September 16, 2019

September 16, 2019

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Rocky Mountain States Make Headway in Blockchain-Related Legislation

With Wyoming having become the first state to define “utility tokens” as a new asset class, Montana and Colorado are following close behind with their own cryptocurrency legislation. Both states have blockchain-related bills going into effect in July and August 2019, respectively.

Four Blockchain Regulations are Now Effective in Wyoming

In 2018, four (4) pro-blockchain regulations were signed into law by the governor. Now all are effective:

HB 19 and HB 70 amend the Wyoming Money Transmitter Act under Wyoming Stat. Sections 40-22-102 and 40-22-104, and Wyoming Stat. Sections 17-4-206, 17-4-102, 40-22-1094 and 40-22-126, respectively.

  • HB 19 provides an exemption from money transmitter laws and regulations for digital currency transmission. Signed by the governor March 7, 2018.
  • HB 70 provides an exemption from certain securities and money transmission laws for a person who develops, sells, or facilitates the exchange of an open blockchain token (a “consumer” or “utility” token). The Wyoming Uniform Securities Act was amended to provide for the same. Effective July 1, 2019.
  • SB 111 exempts digital currencies from property taxation, providing that virtual currency is not “property” for purposes of taxation. Signed by the governor March 12, 2018.
  • SF 34, codified at Wyoming Stat. Sections 2-3-1001 to 2-3-1017, regulates fiduciary management of digital assets, including digital currency. Effective July 1, 2019.

In January 2019, the state introduced and passed new legislation. Effective July 1, 2019, (1) House Bill No. HB0185 permits companies to issue digital or “certificate tokens” in lieu of stock certificates, declaring that the words share certificate, share, stock, share of stock, or other similar words also include a certificate token and certificated shares or similar words to include shares represented by certificate tokens; and (2) Senate File No. SF0125 allows for banks to provide custodial services for a range of digital assets, including virtual currencies (such as bitcoin and ether), digital consumer assets (utility tokens, including those used to purchases goods and services), and digital securities.

Montana Cryptocurrency Act Now in Effect
 

Montana is the third Rocky Mountain state (after Wyoming and Colorado) to pass blockchain-related legislation; House Bill No. 584 went into effect July 1, 2019, and exempts blockchain-based utility tokens from securities laws so long as the tokens have a “primarily consumptive” purpose.

Entitled “Generally Revise Laws Relating to Cryptocurrency,” the new Act defines this purpose as having a primary aim to “provide or receive goods, services, or content, including access to goods, services, or content.” The issuer of the tokens cannot market them as an investment or for speculation.

The Act provides that tokens that qualify for the exemption (i.e., the consumptive purpose of the utility token) must be available no more than 180 days after their date of sale or transfer, and initial buyers of the tokens are not permitted to transfer the tokens until their consumptive purpose is available. Prior to the tokens being offered for sale, the issuer must file a notice of intent to sell them with the state’s securities commissioner.

Additionally, while utility tokens are now exempt from the state’s securities law, the issuers of such tokens still have to notify the securities commissioner, and must file certain disclosures in the state in order to sell such tokens. Such notice must be amended within 30 days for any information previously disclosed that becomes inaccurate in any material respect for any reason.

The Act is codified as a transactional exemption under Section 30-10-105(23) of the Montana Securities Act. The Act terminates Sept. 30, 2023.

Colorado Digital Token Act to Take Effect in August 2019 

The Colorado Digital Token Act (Colorado Act) is scheduled to become effective August 2019. The Colorado Act permits Colorado businesses to effect transactions involving the purchase, sale, and transfer between certain persons of digital tokens secured through a decentralized ledger or database, with a focus on the production, distribution, and consumption of goods.

Under the Colorado Revised Statutes Section 11-51-308.7, transactions meeting certain conditions will be exempt from the securities registration requirements under the Colorado Securities Act (CSA), and those persons dealing in these digital tokens will be exempt from the securities broker-dealer and salesperson licensing requirements under the CSA. This issuer exemption requires the issuer of the digital token, and a person engaged in the business of effecting the purchase, sale, or transfer of a digital token, to file a notice of intent, and the consumptive purpose must be available at the time of sale or within 180 days after the date of sale or transfer of such digital token.

For more on the Colorado Act, click here.

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About this Author

Rebecca DiStefano, Greenberg Traurig Law Firm, Boca Raton, Corporate and Investment Law Attorney
Shareholder

Rebecca G. DiStefano concentrates her practice in the areas of securities regulation, corporate finance, corporate governance, private equity, venture capital, and mergers and acquisitions law. Rebecca counsels public and private companies in areas including angel financing, debt and equity financing, registration of securities under the Securities Act of 1933, registration under the Investment Advisers Act of 1940, continuing disclosure requirements of the Securities Exchange Act of 1934, initial and continued listing of securities on the stock exchanges and electronic...

561-955-7654
Michele Kulerman Corporate Attorney
Of Counsel

Michele A. Kulerman is a corporate attorney with wide-ranging law firm, in-house and government legal experience. Michele primarily advises clients and provides guidance on the legal and regulatory issues surrounding real estate and non-real estate securities offerings of debt and equity, including initial, follow-on and secondary offerings. She represents public and private companies on matters related to state securities or “blue sky” laws, registered and exempt, as well as compliance with the corresponding SEC rules and regulations and FINRA broker-dealer requirements in corporate financing.

Concentrations

  • Mergers and acquisitions

  • Reorganization and spinoffs

  • Private placements, PIPE transactions and SPACs

  • Employee benefit plans/Rule 701

Representative Matters

  • Acted as principal blue sky counsel responsible for advising, overseeing and coordinating compliance of securities offerings with federal and state securities laws for multiple clients in matters involving complex equity and debt capital raising transactions, public and private offerings, venture capital and mezzanine financing transactions, Rule 144A transactions, secondary offerings, mergers and acquisitions, recapitalizations, restructurings and employee benefit plan transactions in a wide range of industries.°

  • Reviewed different types of offering plans, and drafted and filed state and federal forms for exemption or registration (Forms ADV, BD, D, S-11, S-3, S-4, S-8, and U-4) in compliance with the Securities Act of 1933, Securities Exchange Act of 1934, the state- related requirements affected by the Investment Company Act of 1940 and the Investment Advisors Act of 1940, Financial Industry Regulatory Authority (FINRA) and the rules and/or policy statements of the North American Securities Administrators Association (NASAA).°

  • Provided interpretation of rules relating to U.S. and foreign issuers and offshore offerings, and coordinated with state regulatory and enforcement attorneys on a diverse range of securities issues; drafted and filed no-action and interpretive opinions related to offerings by non-traded real estate investment trusts (REITs), business development companies (BDCs), and other non-publicly traded direct investment programs.°

°The above representations were handled by Ms. Kulerman prior to her joining Greenberg Traurig, LLP.

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