Addison Cameron-Huff, Cryptocurrency Lawyer

I've completed my series of blog posts about launching a token as a Canadian business, but it's 23000+ words, so probably most people in 2026 aren't going to be reading it, they're going to be LLMing it.

Most of my clients are heavily using LLMs already, and I've even launched my own production Slack bots for contract pre-reviews, regulatory pre-review, etc.

You can do your own prompting based on my blog post series by copying and pasting the text below. Write your own prompt by starting with "I have a question about launching a token in Canada: [insert your question]. Base your response on the following, and reference the particular title and URL when answering if it is helpful for forming your answer: [copy and paste the below]".

Here is a blog post series by a Canadian lawyer: Addison Cameron-Huff. It is broken into parts that are each available at a particular URL. Carefully read each one as part of your answer. *** Part 1: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business/index.html Launching A Token As A Canadian Business Part 1: What If Tokens Are Allowed But No One Knows It? PUBLISHED ON MARCH 26TH, 2026 Launching a token as a Canadian business is possible and the legal environment is better now than probably any time in the last decade. This is a legal take that probably hardly any lawyers in Canada share, and I hope that this blog post changes their views. If you're a skeptic and your view isn't changed, at least you'll see the rationale for a different point of view: that tokens are legal, can be launched in Canada, and can be genuienly an advancement over the non-digital world. Over the next week or so I'll be posting a series of blog posts explaining why I have this view. This will be a series because there's no such thing as a token. There's a variety of different types of tokens, with different attributes that determine their legal risk. This is obvious to industry watchers, and is being made clear in US guidance that's no longer simply painting tokens with the broad (negative) brush of security. There's a recognition now at the federal level in the US that nuance is the name of the game, and that digital assets aren't de facto illegal. And what happens in America soon comes to Canada. APPLICATION OF THE FEDERAL SECURITIES LAWS TO CERTAIN TYPES OF CRYPTO ASSETS AND CERTAIN TRANSACTIONS INVOLVING CRYPTO ASSETS The most recognition of the nuance of tokens comes in the form of a 68 page report published jointly by the SEC and CFTC. This guidance was news to many, but not to practitioners, who've been talking about these points for years. This is now the phase where a new consensus develops, and technologists/business people can start to think about launching tokens in their home jurisdiction, rather than going abroad. The American view is not unique to the American legal landscape, and the change in view in the States shows how views, rather than hard law, have driven a lot of the discussion over the last decade. The same is true in Canada. THE CAYMAN FOUNDATION PATH: THE STATUS QUO The de facto choice for token projects of the last many years has been the Cayman Islands. I've helped set up numerous foundations, and they've successfully launched digital assets that have been used by hundreds of thousands or millions of people. These are now well-worn paths that are great for Canadian founders and participants, but it's too narrow to say that this is the only path. There's downsides to going abroad, including costs, challenging legal forums for disputes, stigma against offshore, banking difficulties, and more. This blog post series isn't a campaign against the Cayman Foundation structure (which I think is great, and has often been the best choice for token projects), but rather an exploration of pursuing what most people think is a non-starter: launching a token in Canada. 2026 American guidance helps to show where Canada will go. But people overestimate the degree to which regulatory guidance in Canada even applies to the tokens they have in mind. Hostile regulators have managed to scare people more than they've made the case that tokens writ large can't be done. I hope this series of posts gives people a chance to reflect on how right that commonly held view is, and think more about what can be done in Canada. Because the potential for digital assets is enormous, and growing. For all the ups and downs of markets, the trend of technology is clear: upwards. Stablecoins have dramatically expanded in recent years, from a niche market used by crypto traders for arbitrage to a multi-hundred dollar billion business globally. That's just one of the areas where digital assets are showing their worth. Where else? As means of monetizing smart contracts like DEX systems, rewards layers, decentralized debt systems, and more. Recently there's been a raft of launch of tokens for stocks and the S&P500 (which I won't be covering in the next few posts because that's a novel system that's so far been confined to offshore launches). Tokens with useful applications are booming, as people finally start to figure out how to use them properly. More importantly, the infrastructure has been developing over the last years such that tokens can take advantage of the extensive tool and infrastructure on Solana and Ethereum. USEFUL TOKENS AND NEW POSSIBILITIES Tokens are going beyond the failures of the 2017/2018 ICO boom that was mostly composed of useless tokens that were poorly