Securities Clarity Act

I 118TH CONGRESS 1ST SESSION H. R. 3572 To amend the securities laws to exclude investment contract assets from the definition of a security. IN THE HOUSE OF REPRESENTATIVES MAY 22, 2023 Mr. EMMER (for himself and Mr. SOTO) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the securities laws to exclude investment contract assets from the definition of a security. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Securities Clarity Act’’. 4 SEC. 2. SENSE OF CONGRESS; PURPOSE. 5 (a) SENSE OF CONGRESS.—It is the sense of Con- 6 gress that— 7 (1) among the ways that participants in the 8 digital asset industry have raised capital and earned 9 revenue is through arrangements in which investors 10 VerDate Sep 11 2014 05:23 Jun 13, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3572.IH H3572 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 3572 IH provide funds for the development of blockchain- 1 based protocols in exchange for digital assets or the 2 future delivery of digital assets to be used in those 3 protocols; 4 (2) although certain of those fundraising ar- 5 rangements may be deemed to be ‘‘investment con- 6 tracts’’ within the meaning given to that term in 7 section 2(a) of the Securities Act of 1933 (the ‘‘Se- 8 curities Act’’), the underlying assets sold pursuant 9 to these arrangements are frequently not themselves 10 inherently securities as defined in section 2(a) of the 11 Securities Act and, like other assets sold pursuant to 12 investment contracts in the past, do not become se- 13 curities as so defined merely because they are sold 14 pursuant to an investment contract; 15 (3) under SEC v. W.J. Howey Co., 328 U.S. 16 293 (1946), and its progeny, the Federal courts 17 have consistently held that ‘‘an investment contract, 18 for purposes of the Securities Act, means a contract, 19 transaction, or scheme whereby a person invests his 20 money in a common enterprise and is led to expect 21 profits solely from the efforts of the promoter or a 22 third party’’, and have not endorsed the notion that 23 an asset underlying an investment contract (for ex- 24 ample, the orange groves sold in Howey) is also con- 25 VerDate Sep 11 2014 05:23 Jun 13, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3572.IH H3572 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 3572 IH ferred ‘‘security’’ status merely as a result of its 1 being sold pursuant to the relevant contract, trans- 2 action, or scheme; 3 (4) although the distinction between an invest- 4 ment contract, which is a security, and the assets 5 sold pursuant to it had been well-settled for pur- 6 poses of section 2(a) of the Securities Act, the two 7 have been unnecessarily conflated in the context of 8 digital assets; and 9 (5) this new approach, which conflates an in- 10 vestment contract and the asset sold pursuant to 11 that contract or scheme, differs from the approach 12 taken in many other major jurisdictions around the 13 world, has discouraged development of the digital 14 asset sector in the United States, and has hindered 15 innovation in that industry here without providing 16 concomitant benefits to those who enter into invest- 17 ment contracts for the purpose of acquiring digital 18 assets. 19 (b) PURPOSE.—The purpose of this Act is to clarify 20 and codify that an asset sold pursuant to an investment 21 contract, whether tangible or intangible (including an 22 asset in digital form), that is not otherwise a security 23 under the Act, does not become a security as a result of 24 VerDate Sep 11 2014 05:23 Jun 13, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3572.IH H3572 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 3572 IH being sold or otherwise transferred pursuant to an invest- 1 ment contract. 2 SEC. 3. TREATMENT OF INVESTMENT CONTRACT ASSETS. 3 (a) SECURITIES ACT OF 1933.—Section 2(a) of the 4 Securities Act of 1933 (15 U.S.C. 77b(a)) is amended— 5 (1) in paragraph (1), by adding at the end the 6 following: ‘‘The term ‘security’ does not include an 7 investment contract asset.’’; and 8 (2) by adding at the end the following: 9 ‘‘(20) The term ‘investment contract asset’ 10 means an asset, whether tangible or intangible, in- 11 cluding assets in digital form— 12 ‘‘(A) sold or otherwise transferred, or in- 13 tended to be sold or otherwise transferred, pur- 14 suant to an investment contract; and 15 ‘‘(B) that is not otherwise a security pur- 16 suant to the first sentence of paragraph (1).’’. 17 (b) INVESTMENT ADVISERS ACT OF 1940.—Section 18 202(a)(18) of the Investment Advisers Act of 1940 (15 19 U.S.C. 80b–2(a)(18)) is amended by adding at the end 20 the following: ‘‘The term ‘security’ does not include an in- 21 vestment contract asset (as such term is defined under 22 section 2(a) of the Securities Act of 1933).’’. 23 (c) INVESTMENT COMPANY ACT OF 1940.—Section 24 2(a)(36) of the Investment Company Act of 1940 (15 25 VerDate Sep 11 2014 05:23 Jun 13, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3572.IH H3572 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 3572 IH U.S.C. 80a–2(a)(36)) is amended by adding at the end 1 the following: ‘‘The term ‘security’ does not include an in- 2 vestment contract asset (as such term is defined under 3 section 2(a) of the Securities Act of 1933).’’. 4 (d) SECURITIES EXCHANGE ACT OF 1934.—Section 5 3(a)(10) of the Securities Exchange Act of 1934 (15 6 U.S.C. 78c(a)(10)) is amended by adding at the end the 7 following: ‘‘The term ‘security’ does not include an invest- 8 ment contract asset (as such term is defined under section 9 2(a) of the Securities Act of 1933).’’. 10 (e) SECURITIES INVESTOR PROTECTION ACT OF 11 1970.—Section 16(14) of the Securities Investor Protec- 12 tion Act of 1970 (15 U.S.C. 78lll(14)) is amended by add- 13 ing at the end the following: ‘‘The term ‘security’ does 14 not include an investment contract asset (as such term 15 is defined under section 2(a) of the Securities Act of 16 1933).’’. 17 Æ VerDate Sep 11 2014 05:23 Jun 13, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H3572.IH H3572 pbinns on DSKJLVW7X2PROD with $$_JOB