

Federal legislators introduce two bills in an attempt to provide the blockchain economy with regulatory certainty.

By Stephen P. Wink, Morgan E. Brubaker, Cameron R. Kates, and Shaun Musuka

US regulators and federal legislators may be heeding the calls of crypto-enthusiasts for legal clarity regarding the status of digital assets and cryptocurrencies (collectively, Tokens). Two weeks ago, the Securities and Exchange Commission (SEC) released an analytical framework for determining when a Token constitutes a security. Last week, US federal legislators followed up by introducing two bills that are designed to “provide regulatory certainty for businesses, entrepreneurs, and regulators in the US’ blockchain economy,” the Token Taxonomy Act of 2019 (H.R. 2144) (TTA) and the Digital Taxonomy Act of 2019 (H.R. 2154) (DTA, and together with the TTA, the Bills).

The SEC provides additional guidance for analyzing whether a digital asset is a security.

By Stephen P. Wink, Cameron R. Kates, and Shaun Musuka

On April 3, 2019, the U.S. Securities and Exchange Commission’s Strategic Hub for Innovation and Financial Technology (the SEC) released a framework (the Framework) for assessing whether a blockchain-issued token or digital asset (each, a Token) constitutes an investment contract. An investment contract is an enumerated type of security subject to US federal securities laws. The Framework does not have the force of law, but rather, provides additional guidance on the factors to consider when applying the Howey test to Tokens. For background regarding the Howey test, please see Latham’s Client Alert. Latham’s read of the Framework suggests two key takeaways. First, it provides added insight into how existing Tokens may be reevaluated over time and may cease to be subject to federal securities laws. Second, it offers the clearest guidance to date that Tokens that are designed and marketed as purely “virtual currency” should not be considered securities.