That’s the question crypto innovators have had to come to terms with since the concept of “airdrops” – or the practice of gifting tokens in massive giveaways – has come under the scrutiny of government regulators.
But with the launch of a new product Wednesday, CoinList, an initial coin offering (ICO) facilitator spun out of the renowned startup incubator AngelList, is looking to streamline the process of airdrops in a way that doesn’t run afoul with the law.
Aptly named Airdrops, the product runs users through compliance checks and attestations so that a token issuer can give CoinList’s users free tokens. On top of that, if the issuer is looking for users that meet certain criteria (be it a profession or location), they can verify that users actually fit those backgrounds.
In this way, CoinList CEO Andy Bromberg believes he has found a way to enable airdropped offerings at a time when many in the industry are looking for a compliant service. Token issuers themselves have had no shortage of issues here, with some, including video-monetization service Stream, even backing off the concept altogether because of the regulatory uncertainty.
Indeed, the SEC hasn’t taken a formal stance on how it views crypto tokens delivered through ICO, airdrops or other forms of sales and giveaways, but it’s clear regulators are currently investigating that question.
Still, Bromberg is confident in his assembled solutions, and in interview, he hinted at dialogue with regulators that would attest to the viability of the service.
“In our typical compliance first mindset, we sat down and said: Is there a way to pull this off without violating securities laws? And what we came to is the compliant Airdrops product,” Bromberg told CoinDesk.
“I can’t comment on individual discussions with the SEC. What I can say is we are in frequrent communication with them and — based on our understanding of securities law — we are very comfortable with this.”
Not only does the startup believe it has a solution for working under existing securities law, but it’s also opening up its existing user base of past investors to new token issuers. Once users have gone through the company’s compliance flow, they will be verified to receive airdrops, and CoinList will take a nominal fee from users (less than $1 per airdrop) to accept new tokens.
To date, according to its website, CoinList has run $850 million worth of token sales through its platform, representing what could be a vast pool of people interested in investing and taking part in future crypto tokens.
Compliance as a service
While that pool of potential investors will likely be attractive for token issuers, Coinlist’s product is opt-in – a feature added to reduce spam and mitigate the security threats that have become a common annoyance from crypto enthusiasts involved in such offerings.
Also, CoinList says it’s only willing to work with token issuers that are focused on complying with the law. And that’s partly because CoinList will be promoting these projects for issuers.
Still, CoinList’s Airdrops product seems to be set up whereby all the compliance effort is offloaded from the issuer, which many issuers will like since many are not securities law experts.
CoinList’s product allows for airdrops that might fall under Regulation S and Regulation D and will also collaborate with AngelList spin-off Republic, which has a license to sell securities under limited conditions to non-accredited investors using Regulation CF.
The company is also doing a country-by-country analysis to determine what sorts of checks issuers will need to do in order to airdrop to users around the world.
Depending not only on the goals of the issuer and who they want to give to, different levels of know your customer (KYC) and anti-money laundering (AML) requirements will be needed, and whether issuers can to both accredited and unaccredited investors or one or the other…