All Eyes On ICOs But Are Airdrops And Bounty Campaigns Next?
The U.S Securities and Exchanges Commission (SEC) has trained its regulatory eye on initial coin offerings (ICOs) for a while now.
The crackdown on these token sales saw the emergence of two novel ways for crypto start-ups to market their projects and gain public support. They came in the form of airdrops and bounty campaigns.
An Airdrop basically happens when an ICO or blockchain start-up distributes tokens to a crypto community. It is usually given out for free and normally targets capturing the attention of the community. In the end, the start-up or ICO gains wider distribution.
Bounty campaigns, on the other hand, involve performing certain tasks for a given reward. Bounties often require users to participate in bug fixes, content writing, or video campaigns in exchange for a few free tokens.
These methods of disbursing tokens have quickly gained popularity. Many ICO organizers and project developers have opted for them instead of a token sale. One attraction is that they generate far much hype for the project than any other form of campaign.
However, these free tokens could also be about to face scrutiny from the U.S regulator. And that could drastically change the ICO and token landscape.
The precedent could have been set already
The U.S SEC has not hidden its take on the ICO space, terming most of them as securities and thus subject to regulation. Big strides have been made in containing a situation that threatened to spiral out of control with fraudulent offerings.
According to an August 14 SEC court filing, the crypto start-up Tomahawk received a $30,000 fine for engaging fraudulent techniques to market itself to the public.
The start-up’s token offering violated sections of the Securities Act, the filing reveals. The company sold its TOM tokens without registering with the relevant regulatory bodies.
The court decision hinged on the finding that Tomahawk’s used bounty campaigns as well as other activities with the aim of fostering its own economic interests.
The methods employed by the start-up could have also led to manipulation of the market to benefit the company’s tokens.
The SEC has since made public a cease-and-desist order targeting Tomahawk. One thing that comes out of the whole saga is that even those tokens given freely in airdrops are in effect securities according to SEC.
The SEC filing also revealed that the agency has been monitoring the airdrop and bounty campaign ecosystem for a while.
The regulator noted that Tomahawk published an article that incorrectly indicated that the agency could exempt the start-up from ICO regulations regarding securities.
Tomahawk’s article ‘Tomahawkcoin ICO Adjusting to the SEC, by Legally Avoiding Them’ stated that the company would abandon plans of trading via the OTC market.
As a result of this development, it is likely that airdrops and bounty campaigns will face even more scrutiny from the SEC.
The industry’s evasiveness removes any would-be chance for the agency to take a lenient approach. Trying to dodge the SEC only highlights the possibility of the agency training its tentacles towards the industry.