understood (or fraudulent). Over the next few years I think they'll be a new wave of innovation in this space, whether driven by RWAs (real world assets), smart contract monetization, or other angles yet to be developed. There's gold tokens (XAUT), S&P500 tokens (SPYx), stablecoins (USDC), and DEX fee-sharing tokens (RAY) that didn't exist back in 2017-2018. While many people are only aware of the hype, frauds, and get rich quick schemes that easily makes the news, there's been billions poured into developing new models, and they're starting to bear fruit. Canadians are already a part of this, but the current consensus is that they can only be a part of it through offshore structures. I think that view is incorrect. I think there's a lot more that can be done in Canada, and with the right approach, by the right people, someone will clearly show the consensus to be wrong, and now's the right time to do it. The rest of this series will explain why by looking at the guidance in Canada, the laws, technological developments over the last five years, and what's happening abroad. *** Part 2: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-two/index.html Launching A Token As A Canadian Business Part 2: Federal Regulators (BoC & FINTRAC) PUBLISHED ON MARCH 27TH, 2026 In the first part of this series I noted some of the reasons why the time is right to think about launching a token in Canada. The enormous change in the posture of American regulators (without underlying legislative action) is the reason to think that the same will one day happen in Canada. But the starting point for understanding why things have changed is to look at how things were. Anyone with a deep understanding of the regulatory guidance and applicable laws, like loyal readers of this blog, may want to skip to part four of this series (part three concerns securities laws). WHY DO PEOPLE THINK YOU CAN'T LAUNCH A TOKEN IN CANADA? What have Canadian regulators said about crypto? Why did that scare so many entrepreneurs off and lead to lawyers telling their clients not to launch tokens? What exactly did the regulators say, and how does that impact how we should view the legal landscape for new tokens? But first, a look at the regulators who are in play, and what laws have been passed. REGULATORS: FEDERAL VS. PROVINCIAL The government has always been the #1 fear of projects looking at launching tokens in Canada. Private litigants aren't in scope for this blog series because it's always possible to do something wrong and be held to account for it, and this hasn't held back tokens in other jurisdictions that have the same common law system. Private action was never an important factor in the reluctance of Canadians to launch tokens from their home territory. The major factor has always been regulators. Specifically: securities regulators. But, to a lesser extent, there's two relevant federal regulators: Bank of Canada and FINTRAC. Since federal regulators are the least problematic, it's useful to start with what they've said (as guidance/policy interpretations) and what their governing laws say. FEDERAL REGULATION: PCMLTFA Canada's principal anti-money laundering (AML)/counter-terrorist financing (CTF) law is the PCMLTFA (or, for people who don't live and breathe AML: Proceeds of Crime (Money Laundering) and Terrorist Financing Act). This was one of the first statutes in the world to specifically address cryptocurrency. I wrote about it back in 2014, 12 years ago, when the amending legislation was first introduced in Parliament. Following the amendments to the PCMLTFA, dealing in cryptocurrency became a registrable category of Money Services Business (MSB). What that means is that companies that are dealers need to register, file reports about suspicious activities, and more. On first glance, this wouldn't seem to impact a company launching a token. But many lawyers have questioned that assumption. Below are the definitions from the law that show where the issue might lie in this relatively unexplored question: The regulation defines virtual currency as: a digital representation of value that can be used for payment or investment purposes, that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds ... [and then another clause irrelevant to the issue at hand] And the rule is only relevant to: (h) persons and entities that have a place of business in Canada and that are engaged in the business of providing at least one of the following services: ... dealing in virtual currencies There are two key ways that these definitions work together to keep newly launched tokens out of the ambit of FINTRAC: 1) the tokens don't qualify as virtual currency; or b) the selling of the tokens doesn't qualify as being in the business of being a dealer in virtual currency. Not A Virtual Currency Under The PCMLTFA? Is a newly created token a digital representation of value? Not really, unless it's a stablecoin, but the way this has been interpreted is to include dealing in bitcoin, with the idea being that it's digitally represented, and has value, rather than it being a digital representation of value. PI-11495 (a FINTRAC-published interpretation bulletin) assumes that bitcoin is a virtual currency, and the entire purpose of the amendment to the law 12 years ago was to include bitcoin. Exchanging One odd consequence of the very specific definition of exchange is found in PI-10644, which explains that if a company sold virtual currency to people in exchange for airline miles, the