Telegram has denied its Gram token is a security, refuting allegations made by the U.S. Securities and Exchange Commission (SEC).
In a new court filing, the messaging app asked the U.S. courts to dismiss the action raised by the SEC, rejecting suggestions that its token sale was an unregulated securities offering. According to the filing, Telegram is excluded from legal definitions of a security because it is available only to sophisticated, accredited investors, in line with federal registration exemptions.
Plaintiff’s claims are without merit as Telegram‘s private placement to highly sophisticated, accredited investors was conducted pursuant to valid exemptions to registration under the federal securities laws and Grams will not be securities when they are created at the time of launch on the TON Blockchain.
The filing goes on to accuse the securities regulator of “regulation by enforcement,” claiming the SEC failed to provide “clear guidance” of its views on interpreting and applying the law to token sales.
It stated, “Plaintiff has engaged in improper ‘regulation by enforcement’ in this nascent area of the law, failed to provide clear guidance and fair notice of its views as to what conduct constitutes a violation of the federal securities laws, and has now adopted an ad hoc legal position that is contrary to judicial precedent and the publicly expressed views of its own high-ranking officials.”
The filing says Telegram had chosen to engage with the SEC “voluntarily” ahead of the sale, but that the regulator had failed to offer guidance or advice before initiating an enforcement action.
Noting that its Gram tokens are yet to be created, Telegram said “if and when they do, they will constitute a currency and/or commodity—not securities under the federal securities laws.”
Telegram has frozen sales of its token since October after a court order ruled more time was required to “resolve the legal issues at the heart of the matter.”
The first batch of Gram tokens was initially expected to be delivered by the end of October.
The court will now consider the arguments in Telegram’s submission, before deciding whether to dismiss the claims against the app.
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