Commissioner Peirce warns the SEC not to cast Howey’s net too wide

On February 8, 2019, SEC Commissioner Hester Peirce delivered a speech at the symposium ”Protecting the Public While Fostering Innovation and Entrepreneurship: First Principles for Optimal Regulation.” Her remarks, entitled “Regulation: A View from Inside the Machine,” provide insight into how SEC regulators currently view certain technological innovations and how they interpret and apply the Howey test as to when something is an “investment contract,” and therefore a security, for purposes of the US federal securities laws. Commissioner Peirce began by noting the challenges that the SEC is facing with respect to new technologies such as blockchain and cryptocurrencies. As such, the SEC has been considering if these technologies fit into existing securities rules or instead if a new regulatory framework should be created. “If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the…

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