definition would not be met, because one leg of the transaction is neither funds nor virtual currency. This suggests a company could sell virtual currency in exchange for anything other than funds or virtual currency, but there's not many token projects that could actually avail themselves of this in the initial phase of their operations (other than perhaps paying people in tokens). So can a company sell its own tokens, to buyers (for $/crypto), without registering under the PCMLTFA? Not if it can be readily exchanged. But newly launched tokens generally can't be readily exchanged, because no one is offering that service. Perhaps this isn't true for tokens that launch via DEXs, but even there, it's not that exchange is impossible but rather than exchange has to be readily available which is something more than simply being available somewhere. Does this phrase mean readily exchanged at a Canadian business? Or anywhere? Fortunately, probably not many tokens would need to get to that question, because the threshold question of used for payment or investment purposes probably wouldn't be met. If the company selling the token doesn't accept it for payment, on initial launch, that leaves only investment purposes. But, tokens should generally not be launched for that purpose anyway, because that engages with securities laws (explained in part three), although it's possible that the PCMLTFA definition of investment is something different than what's meant in provincial securities law. In short: the actual boundaries of what qualifies as crypto dealing under the PCMLTFA are hard to identify, and not well-tested. FINTRAC may not even have considered the issue of whether a newly created token sold by its creator might qualify as virtual currency dealing. The reason for this is not so much oversight, as that the target of the law is companies that let people convert money to crypto and back again, which is relevant to anti-money laundering. A one-way sale of newly-created tokens, on a limited time basis, is not in the same category of risk. Not A Dealer Maybe the above points are a problem, but a company that sells tokens might still be in the clear if they aren't in the business of .... dealing in virtual currencies. This is maybe an arguable point, but few useful tokens would be sold by companies that see their activities as being focused on dealing in their own token. A company that exists purely or primarily for that purpose would be caught by this, and its obvious the types of businesses this rule is meant to capture. But a company that incidentally sells its own token, and does so as part of a different mission, and where that different mission takes up most of the company's time and efforts? I would think they're generally not going to be a dealer. Especially if the public doesn't view them in the same way as a dealer or exchange service. The manner in which newly-created tokens are sold just does not look like dealing, and at the end of the day, that may be dispositive. FINTRAC is looking for certain activities, and the further away a company is from what those are, the less interested they'll be in trying out novel stretches of the law. In the most common scenario, a company only sells some tokens for a limited period of time, and then it pursues other business activities. Even if it might, at a given point in time, operate in a way similar to a dealer, that isn't their overall goal, and it's a transitory phase rather than a business model being pursued. In most cases, probably a newly created token being sold for a while by its creator, in connection with a larger business objective, wouldn't be a dealer. And the lack of enforcement along these lines by FINTRAC further supports this interpretation as either being correct, or at least the de facto stance by FINTRAC (which is also sufficient for a token project!). FINTRAC has, to my knowledge, not enforced the view that every newly created token sold is one that ought to be done under the PCMLTFA framework. Instead, securities regulators have taken up that challenge. BANK OF CANADA: NOT A SIGNIFICANT REGULATOR The Bank of Canada has recently taken on the role of regulating PSPs under the Retail Payment Activities Act, which was created in response to protesters (or, in the Prime Minister's words: racists, misogynists, insurrectionists and a fringe minority) crowdfunding opposition to the federal government during Covid times (using mostly funds but also crypto). Despite its genesis, the RPAA is not focused on tokens or cryptocurrency. It's more focused on the crowdfunding platforms that protesters used to raise money, and the MSBs that are generally now subject to a second regulator. So long as a company selling tokens isn't holding user funds before selling them a token, and isn't involving themselves in sending money to third parties, or routing money, the RPAA will probably not apply. That said, stablecoins will soon be introduced into the RPAA framework by the budget act that's about to be passed into law. So for a company making stablecoins, they would want to pay attention to the RPAA, while for most regular projects making a token that serves some purpose in a larger system, they would be hard-pressed to conduct their business in a way that falls afoul of the Bank of Canada's jurisdiction over retail payment activities. CONCLUSION The federal regulators that have been most active in relation to cryptocurrency are not the barriers to launching tokens. There just isn't