Sec. 2. Sense of Congress; purpose

414 words·~2 min read·/bill/118/hr/3572/ih/section-2

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It is the sense of Congress that— among the ways that participants in the digital asset industry have raised capital and earned revenue is through arrangements in which investors provide funds for the development of blockchain-based protocols in exchange for digital assets or the future delivery of digital assets to be used in those protocols; although certain of those fundraising arrangements may be deemed to be investment contracts within the meaning given to that term in section 2(a) of the Securities Act of 1933 (the Securities Act ), the underlying assets sold pursuant to these arrangements are frequently not themselves inherently securities as defined in section 2(a) of the Securities Act and, like other assets sold pursuant to investment contracts in the past, do not become securities as so defined merely because they are sold pursuant to an investment contract; under SEC v.

W.J. Howey Co., 328 U.S. 293 (1946), and its progeny, the Federal courts have consistently held that an investment contract, for purposes of the Securities Act, means a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party , and have not endorsed the notion that an asset underlying an investment contract (for example, the orange groves sold in Howey) is also conferred security status merely as a result of its being sold pursuant to the relevant contract, transaction, or scheme; although the distinction between an investment contract, which is a security, and the assets sold pursuant to it had been well-settled for purposes of section 2(a) of the Securities Act, the two have been unnecessarily conflated in the context of digital assets; and this new approach, which conflates an investment contract and the asset sold pursuant to that contract or scheme, differs from the approach taken in many other major jurisdictions around the world, has discouraged development of the digital asset sector in the United States, and has hindered innovation in that industry here without providing concomitant benefits to those who enter into investment contracts for the purpose of acquiring digital assets.

The purpose of this Act is to clarify and codify that an asset sold pursuant to an investment contract, whether tangible or intangible (including an asset in digital form), that is not otherwise a security under the Act, does not become a security as a result of being sold or otherwise transferred pursuant to an investment contract.

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328 U.S. 293

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Sec. 2

Sense of Congress; purpose

SCOTUS328 U.S. 293

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