Before launching our token (PATR), our team consulted with SEC legal experts to determine the safety of an airdrop within the United States. After thorough consideration, Patreos was able to produce a well-reasoned position paper making the case for not being within SEC regulatory purview.
At this point in time, the Howey test was the legal framework within which considerations were made. Our case was straight forward: airdrops that do not require opt-in user actions are not investment contracts, and thus, not a security.
Last month, the SEC produced a new framework, which not only applies to airdrops but greatly expanded the regulatory scope of the SEC. The PATR token would have to be reconsidered within the new legal framework, and not Howey alone.
We will not labor through each framework consideration point by point, however, the following is but one that aptly outlines our trouble:
Purchasers would reasonably expect [Patreos] to undertake efforts to promote its own interests and enhance the value of the network or digital asset" where Patreos has "the ability to realize capital appreciation from the value of the digital asset. This can be demonstrated, for example, if [Patreos] retains a stake or interest in the digital asset. In these instances, purchasers would reasonably expect [Patreos] to undertake efforts to promote its own interests and enhance the value of the network or digital asset.
Basically, if we own and control tokens, this is viewed as an implicit signal to potential speculators and is grounds for being regulated as a security. This was again made explicitly clear to Patreos by the SEC themselves.
Considering Patreos has not yet issued founder or company tokens, but only issued community tokens, we haven't yet crossed that line. However, Patreos not being able to issue founder tokens and take part in the economy of PATR leaves our business model and company incentive structure hamstrung.
The only alternative is to not honor the token within the platform and to consider salvaging Patreos as a simple, fee-based business (something we are not excited about).
Seeing BlockOne restrict their Voice token from U.S. territory (despite the token not being sold) further spells out the impossibility of issuing tokens under current U.S. regulation. We occasionally thought not having expensive lawyers was part of our problem, but the unconditional hostility towards tokens is now clear. Operating as a U.S. company with a tradable token isn't feasible, and we are not able to change jurisdiction.
From this point onwards, the PATR token should be considered defunct, as we will not be using it in any way. In addition, we will likely lock the contract preventing future transfers or interaction. So it goes.
TLDR; The Patreos token, PATR, will not be used within our platform and should here forward be considered inactive and dead.