a federal law that bars people from making and selling blockchain tokens. SECURITIES REGULATORS Securities law has been the biggest topic for token-based projects, and accordingly, the entire next part of this series explores that angle. *** Part 3: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-three/index.html Launching A Token As A Canadian Business Part 3: History Of Securities Regulation In Canada PUBLISHED ON MARCH 27TH, 2026 Part two of this series dealt with federal regulators in Canada, which is a relatively simple story: they're simply not very relevant to a company launching a token (unless it's a stablecoin). This part deals with the thornier topic of securities regulators, who have been the most vocal governmental opponents of new token launches. UNDERSTANDING THE SECURITIES REGULATOR DILEMMA Many crypto industry people hold a negative view of securities regulators, in part because they fail to realize their role. Securities regulators exist to enforce securities laws. They do not exist to enable new models, improve the economy, or bring about a new golden age of decentralization. The mandate is to regulate securities, which is a deliberately broad term. What's a security? It's generally something that's an investment (more on this in a minute). If it's not a security, that's a different regulator's problem (or, a problem for common law courts.) This is the same pattern across most of the countries in the world. And token launches have run into very similar issues around the world. Why? To understand how this ended up roping in units of account in decentralized databases that use private/public-key cryptography and hash functions, a thing which didn't exist until the 1980s (other than in the secret math departments of intelligence agencies), we have to go back into the history archives. WHEN DID EVERYTHING BECOME A SECURITY? People imagine that laws today work the way they did a century ago. That's not true. Most laws, in most countries, are not written as a series of clear rules to follow. Most significant laws today involve delegating substantial authority to technical experts, who then decide what the rules should be. (They also involve vague definitions that lawyers can fight over - excellent for my profession, not so great for most other stakeholders.) The rules are not clear by design. The design is: preserve maximum flexibility for the government to act when something looks like the sort of thing they're supposed to be doing something about. This is a very modern idea, and it only came about within the last century or so. Originally, the English Companies Acts were about regulation of stocks in companies (today, this is corporate law, not securities law). Stocks emerged in various ways, in various cultures, over many centuries. But the modern corporation as we know it today really emerged in the 1800s, and the English Companies Acts are written in language that's very understandable to today's businessperson. But regulation of stock issuance by companies is not the starting place for our current law, but rather an evolutionary step towards greater legislative control over what was previously a private matter. With widespread companies and stocks came stock markets. Although an invention of the 1600s in the Netherlands, stock exchanges really took off in America in the latter part of the 1800s. Stock markets democratized access to company shares, and when society at large gets involved in any activity regulation often follows. Statutory (as opposed to self-imposed) rules for stock markets emerged in the early 1900s. But still, the laws were about things that no one disputed: stocks or stock markets. It's obvious what a stock market is, and it's obvious what a company is. This is still not the origin of modern securities laws, because at this point in time the laws were still quite clear about the subject matter, and there was little doubt about whether stock regulation applied. American stock market regulation continually expanded until the 1940s, when the modern statutes for the SEC and stock regulation emerged. This led to pressure in Ontario to conform, in part because American regulators were fed up with Canadians soliciting Americans with scammy investments into mining ventures. This followed decades of experience at the state level in the US, following the first blue sky law in Kansas in 1911. These laws were novel, and triggered a US Supreme Court case in 1917, which notes that the subject matter was: any stock, stock certificates, bonds, debentures, collateral trust certificates or other similar instruments (all hereinafter termed 'securities') Here we have the origin of the modern Ontario rules about securities. Over the years, they've added more definitions, but it's still the basic idea of "similar instruments", which is what makes these laws have an uncertain scope. What's similar? It is at this point that securities laws cross over into regulating an uncertain field of things, because what is similar to a stock is in the eye of the beholder. In practice, that means the eyes of the courts. The current Ontario definition of security is so long that I've included it as an appendix at the bottom of this article, but it's clearly drawing on the same concept as the Ohio law that was made based on the Kansas law, with the concept ultimately blessed by the US Supreme Court in 1917. This ushered in the modern world of vagueness. The law moved from regulating shares in companies, or shares