Are venture firms legally buying tokens?


Venture firms are buying tokens, but the legality of these transactions is questioned. This has been highlighted concerning behavior like buying tokens early and potentially engaging in practices that involve flipping them for profit before they become available to the public. Such actions can border on violations of securities law and have raised flags for regulatory scrutiny.

  • Jason Calacanis discussed concerns about tokens behaving like securities bought by investment firms, which can be deemed illegal according to securities laws. He noted that the SEC could view such actions as violations, particularly when tokens are not used for their utility but merely for investment and profit by these firms 1.
  • David Friedberg and Jason Calacanis also commented on potential legal challenges associated with token sales by venture firms. They described several dubious practices, like issuing tokens under complex arrangements to circumvent traditional investment requirements and subsequently liquidating those for profit. This type of activity could attract litigation if found in contravention of financial regulations 2.

The activities of these venture firms in the crypto and token space invariably involve complex legal considerations and often operate in gray areas of the law. For users or investors, it's critical to understand that involvement in such investments carries potential legal risks and should be approached with caution.

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