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SEC Issues its First Cryptocurrency No-Action Letter

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In a first, on April 3, 2019, the US Securities and Exchange Commission issued its first cryptocurrency No-Action Letter.  The Letter was issued to TurnKey Jet Inc. (“TKJ”), a jet-leasing business. The company will issue the TKJ digital tokens to people who sign up for its membership program and the members can then use the tokens to charter a private jet.  Based on the Letter, TKJ may offer and sell its tokens without registration under the Securities Act and the Exchange Act.  The action was taken because of the following representations that TKJ made to the SEC:

  • TKJ will not use any funds from Token sales to develop the TKJ Platform, Network, or App, and each of these will be fully developed and operational at the time any Tokens are sold;
  • the Tokens will be immediately usable for their intended functionality (purchasing air charter services) at the time they are sold;
  • TKJ will restrict transfers of Tokens to TKJ Wallets only, and not to wallets external to the Platform;
  • TKJ will sell Tokens at a price of one USD per Token throughout the life of the Program, and each Token will represent a TKJ obligation to supply air charter services at a value of one USD per Token;
  • If TKJ offers to repurchase Tokens, it will only do so at a discount to the face value of the Tokens (one USD per Token) that the holder seeks to resell to TKJ, unless a court within the United States orders TKJ to liquidate the Tokens; and
  • The Token is marketed in a manner that emphasizes the functionality of the Token, and not the potential for the increase in the market value of the Token.

Representatives of the SEC have previously spoken about the possibility of issuing no-action letters in connection with token sales and this first one provides some guidance as to the factors that the SEC considers important.  Of course, because the TKJ Token has so many restrictions, it lacks the allure that tokens often have for cryptocurrency investors.  But those factors were obviously not an important reason why TKJ wants to use the Tokens.  Because of the limits placed on the Tokens, especially the bar on trading them in the open market, it is unclear how many other companies will follow suit.  But that might be exactly what the way the SEC wants it.

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David Zaslowsky is partner in the Litigation Department of Baker McKenzie's New York office. He helps companies solve complex commercial disputes in arbitration and litigation, especially those involving cross-border issues and Section 1782 discovery. David has a degree in computer science and, as a result, has worked on numerous technology-related disputes, including, most recently, those involving blockchain and artificial intelligence. In April 2025, Attorney Intel named David one of the top 25 blockchain lawyers in the country. He is the editor of the Firm's blockchain blog and co-editor of the firm's International Litigation & Arbitration Newsletter. David has been included for a number of years in the Chambers USA Guide and Chambers Global Guide for his expertise in international arbitration. He also sits as an arbitrator and is on the roster of arbitrators for a number of arbitral institutions. David sits on the Board and chairs the governance committee of the New York International Arbitration Center, and is a founding member of the International Arbitration Club of New York. For over 35 years, he has written and spoken often on the subjects of arbitration and international litigation.

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