on stock exchanges, to regulating things similar to shares, which becomes an open-ended concept. This has led to no end of frustration by people who want to know: what is a security?. Is a token a security? Well, is it similar to a share? How similar does it have to be? Is it about the underlying business, how the thing is sold, expected returns, or maybe how likely someone is to lose money? Everything in the world has some similarities to other things, and how regulators are to think about similarity comes from the courts. SECURITY IS A CATCH-ALL TERM: THE SUPREME COURT OF CANADA DECIDES The Canadian Supreme Court noted in 1977 that the definition of security is really a catch all, of overlapping definitions that aren't clearly defined. Even more than half a century ago, promoters were hard at work coming up with new ideas that tested the limits of what a security is. In the 1977 case, which is the cornerstone of Canadian law about what a security is, the promoters were selling bags of silver coins. That doesn't sound like a security (and isn't: selling silver coins is not a securities business), but they offered margin loans to buy silver, and that's where they ran into the law. The promoters called the silver bags an investment and most people bought on margin (i.e. 35% down payment, which is effectively leveraged speculation on the price of silver). Is that a security? SUPREME COURT DEFINES SECURITIES AS THINGS LIKE SECURITIES: PACIFIC COIN The famous (among securities lawyers) case of Pacific Coast Coin Exchange v. Ontario Securities Commission was the first real test of the idea that the government could regulate so broadly. Bags of silver were not historically considered securities, and if the company had confined itself to just selling silver coins, there never would have been a case. The Ontario Securities Commission (provincial regulator) only disputed the part about allowing people to speculate by paying part of the price of the bags of silver coins. And even then, they weren't actually sure why that was illegal. The OSC argued that the silver bag deals were either investment contracts or evidence of title to or interest in the capital, assets, property, profits, earnings or royalties. And today, they still argue cases like this, arguing that maybe it's one thing, maybe it's another, but it's definitely a security. The Ontario Court of Appeal said they're investment contracts, so there's no need to figure out if they're also the other thing, and then when it went to the Supreme Court only the category of investment contracts was in question. This category is the main category the OSC relies on today to try to capture digital assets within the definition of security. The Chief Justice of the Supreme Court was not keen on the OSC's interpretation. If he'd had his way, the term investment contract would have a far narrower definition in Canada: The term 'investment contract' applies to one of the many kinds of security included within The Securities Act [of Ontario]. It was conceded that the term could not be given a literal meaning as to do so would bring innumerable transactions which have no public aspect within the scope of the Act; and it was common ground that commodity futures contracts were not per se under the Act. It is easy when faced with a widely approved statute for the protection of the investing public to give broad undefined terms a broad meaning so as to bring doubtful schemes under the authority of the statute. However where the Legislature has deliberately chosen not to define such a term which embraces various transactions, of which some are innocent, there is no reason for Courts to be oversolicitous in resolving doubt in the enlargement of the scope of statutory control. Justice Laskin recognized that vague terms shouldn't be interpreted widely, and that the goodness of the cause (fighting fraudsters) doesn't mean we should throw good legal principles out the window. (His actual words are slightly different than the headnote quoted above, but it's more concise and has exactly the same meaning.) What he went on to say was that the case should be decided based on whether or not the financial outcome depends on a market vs. a system controlled by the promoters (Pacific Coin was the only purchaser of the bags of silver). He sought to distinguish that from the American case that the majority of the court relied on to conclude that yes, the law in Canada is the same as that in the United States when it comes to the meaning of security. The court ruled that it should be decided in the same way as the 1946 US Supreme Court case of Howey. They distilled the rule down to this key inquiry: Is there a common enterprise? Are the profits to come solely from the efforts of others?. This is still the rule today in Ontario, and the rest of Canada. THE HOWEY TEST OF 1946 It is at this point that the story shifts back to America, which was in any event the origin of the rules in Ontario (this interplay is a key part of the Canadian regulator system, since American investors are a major force in Ontario business). Today, the Howey Test is still cited in virtually any discussion of whether a digital asset is a security, even though the case was actually about renting orange grove production. Yes, that's right, the regulation of blockchain tokens and renting Florida orange grove production in the 1940s still controls our lives. In law, history is always with us. What was Howey up to? Starting in 1932, Howey's