SEC issues first no action letter for Ethereum-based token

The U.S. Securities and Exchange Commission (SEC) has approved the first-ever Ethereum token sale from blockchain-based gaming startup Pocketful of Quarters (PoQ).

In a no-action letter published Thursday, the SEC Division of Corporation Finance said that PoQ may sell its Quarters tokens (based on ERC-20 standard) without registering them as securities.

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“The Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that the Quarters are not securities, PoQ offers and sells the Quarters without registration under Section 5 of the Securities Act and does not register Quarters as a class of equity securities under Section 12(g) of the Exchange Act,” said Jonathan Ingram, chief legal advisor for the SEC’s FinHub wing.

The letter, however, comes with a number of conditions, such as the Quarters tokens will be immediately usable for their intended purpose of gaming at the time they are sold and only developers and “influencers” with approved accounts will be able to transact, among other restrictions.

This is the SEC's second no-action letter issued to a firm seeking to launch a token sale, but the first for an Ethereum token. The first letter was issued to aircraft charter service TurnKey Jet back in April, approving that their TKJ tokens (based on a private, permissioned, centralized blockchain network) are not securities.

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Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.