The SEC and CFTC's landmark crypto taxonomy has been widely hailed as a decisive break from years of regulatory limbo but legal experts say one of its most consequential provisions raises more questions than it answers, with no formal process for issuers to find out if they've gotten it right.
At issue is the guidance's framework for when a token initially sold as part of an investment contract can "separate" from that contract and trade freely.
Under the release, a non-security token becomes subject to an investment contract when an issuer sells it with promises to undertake "essential managerial efforts." That investment contract ends when the issuer either fulfills those promises or publicly abandons the project.
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