company offered people sales of orange grove land. The land cost more if it had more mature orange trees. Once purchased, Howey's company would service the fields and sell the oranges. People could choose not to use Howey's company, and do it themselves, but only 15% of buyers did and Howey said he was the best at it (which was probably true - they had massive orange grove plantations.) The federal US securities regulator (analogous to the OSC in Ontario) said this was illegal because it was an investment contract. The Florida court said it was fine because they weren't selling investments, they were selling land, orange tree services, and marketing services. The US Supreme Court said it's completely unlawful. How did they get to that conclusion? THE SUPREME COURT DEFINES INVESTMENT CONTRACTS USING THE HOWEY TEST The Supreme Court pointed out that most of the buyers of these odd orange grove deals were non-residents who didn't know anything about citrus growing. Although true, how is that relevant? Because it goes to the idea that the law is for investor protection, and that the less knowledgeable the buyer, the more they need protecting. This is not officially a part of the so-called Howey Test but it is a key part of securities regulation across North America, even today. Regulators regard themselves as standing up for the little guy, and they'll apply the test flexibly to achieve that. And in this, we see the beginnings of modern law, in which rules aren't rules, but are actually guidelines, to be enforced selectively against the people they ought to be enforced against. (This is very popular amongst lawyers, and considered the right and proper way to do things, but the public generally doesn't know that this is how many regulatory schemes work.) As the Supreme Court put it: Form [is to be] disregarded for substance and emphasis ... placed upon economic reality. The first part of Howey notes that the buyers were buying more than fee simple interests in land (i.e. more than property), and by going beyond the normal bounds of property and management services, Howey and his company were stepping into the world of investment contracts. The Supreme Court then goes on to note that the returns from citrus growing depend on the large scale that Howey's company provides, since only with their very large farming operation can the individually owned plots make the 10% returns they advertised. Even though the owners could have cultivated the oranges themselves (and some did), the buyers were depending on Howey's larger scale operation, which was labelled the common enterprise. The fact that some people didn't use the services of Howey's company is immaterial, because what is illegal is offering the possibility, even if it's not actually taken up. So long as the orange grove land owners were offered the services that Howey offered, it's the offering that's wrong, not the land sales, orange grove cultivation services, or sales agent services. The test becomes: Thus all the elements of a profit-seeking business venture are present here. The investors provide the and share in the earnings and profits; the promoters manage, control and operate the enterprise. It follows that the arrangements whereby, the investors' interests are made manifest involve investment contracts, regardless of the legal terminology in which such contracts are clothed. We reject the suggestion of the Circuit Court of Appeals that an investment contract is necessarily missing where the enterprise is not speculative or promotional in character and where the tangible interest which is sold has intrinsic value independent of the success of the enterprise as a whole. The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value. If that's hard to follow, consider reading the 2019 paper by the SEC explaining how they believe this test applies to digital assets. The second paragraph refers the reader back to 1930s orange groves in Florida. BACK TO ONTARIO: INVESTMENT CONTRACTS The Ontario Securities Commission released some of their first guidace about cryptocurrencies in 2017 amidst a boom of ICOs. This guidance was not a new law, but rather the OSC's interpretation of the existing, wide-ranging, catch-all: the investment contract. Side note: the term ICO was a very unfortunate term that was meant to sound like IPO. Since IPOs are the main route for companies to list on stock markets, this obviously attracted regulatory attention. Hardly anyone uses this term anymore. The language the OSC used in its 2017 guidance has clear parallels to the historical source of securities laws, the guiding motivation of supreme courts to protect people, and a clear set up for further moves by the regulator: ICOs/ITOs are generally used by start-up businesses to raise capital from investors through the internet. These investors are often retail investors. An ICO/ITO is typically open for a set period, during which investors can visit a website to purchase coins/tokens in exchange for fiat currency or a cryptocurrency such as bitcoin or ether. The structures of ICOs/ITOs will vary, and they may be used to raise capital for a variety of projects, including the development of a new cryptocurrency, distributed ledger technology, service or platform. Anyone with internet access can create or invest in an ICO/ITO; in many cases, they can do so anonymously. In many ways, an ICO/ITO can be very similar to an initial public offering (IPO). It is absolutely true that many people were illegally