SEC Issues Historic First ICO ‘No-Action’ Letter to TurnKey Jet

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by Teuta Franjkovic · 3 min read
SEC Issues Historic First ICO ‘No-Action’ Letter to TurnKey Jet
Photo: Pixabay

The U.S. Securities and Exchange Commission (SEC) has issued a “no-action” letter to TurnKey Jet, Inc., in whick it agrees that tokens that are used by the business-travel startup are not securities.

In the letter, the SEC specifies that it considered that the TurnKey Jet platform will be fully developed and operational at the time the tokens are sold, and the funds won’t be used to develop the platform. It also mentions that the tokens will be immediately usable and have been marketed for their utility, not potential profits.

In addition to the much anticipated ‘No Action’ letter the SEC’s FinHub, established in October 2018 to address issues related to cryptocurrency and other financial innovations, published a lengthy, highly anticipated document explaining its rationale for evaluating such requests.

Bill Hinman, the SEC’s director of the division of corporation finance said:

“It’s not binding on the rest the commission, but it gives market participants a good idea of how the SEC staff will look at the issue and deal with it.”

Gabriel Shapiro, an attorney with the blockchain-focused DLx law stated:

“The no-action letter is helpful in finally having at least one token—albeit a very restricted consumer-credit-style token that trades on a permissioned blockchain—that the SEC does not view as a security.”

Selling Tokens With Purpose of Helping Customers

While it’s “mostly a confirmation of things we already knew,” says Shapiro, the framework goes deep on arguably the most impactful prong of the Howey Test in relation to ICOs and token projects: the “reasonable expectation of profits derived from the efforts of others.”

The letter means the Florida-based startup can sell TKJ tokens to customers with the sole purpose of helping them book travel on private jets. James Prescott Curry is the lawyer who worked with TurnKey Jet to get the SEC’s assurance that it won’t take regulatory action against the startup. Curry said:

“I submitted the first draft of the letter on May 23, 2018, so it was a long, but rewarding, process.”

TurnKey’s letter also goes into some detail about the token’s use:

“Redeemable for air charter services, the proposed Tokens in operation will be like the business jet card programs that are common in the aviation industry today.”

TurnKey further asserts that these tokens will not obligate the company to provide service at any cost; rather, one TKJ will represent one USD worth of fees.

All outstanding tokens will be fully backed by an equal amount of fiat in an FDIC-insured institution, the company writes.

The TurnKey letter notes that only the company will be able to generate tokens and that the sale will be on an ongoing basis. Tokens will be nonrefundable and destroyed as users spend them – and escrowed USD will be remitted to the company or its business partners.

While the SEC’s letter forbid the tokens from leaving wallets controlled by TurnKey Jet, it did not object to this statement within its letter to the agency:

“When a Token enters circulation, TKJ Consumers may freely trade or exchange the Tokens in their possession between any other Consumer, Broker or Carrier within the Network.”

The SEC first ruled that ICOs could be securities back in July 2017, later updating that advice in 2018 to note that cryptocurrencies aren’t necessarily securities but most token offerings are.

Last year, in December, came the news that blockchain token projects can bypass U.S. Securities registration requirements. The SEC explained that this means that token issuers now had three options if they want to conduct an initial coin offering (ICO).

One of the ways is registering as a securities offering. Second solution would be applying for an exemption, and the third way would be assuring that they’re not a security.

Altcoin News, Cryptocurrency news, News, Token Sales
Teuta Franjkovic

Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.

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