A second Reg A+ offering has just been approved by the SEC.
For those who miss our newsletter earlier this week:
“Reg A+ is part of the Jumpstart Our Business Startups Act, a 2012 law meant to spur job creation. Under Reg A+, companies can raise up to $50 million in a 12-month period with fewer disclosure obligations than in a traditional IPO.
When the JOBS Act became law, Reg A+ offerings were marketed as a way for startups to tap the capital markets without the expense of an IPO. Yet these mini-IPOs, as they are known, have been dogged by lackluster performance and fraud concerns. Nasdaq Inc. and the New York Stock Exchange recently raised listing requirements for Reg A+ companies due to their poor track record.
Some blockchain-based startups have sold tokens under a different SEC provision, Reg D. Those offerings don’t require SEC approval and are limited to accredited investors—companies with assets of at least $5 million and individuals with a net worth of at least $1 million. Anyone can buy shares or tokens offered in a Reg A+ sale.”
Props has already raised $21 million by pre-selling tokens to Union Square Ventures, Comcast, Venrock, Andreessen Horowitz’s Chris Dixon and YouTuber Casey Neistat, so it isn’t raising any money with the RegA+ by selling its tokens like Blockstack. Instead, users earn or “mine” Props by engaging with apps like YouNow, which will award the tokens for creating broadcasts, watching videos and tipping creators. Having more Props entitles YouNow’s 47 million registered users bonus features, VIP status and more purchasing power with the app’s proprietary credits called Bars, which users have bought $70 million-worth of to date.
“Our offering of Props is the first consumer-facing offering of ‘Howey tokens’ to be qualified by the SEC. It makes it the first offering of consumer-oriented utility tokens that the SEC deems compliant, outside of Bitcoin and Ether,” Props CEO Adi Sideman said. While SEC officials have said Bitcoin and Ether aren’t securities thanks to their sufficient decentralization, they haven’t received formal approval. “We used Regulation A+ (Reg A) for this qualification, so that Props may be earned by, and provide functionality to, non-accredited investors, users, apps and validators, in compliance with U.S. regulations.”
So, reading through the filling document, it’s clear this is very similar to Blockstack’s offering: these are utility tokens with no equity, voting rights, or revenue share associated with them. They’re just speculative vehicles which we should be pretty familiar with in the crypto space.
“Props enables us to turn creators into stakeholders in the network, meaning they become partners in the success of the network. It’s an important tool for us to better incentivize and align with the most important users of our apps,” PeerStream CEO Alex Harrington writes. “Props abstracts, for us as developers, the technical and regulatory complexity associated with blockchain-based tokens, through a simple set of APIs that we can use to integrate the token into our apps’ experience.”
With Blockstack and Props having pioneered the RegA+ approach, we could see more companies filing to use this method of raising money or sharing stakes with their users.
As I talked about yesterday, this is a massive development for the industry and pushes us towards more adoption and recognition.
Good things ahead.