The Reg X exempt offering framework is intended to interact with Safe Harbor X to provide projects that do not meet the requirements of the Safe Harbor an opt-in regulatory framework to issue certain tokens. The Reg X offering exemption and secondary market disclosure framework could enable the public policy framework of securities laws to extend to issuances of Tokens in a way that:
(i) facilitates capital formation and enables peer-to-peer transactions by enacting certain key modifications to laws around exempt securities offerings while minimizing arbitrage opportunities for issuers;
(ii) retains the focus on issuer disclosures while adjusting such disclosures where necessary to interact with the particularized risks posed by these models;
(iii) clarifies what types of token issuances fall beyond the securities laws, subject to certain conditions (see Reg X Safe Harbor);
(iv) mandates secondary markets disclosure with a focus on (i) insiders, (ii) points of control and centralization and (iii) actors with large holdings in the market, while retaining traditional securities law focus on ongoing issuer reporting obligations, protections for retail investors, and enforcement against bad actors; and
(v) attempts to harmonize how these assets and this disclosure regime interacts with existing securities laws and disclosures, including when a token offering might implicate a registration of an issuer’s equity under Section 12(g) of the Exchange Act.