The U.S. Securities and Exchange Commission has given a second blockchain company the green light to sell tokens without registering them as a security.
Gaming startup Pocketful of Quarters (PoQ) was issued a no-action letter by the SEC’s Division of Corporation Finance (DCF) on July 25 for its plan to sell Ethereum-based Quarters tokens. These tokens will be used as in-game currencies on gaming platforms, and will be transferable from one game to another, even across platforms.
The no-action letter was issued by the SEC staff, and isn’t binding on the SEC commissioners, who actually vote on enforcement actions. That said, the commission generally follows staff recommendations. On April 3, the SEC sent its first no-action letter to Turnkey Jets, whose TKJ tokens can only be used to purchase rides on its private jets.
PoQ is notable for having a sixth grader, George Weiksner, as CEO and co-founder. The fact that the COO and other co-founder is his father Michael Weiksner, a general partner at venture capital firm Rostrum Capital, tempers that rather unusual strategy.
In the letter pre-approving the token offering, Jonathan Ingram, chief legal advisor for the DCF’s FinHub, made clear that the Quarters tokens must be usable only for gaming, and cannot be sold by players. The tokens will have to be usable only on the PoQ platform and held in PoQ wallets that do not allow players to exchange them among themselves. The quarters tokens will also be a stablecoin with a fixed value.
Only the approved game developers and “influencers” contracted to help the token build its base “will be capable of exchanging Quarters for ETH,” Ingram wrote, adding that they will only be able to exchange those Quarters tokens for ether coins “at pre-determined exchange rates.”
In addition, Ingram specified that the tokens must be immediately usable at launch.
So far, PoQ has not listed any games that have signed onto the platform, although it promises that it “will have some great games.”
The firm said game developers will use the Quarters as prizes for completing in-game achievements and as rewards for tournaments held in multi-player competition games such as Fortnite and PUBG. The company gave the example of Fortnite players using its in-game currency to obtain new skins for their characters.