SEC Commissioner Hester Peirce Proposes Retroactive Token and Coin Offering Relief Measures

The retroactive token and coin offering relief measures proposed by US Securities and Exchange Commission Commissioner Hester Peirce will likely

The retroactive token and coin offering relief measures proposed by United States Securities and Exchange Commission Commissioner Hester Peirce will likely benefit certain crypto firms and projects, attorneys told Cointelegraph.

According to Franco Jofré, an attorney and senior adviser at Miller & Chevalier, firms that conducted initial coin offerings during the ICO boom of 2017–2018 have a strong argument for relief under the new proposal.

"These include decentralized finance projects, layer-2 scaling solutions, and other crypto infrastructure that use tokens for governance and security. Custodians and centralized exchanges are also notable candidates for relief," the attorney told Cointelegraph.

Moreover, projects that exhibit strong utility use cases for their tokens or coins, as opposed to purely speculative instruments with an investment focus, will also likely qualify for any potential relief, Jofré added.

Peirce, a longtime SEC commissioner, recently proposed measures to provide retroactive relief for past digital token and coin offerings that were later deemed to be unregistered securities by the regulator. The proposal, which is yet to be voted on by the SEC, seeks to address the agency's "heavy-handed" approach to past ICOs.

If approved, the measures could potentially impact pending lawsuits filed by the SEC against several crypto firms for allegedly offering unregistered securities during their initial coin offerings. Some of the firms facing legal action from the SEC include Ripple Labs, Block.one, and LBRY.

Projects and firms could be excluded from relief if found to have misled investors

Both Jofré and Eli Cohen, the general counsel at real-world asset tokenization platform Centrifuge, said the SEC has the full authority to dismiss the lawsuits it brought against crypto firms for allegedly offering unregistered securities.

However, any potential relief from the SEC would exclude firms it deemed to have engaged in fraud or misled investors during their initial coin offerings, according to Jofré. He added that the SEC is unlikely to drop all of its litigation against crypto firms.

"If the SEC redefines the criteria for securities offerings or adopts a new approach to interpreting initial coin sales, then pending litigation will have a greater chance of being dropped. Additionally, the SEC could decide not to offer retroactive relief to crypto firms at all and only focus on granting prospective relief," the attorney noted.

According to Cohen, the SEC has the power to settle or dismiss any pending litigation at its own discretion, and it could choose to do so without providing any further explanation or justification.

"The SEC can settle or dismiss any pending litigation at its own discretion. It could choose to do so without providing any further explanation or justification. This is provided for under Rule 41(a)(1) of the Federal Rules of Civil Procedure," Cohen told Cointelegraph.

"The SEC could also choose to settle or dismiss some cases and continue litigating others, depending on the specific facts and circumstances of each case. For example, the SEC may choose to settle or dismiss cases where it now believes that the offering in question was not, in fact, a security," he added.

Peirce's proposal and the new SEC leadership's approach to crypto regulation

Peirce's proposal comes amid a new approach to crypto regulation being adopted by the SEC under the leadership of Gary Gensler. In recent months, the SEC has scaled back its specialized crypto enforcement unit within the Division of Enforcement.

According to Consensys attorney Bill Hughes, the regulatory approach under the new leadership at the Securities and Exchange Commission is a breath of fresh air, but implementing changes will take some time.

In a statement to Cointelegraph, the attorney urged patience while the new leadership at the SEC settles into its role.

"I think it’s fair to expect that leaf to turn by the summer at the latest," said Hughes.

The attorney also praised the agency's invitation for crypto firms to provide input for the regulatory process — something industry executives have requested for years.

"One of the key takeaways from the SEC’s recent regulatory efforts is that the agency is finally starting to engage with the crypto industry in a meaningful way. This is something that crypto firms have been requesting for a long time," Hughes added.