Regulation by Selective Enforcement: The SEC and Initial Coin Offerings

Washington Journal of Law and Policy (Forthcoming)

UCLA School of Law, Law-Econ Research Paper No. 19-09

26 Pages Posted: 6 Nov 2019 Last revised: 15 Nov 2019

See all articles by James J. Park

James J. Park

University of California, Los Angeles (UCLA) - School of Law

Howard H. Park

University of California, Los Angeles (UCLA), School of Law, Students

Date Written: November 14, 2019

Abstract

In addressing the problem of unregistered sales of digital tokens through initial coin offerings (ICOs), the SEC has proceeded through a strategy we call Regulation by Selective Enforcement. Rather than impose penalties on a significant number of violators, the SEC has brought a small number of significant cases. The SEC issued several extensive settlement releases that established without court intervention regulatory guidance about when ICO tokens are securities. The SEC has been able to pursue this strategy in part because there are multiple enforcers of the securities laws. State regulators and private plaintiffs have brought a significant number of cases against fraudulent ICOs, permitting the SEC to focus on developing issues of national importance. We conclude that while the SEC’s Regulation by Selective Enforcement strategy has been thoughtful and successful, some aspects of the agency’s approach are problematic.

Keywords: Securities, securities regulation, initial coin offerings, blockchain, Securities & Exchange Commission, securities fraud

Suggested Citation

Park, James J. and Park, Howard H., Regulation by Selective Enforcement: The SEC and Initial Coin Offerings (November 14, 2019). Washington Journal of Law and Policy (Forthcoming); UCLA School of Law, Law-Econ Research Paper No. 19-09. Available at SSRN: https://ssrn.com/abstract=3478661

James J. Park (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

Howard H. Park

University of California, Los Angeles (UCLA), School of Law, Students ( email )

Los Angeles, CA
United States

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