raising money using tokens when the OSC issued their guidance. It's also absolutely true that people were treating token exchanges as something analogous to stock markets. But what is much less obvious is how far this view goes, and what exactly it covers. At this point it is worth stopping to point out that in the Canadian and American high court cases, the claim was not that oranges, land, or bags of silver are securities. There must be additional elements on top of these things, because the underlying things are simply property. Had Howey just sold his orange grove land, the US Supreme Court would not have said that is the sale of securities. A recent Ontario Court of Appeal case confirms this idea, by explaining that the sale of condos isn't the sale of securities, but it can certainly be so if it's a part of a larger system. If Howey had just sold orange grove services to owners of land, that would also not be a securities transaction. And if Pacific Coin had just sold bags of silver they'd be merely a dealer in precious metals. Property is not a security, but it can become a part of a security if there's more that happens as part of a larger system. Securities laws create a new regulatory layer over top of assets, whether shares, orange groves, or bags of coins. COMING UP NEXT: OSC/CSA OPINIONS ON THE LAW The next part of this series examines whether the public's take on the OSC's 2017 view has been accurate, and how the OSC's guidance stands up today, 9 years after issuance. Keep in mind that the laws are the same today as they were decades ago, and what's changed is how they are interpeted to fit the facts. Or, how they're enforced. Because modern law is not about clear rules set down by the legislature, and especially not when it comes to securities. Securities law is up for debate, and recently that debate has shifted in the United States towards an understanding that far more is permitted within the realm of tokens than the regulators previosuly telegraphed. APPENDIX A: DEFINITION OF SECURITY UNDER THE ONTARIO SECURITIES ACT Read the statute here. “security” includes, (a) any document, instrument or writing commonly known as a security, (b) any document constituting evidence of title to or interest in the capital, assets, property, profits, earnings or royalties of any person or company, (c) any document constituting evidence of an interest in an association of legatees or heirs, (d) any document constituting evidence of an option, subscription or other interest in or to a security, (e) a bond, debenture, note or other evidence of indebtedness or a share, stock, unit, unit certificate, participation certificate, certificate of share or interest, preorganization certificate or subscription other than, (i) a contract of insurance issued by an insurance company licensed under the Insurance Act, and (ii) evidence of a deposit issued by a bank listed in Schedule I, II or III to the Bank Act (Canada), by a credit union or central to which the Credit Unions and Caisses Populaires Act, 2020 applies, by a loan corporation or trust corporation registered under the Loan and Trust Corporations Act or by an association to which the Cooperative Credit Associations Act (Canada) applies, (f) any agreement under which the interest of the purchaser is valued for purposes of conversion or surrender by reference to the value of a proportionate interest in a specified portfolio of assets, except a contract issued by an insurance company licensed under the Insurance Act which provides for payment at maturity of an amount not less than three quarters of the premiums paid by the purchaser for a benefit payable at maturity, (g) any agreement providing that money received will be repaid or treated as a subscription to shares, stock, units or interests at the option of the recipient or of any person or company, (h) any certificate of share or interest in a trust, estate or association, (i) any profit-sharing agreement or certificate, (j) any certificate of interest in an oil, natural gas or mining lease, claim or royalty voting trust certificate, (k) any oil or natural gas royalties or leases or fractional or other interest therein, (l) any collateral trust certificate, (m) any income or annuity contract not issued by an insurance company, (n) any investment contract, (o) any document constituting evidence of an interest in a scholarship or educational plan or trust, and (p) any commodity futures contract or any commodity futures option that is not traded on a commodity futures exchange registered with or recognized by the Commission under the Commodity Futures Act or the form of which is not accepted by the Director under that Act, whether any of the foregoing relate to an issuer or proposed issuer Part 4: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-four/index.html Launching A Token As A Canadian Business Part 4: The Position Of The Ontario Securities Commission PUBLISHED ON MARCH 31ST, 2026 Part three of this series looked at the historical origins of the modern approach to interpreting what a security is. Now that we know how the courts have decided the fundamental issue for orange groves and bags of coins, we can look at how regulators have applied this to digital assets. (If any of the terms below are unfamiliar, please go back and read part three and this will make more sense). Below is a complex dive into regulatory guidance. Keep in mind what all of this shows: the OSC has never said that all crypto is a security, and