The DAO Report decade

Staff engaged with crypto as early as 2013 — the first registration statement for a crypto-asset exchange-traded product was filed on July 1, 2013. The first Commission-level analytical framework arrived in 2017, as ICO volume spiked. The vehicle was not a rule. It was a section 21(a) report of investigation into The DAO.

The DAO Report (Release 34-81207, July 25, 2017) found that DAO Tokens were offered and sold as investment contracts under Howey. That finding became the template. Subsequent settled actions — Munchee (Dec. 2017), Paragon Coin (Nov. 2018), Gladius (Feb. 2019) — and a handful of no-action letters (TurnKey Jet, Pocketful of Quarters, IMVU) were the entire “framework.” There was no form, no exemption, and no off-ramp.

Why not set forth a coherent legal framework in a rule? After all, if we continued with our regulation-by-enforcement approach at our current pace, we would approach 400 years before we got through the tokens that are allegedly securities.

The Commission now quotes that critique in the proposing release. That is not a small thing. A proposing release that reprints a sitting commissioner’s attack on the prior decade is the Commission telling commenters which political argument has already been accepted. Re-arguing “regulation by enforcement” in 2026 is fighting a war the paper says it has already conceded.

The petition file the Commission says it considered

• Coinbase Global, Inc. (July 21, 2022) — petition for rules to identify which digital assets are securities and to govern digitally native offerings.
• J.W. Verret (Jan. 22, 2022) — open call for comment on flexibility across the 1933, 1934, Advisers and Company Acts.
• Vincent Molinari / Templum / Ouisa / Liquid M / Sustainable Holdings — a cluster of petitions from 2017–2021 on ICOs, post-trade, mining and NFTs.
• No-action letters cited: TurnKey Jet (Apr. 3, 2019), Pocketful of Quarters (July 25, 2019), IMVU (Nov. 19, 2020). Those letters were consumptive-use facts, not a token safe harbor.

Landreth Timber, 471 U.S. 681, 686 n.1 (1985), is cited for the proposition that the Securities Act and Exchange Act definitions of “security” are treated as identical. That matters for Rule 400, which would safe-harbor the term “investment contract” in both statutes at once.

• If you were a respondent in an ICO case, this is the place to put a one-paragraph statement of what a 2017–2024 issuer could not have known. Do not relitigate liability. Use it to argue for a transition path into Rule 400 for legacy tokens.
• The no-action letters are a research exhibit, not a model. They required consumptive use, no transfer for speculation, and marketing restraints that no modern L1 launch can satisfy. A comment that says “just revive TurnKey Jet” will be ignored.
• Petitioners from 2018–2022 should say which of their asks this paper actually answers and which it does not. Coinbase asked for a classification rule; it got an offering exemption. That gap is still live.