SEC Issues its First ‘No Action’ Letter to Digital Token Business

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The U.S. Securities and Exchange Commission (SEC) has released its first ‘no action’ letter to cryptocurrency startup TurnKey Jet Inc., admitting that the digital tokens TurnKey utilized for its business-travel are not securities. The stamp of regulatory consent is unexpected upon the firm utilizing its digitalized tokens under particular conditions only.

Those particular conditions are:

  • Token-created funds can’t be utilized to expand the firm’s platform technology (like its app).
  • The tokens will be instantly useful.
  • The TKJ digital tokens will stay at a particular price of one U.S. dollar.
  • The tokens can only be utilized for private jet services.
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  • Repurchasing can only be done at a discount on the digitalized token.
  • TurnKey Jet will not exhibit the tokens as having profit strength.

TurnKey Jet is a private jet and taxi service since 2012, basically from the United States, regulated from West Palm Beach, Florida.

In an action to a request made by an attorney and TurnKey Jet spokesperson James Curry, the SEC Division of Corporate Finance has released a no-action letter concerning the TKJ digital token on April 3. The letter advised that the token has a basic usage function and establishes no securities position.

As per the securities attorney Scott Andersen, the SEC moved to legal counsel in creating their judgment. Andersen, who earlier worked for FINRA stated there were two major issues in the decision: whether or not the fund’s allotment had the initial agenda of funding a virtual stage, and if the token consumer had an initial incentive of the token’s higher price over time.

Andersen stated,

In TurnKey, the platform was already fully developed and operational and the tokens were immediately usable for the intended functionality, thus no funds from the sale were to be used to develop the platform. Separately, as the tokens were restricted to TurnKey wallets only (and not to wallets external to the platoform), were to be sold for the life of the program at a fixed price of one USD per token, and as TurnKey could only repurchase tokens from its holder at a discount to the token’s face value of one USD, the SEC appears to have become comfortable that any purchases of the token would not be for investment purposes. This conclusion too was aided by the fact that TurnKey represented that the token would not be marketed in a manner that emphasized the potential that its token could increase in value.

The cryptocurrency and finance attorney Joshua Ashley of Klayman LLC informed, 

It is a huge step forward for the industry to have a no-action letter published. It is the sort of guidance that the market needs and has been looking for.

The SEC’s director of the division of corporation finance Bill Hinman commented on this stating,

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.

The SEC’s Valerie Szczepanik examined the company’s ongoing settlements with digital currency startups among the token sales. Szczepanik has been suggesting firms communicate directly with the firm, advising better results will happen if they do. 

We’d much rather have people come and ask us before they do something rather than coming and asking for forgiveness,

she stated previous month at SXSW.

The TurnKey explains a number of incapability in the aviation industry that it thinks smart agreements can solve this. The TKJ’s letter goes in further details about the utilization of the token:

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.

The TKJ’s letter minute that only the firm will be able to create tokens and that the bargain will be on running criteria. The token will not be refundable and burned after the users used them and bonded USD will be transacted to the company or its partners.

At the time the SEC’s letter prohibited the token from vacating wallets powered by TurnKey Jet, it didn’t oppose to this declaration within its letter to the firm:

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.

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