The US Securities and Exchange Commission (SEC) approved TurnKey Jet, Inc. on Wednesday to raise funds by selling a custom cryptocurrency. This is the first "no objection" letter issued by the SEC for blockchain financing.
This “no objection” letter means that the Florida-based startup can sell TKJ tokens to customers, and the token has only one use, which is to help users book private jets. James Prescott Curry, a former lawyer with TurnKey Jet, received a SEC guarantee that the SEC would not take regulatory action against the startup.
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When the decision was announced on April 3, the SEC referred to a letter sent to them by Curry on April 2. However, according to Curry's explanation to CoinDesk today, the letter yesterday may be his tenth letter to the SEC.
He told CoinDesk:
“I submitted the first draft of this letter for the first time on May 23, 2018, so this is a long but worthwhile process.”
In addition to multiple versions of the letter, Curry estimates that he may have played as many as 50 calls with SEC staff, mostly since last fall. He said that four or five calls ranged from one hour to 90 minutes, and the SEC staff raised detailed questions about TurnKey's proposal.
These longer calls are called "comment calls" by the staff. Curry said that the first call was in October last year, and after that, TurnKey and the SEC began a long process of contact.
During the discussion, the letter was reduced from more than 20 pages to the current 13 pages. Curry said that despite so many contacts, the company was not sure whether it could be released before the SEC's letter this morning.
"They are good poker players," he said.
Coindesk interviewed Curry, who now works on two technical committees of the Florida Bar Association, detailing how he led TurnKey into this phase of the business model.
Step 1: Call the Washington side
The US Securities and Exchange Commission (SEC) has always wanted entrepreneurs to take the initiative to contact their staff first and then carry out activities. That's what TurnKey does.
“TurnKey Jet is highly regulated,” Curry said. It has links to multiple transportation and public safety agencies, which makes the company hesitant to enter the controversial ICO field.
"We decided to start with the SEC, not invest any money," he continued. "We really think this is totally impossible."
“We decided to contact the SEC before investing any money,” he continued. “We really think this is a risky bet.”
Although a positive step has been taken, it is worth noting that despite the SEC’s “no objection” letter, this does not mean that a sin-free gold medal has been obtained.
A source familiar with the internal processes of the SEC told CoinDesk:
"The 'no objection' letter sets out the conditions that the issuer will follow in order to ensure that the SEC does not interfere. It is not binding on the SEC, but it is a very powerful letter."
Why use tokens?
Bank hours restrictions have created a problem for the charter industry.
“The rich are likely to need wire transfers at any time, but they are subject to bank hours.”
He explained that if the money is not paid, the plane will not take off. Traditional financial channels can take too long.
If you have a token, TurnKey can prepay or buy tokens from other members of the final network. If it works well, even the last tokens can be exchanged for value with cryptocurrencies such as Bitcoin. The limitations of the traditional banking industry prompted the company to seek another option through the SEC.
Curry said that from his first letter to the SEC, there has been little change in facts. But he did mention a noteworthy adjustment: When TurnKey first filed an exemption request, it mentioned Ethereum as a potential blockchain for running its tokens. The last letter has nothing to do with which blockchain technology it will use.
Curry said that TurnKey will begin investigating the "post-acceleration" option and point out that it is completely impossible to build its own solution.
"We will not invent our own from scratch," he said. He mentioned solutions from Microsoft, IBM and other companies, but did not rule out the public blockchain.
“These tokens will meet the standards,” Curry said. "It won't be any unique token."
What do you think inside the SEC?
Curry said that the factual information provided by TurnKey is the content of the "no objection" letter that the SEC wishes to submit. He added:
"We provided good facts. They said this in one of the calls. It is very easy to test and become a security through Howie. Our model did not pass the Howie test, not a security."
Curry discussed the benefits of the blockchain for the business on the second page of the latest letter, but he also mentioned the 10th and 11th of the newly released distributed ledger guidance document of the US Securities and Exchange Commission (SEC). page. This document describes an online retailer that provides store credits based on cryptocurrencies.
"This is us," he said. "We really became a precedent."