WASHINGTON - July 29, 2019 -DLx Law announced today that its client Pocketful of Quarters (PoQ), a gaming startup, received a no-action letter from the U.S. Securities and Exchange Commission (SEC). The letter, issued by the SEC's Division of Corporation Finance on July 25, 2019, clears the way for PoQ to offer its blockchain-based tokens for sale as a consumer good not subject to U.S. federal securities laws.
Founded by its 12-year-old gamer CEO George Weiksner, PoQ developed Quarters in 2018 as the first token to allow online gamers to make purchases across multiple online games.
"By providing one currency for many games, we hope to make gaming simpler and more fun," said Weiksner.
"To make this innovative product a reality, we presented a focused legal argument and worked with the SEC to ensure that the sale of Quarters would not be subject to securities laws," said Lewis Cohen of DLx Law.
The incoming request letter submitted by DLx Law to the SEC on behalf of PoQ addressed the Howey Test, which, based on the 1946 U.S. Supreme Court case SEC v. W.J. Howey Co., defines a security as an investment of money with profits gained solely by the efforts of others. DLx contended that gamers will purchase Quarters exclusively for use in games without a reasonable expectation of profit.
"By developing a strategic approach that defined the Quarters' usage," added Cohen, "We were able to attain the first-ever no-action letter that recognizes that an ERC-20 token can be sold as a consumer product not subject to the registration requirements of federal securities laws."
The SEC provided no-action relief based on these arguments.
"Though this letter is solely for PoQ and has specific requirements, it's a big step forward for the blockchain space," said Greg Strong of DLx Law. "It is a further recognition that not all tokens should be treated as securities and presents a path forward for developers of blockchain-based systems designed to provide a consumer good or service that involve tokens. We are hopeful this will open a lot of doors for further growth in this space."
About DLx Law
DLx is a new type of firm, for a new type of economy. We focus on sound lawyering and jurisprudence on behalf of the blockchain space. www.dlxlaw.com.
About Pocketful of Quarters
Pocketful of Quarters is the developer of the first cross-game token on the blockchain: Quarters. Quarters are the universal virtual currency for gaming, usable across different games and platforms. www.pocketfulofquarters.com.
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