Former SEC chair Jay Clayton feels ‘vast majority’ of crypto tokens are securities

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But there’s hope: Something that is once labeled as a security, ‘might not always be a security.’

Former SEC Chairman Jay Clayton has reiterated his position that many cryptocurrencies could be defined as securities, even as the crypto industry continues to combat the U.S. Securities and Exchange Commission over the regulator’s prohibitive stance toward the industry.

“I’ve said this for a long time: I think the market has evolved, but many, if not the vast majority, of the tokens that were sold for cash would fall within the definition of a security in America,” Clayton, now a senior policy advisor and counsel at Sullivan & Cromwell LLP, said at the R3 CordaDay conference on Wednesday.

The definition of a security is “intentionally broad and flexible,” Clayton noted. But, he added that there’s a chance that something once labeled a security, “might not always be a security.”

So what could cause that shift? Present utility versus future utility, Clayton said.

Clayton pointed to Broadway tickets as an example: If someone bought 1,000 tickets for $10 and told their friends and family they would be able to resell those tickets for $100 or $1,000, then it’s a security, he said. “But if you just buy the ticket 10 years later, it’s just a ticket.”

“The confusion around that, and the horrible legal advice [that’s been] given has led to bitter, emotional fights over classification,” Clayton said.

For the former SEC chair, the bigger question is how to trade those tickets when they’re not securities. For example, Taylor Swift tickets, which have caused a bit of chaos for fans and Ticketmaster in recent months, can resell for thousands of dollars more than initially bought, but that would not be securities trading, Clayton said. “But we should have a digitized market for it.”


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