Initial Coin Offerings: When Are Tokens Securities in the EU and US?

77 Pages Posted: 10 Mar 2019 Last revised: 9 Apr 2019

See all articles by Thijs Maas

Thijs Maas

Tilburg University; Law and Blockchain Consultancy

Date Written: February 13, 2019


This article presents a comparative analysis of the application of US and EU securities laws to initial coin offerings (ICOs), or token sales. An extensive token taxonomy framework is proposed to categorize digital assets in order to advance a more precise discussion on the legal classification and regulation of tokens. For the US, a full analysis of the application of the Howey test to different types of tokens gives insight into classification of tokens as a security (“investment contract”) under Section 2(a)(1) of the US Securities Act of 1933 and 3(a)(10) of the Securities Exchange Act of 1934. The analysis shows that most, if not all, so-called utility tokens can be classified as a security in the US. A possible ‘sufficiency-of-decentralization-test’ is also explored, while taking prior case law and the multiple dimensions of decentralization of blockchain projects into account.

For EU financial law, the analysis in this paper focuses on the classification of tokens as ‘transferable securities’ under Art. 4(1)(44) of MIFiD II. The analysis shows that, in contrast to the US, pure utility tokens might not be deemed transferable securities under the EU securities regime. Across EU Member States however, large differences exist in terms of the legal classification of most tokens, which result from the freedom provided to EU Member States in transposing the MIFiD II definition of transferable securities into national law. The analysis in this paper provides insight into the two main approaches adhered to by EU Member States in the implementation of this definition, as well as their consequences for the legal classification of tokens. Conclusions are subsequently drawn on possible offering strategies adopted by issuers for future token sales and regulatory developments in the US and EU.

Keywords: Initial Coin Offerings, Initial Coin Offering, ICO, ICOs, Tokens, Securities, Law, Laws, Regulation, Transferable Securities, Token Sales, MIFiD, Howey, Utility Tokens, Security Token Offerings, STOs, Crypto, Digital Assets, Decentralization

Suggested Citation

Maas, Thijs, Initial Coin Offerings: When Are Tokens Securities in the EU and US? (February 13, 2019). Available at SSRN: or

Thijs Maas (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE

Law and Blockchain Consultancy ( email )

Huijsmansstraat 12
Tilburg, Noord Brabant 5042PG
+31658884444 (Phone)

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