On July 14, 2021, the SEC issued a cease-and-desist order settling charges under the Securities Act of 1933 (Securities Act) (15 U.S.C. § 77a et seq.) against Blotics Ltd., f/d/b/a Coinschedule Ltd., a private UK limited company and successor to Coinschedule Ltd., a now-dissolved UK company (Coinschedule) for promotion and touting of digital asset securities listed on the Coinschedule website. The order , as consented to by Coinschedule, includes payments to the SEC for disgorgement, pre-judgment interest, and a civil penalty.

According to the SEC findings, the Coinschedule platform, Coinschedule.com, was accessible in the United States from the period of 2016 to August 2019. During that period, a significant portion of the Coinschedule platform’s web traffic originated from the United States until August 2019, when Coinschedule took measures to deter and prevent United States persons from viewing the platform's content. As noted in the Coinschedule order, Coinschedule primarily earned revenue based on compensation received from token issuers that paid Coinschedule to list their token offerings on the platform. Coinschedule did not disclose to platform visitors how much token issuers had paid Coinschedule and no pricing information or details for listing packages were accessible to Coinschedule’s platform visitors during the relevant 2016 to August 2019 period.

The SEC found in the Coinschedule order that digital tokens and initial coin offerings (ICOs) publicized by Coinschedule included tokens that were offered and sold as investment contracts which the SEC asserted were securities under Section 2(a)(1) of the Securities Act. According to the SEC findings, Coinschedule never disclosed to platform visitors that digital token issuers paid Coinschedule to profile their token offerings on its web platform. By failing to disclose the consideration Coinschedule received from token issuers, the SEC found that Coinschedule violated Section 17(b) of the Securities Act, which makes it unlawful for any person to promote a security without disclosing that the promoter received compensation for doing so or the amount of the consideration.

Without admitting or denying the SEC’s findings, Blotics, as the successor to Coinschedule, consented under the Coinschedule order to cease and desist from committing or causing any future violations of the anti-touting provisions of the federal securities laws. Blotics also agreed to pay $43,000 in disgorgement, plus prejudgment interest, and a penalty of $154,434.

Touting occurs when a person recommends a security to an investor without disclosing the person is receiving compensation or remuneration to make the recommendation. Touting is prohibited by Section 17(b) of the Securities Act (see Checklist, Prohibited Trading Practices Checklist).

In connection with the Coinschedule order, SEC Commissioners Hester M. Peirce and Elad L. Roisman issued a separate public statement on July 14, 2021 in which they expressed disappointment that the SEC failed to identify in the Coinschedule order which of the more than 2,500 digital tokens promoted on the Coinschedule website were actually securities under the Securities Act. The commissioners urged the SEC to adopt a recently updated three-year safe harbor provision proposed and drafted by Commissioner Peirce to provide guidance to digital asset issuers (see Practice Note: SEC Regulation of Digital Assets: Commissioner Peirce Proposed Safe Harbor for Digital Token Sales and Legal Update, SEC Commissioner Peirce Updates Proposed Safe Harbor for Digital Token Sales). The commissioners noted in their statement that they otherwise agreed with the result of Coinschedule order.

For further information on SEC regulation of digital assets, see Practice Note, SEC Regulation of Digital Assets.