The Securities and Exchange Commission (SEC) has given the go-ahead to blockchain gaming start-up Pocketful of Quarters to sell its tokens directly to gamers, marking the first time a no-action relief has been granted for ERC-20 token sales on the public Ethereum blockchain.
The SEC announced the news on its website, stating: “Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that Quarters are not securities, PoQ offers and sells Quarters without registration under act 5 of the Securities Act and does not register Quarters as a class of equity securities under Section 12(g) of the Exchanged Act.”
This means that Pocketful of Quarters can now legally sell its tokens (Quarters) without registering them as securities. Quarters are built in accordance with the Ethereum ERC-20 token standard, as per the company’s white paper.
The SEC has reached this decision based on the belief that Pocketful of Quarters will not use any funds raised from the tokens to build its platform. The platform has already been fully developed and will be fully functional and operational upon launch and before any Quarters are sold.
The Quarters will also be immediately available for use within games at the time they are sold.
Pocketful of Quarters will also implement technological and contractual provisions governing the Quarters and the Quarters platform that restrict the transfers of tokens to the game or to wallets on the platform.
Gamers will only be able to transfer Quarters from their Quarter hot wallets to addresses of developers with approved accounts or to Pocketful of Quarters in connection with participation in eSports tournaments.
Only developers and influencers with approved accounts will be capable of exchanging Quarters into Ether at predetermined exchange rates by transferring their Quarters to the Quarters smart contract.
To create an approved account, developers will be subject to ‘Know-Your-Customer’ (KYC) and ‘Anti-Money Laundering’ (AML) checks upon creating the account as well as on an ongoing basis.
Pocketful of Quarters will market and sell Quarters to gamers solely for consumptive use as a means of accessing and interacting with participating games.
However, while the SEC has reached its decision based on these notes, the regulator also warned: “Any different facts or conditions might require the Division to reach a different conclusion.”
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.