they have consistently referred to tokens in reference to raising capital, which few disagree is a regulated activity. The guidance isn't wrong, it's the interpretation of that guidance that is. Furthermore, in the application of this guidance, there isn't one decided case to point to that says whether any non-stablecoin token is a security, other than in connection with an investment/fraud scheme. But there is a 2024 CMT decision that suggest the OSC has pushed beyond the bounds of the law in their characterization of tokens. STAFF NOTICES: THE OSC'S PRIMARY MEANS OF EXPRESSING VIEWS OSC Staff Notices are the main regulatory instrument that securities lawyers point to when discussing the legality of crypto under the Ontario Securities Act. The views of other provincial securities regulators differ, but since Ontario is 3/4 of capital activity in Canada and the OSC is the largest regulator (which regularly works with the others to align views), we can simplify the discussion by just looking at Ontario. The OSC issues staff notices that are non-binding guidance and views expressed in a staff notice do not necessarily represent the views of the Commission. And yet, these are treated as law, because the OSC regularly refers to its own views, and it tells everyone that's what the law is. Technically, policies may not be prohibitive or mandatory in character. FUNDS, PLATFORMS, AND TOKENS The OSC has three streams of work: regulation of investment funds (which is undoubtedly within the domain of the OSC), regulation of platforms that have chosen to register with the OSC (i.e. companies willingly agreed to follow the specified rules), and then rules of general application. Again, technically staff notices aren't rules, but since they function as rules, they'll continue to be referred to as that. Platforms are companies that offer crypto exchange/dealer services and which have submitted extensive paperwork with the OSC and agreed to a great many rules. Funds are investment funds, which may want to buy crypto. Neither of these two categories are of interest to this series because they concern registrants. Our real interest is in companies that have not registered, and have not signed up for a special regulatory system. That said, a few of the staff notices about platforms have comments that reveal the OSC's view on crypto in general. THE OSC'S FIRST PUBLIC ANNOUNCEMENT: 2014 FRAUD WARNINGS The OSC is not proud of their first announcement about crypto. They've deleted it from their website. It only lives on in the form of quotes on a third-party website, and in my memory. This announcement warned people about buying crypto because of fraud risk and notes that there's uncertainty about what crypto is, noting that maybe it's a security, maybe it's money, or something else. They were right to warn about frauds and ponzis, and they were right to keep an open mind about what crypto is. 2017/2018 ICO ERA: CSA STAFF NOTICE 46-307 By the summer of 2017 crypto markets were beginning another rise, and interest was growing. And where there's public interest, there's regulators. In CSA Staff Notice 46-307 the OSC told everyone what it thinks: Many of these cryptocurrency offerings involve sales of securities. The OSC says maybe they're securities or maybe they're derivatives. Or, maybe they're securities and derivatives. Every ICO/ITO is unique and must be assessed on its own characteristics. For example, if an individual purchases coins/tokens that allow him/her to play video games on a platform, it is possible that securities may not be involved. However, if an individual purchases coins/tokens whose value is tied to the future profits or success of a business, these will likely be considered securities. The guidance provides no statutory references or case law, and just says that they've considered the relevant case law. That's hardly a legal opinion. The footnote: The Supreme Court of Canada's decision in Pacific Coast Coin Exchange v. Ontario (Securities Commission), [1978] 2 S.C.R. 112; as well as the various judicial and administrative decisions that have been issued subsequent to that case. This is really just a reference back to Pacific Coin, which provides only a framework for thinking about these problems, rather than an answer. The OSC provides no further details on how anyone would decide whether a token is a security or not, but the overall document provides a major hint: Cryptocurrency offerings can provide new opportunities for businesses to raise capital and for investors to access a broader range of investments. In other words: if it's raising capital, it's a security. The focus is on that angle. Follow up guidance in 2018 said that the 2017 guidance was about things that are investment contracts or are otherwise securities. This is the same regulatory strategy the OSC pursued 50 years earlier with Pacific Coin, and which was never resolved then either, since only the investment contracts portion went to the Supreme Court. EXCHANGE REGULATION: CONSULTATION PAPER 21-402 In 2019 the OSC and other securities regulators sought comments on their regulatory scheme for exchanges. (Later, they ignored basically all of the comments and went forward with their plan.) Now that the 2017/2018 ICO boom was over, the regulators moved their attention to the latest term of art: utility tokens. This term was invented by US lawyers to try to say that tokens aren't securities, because they were seeing the same view in the US as Canadians were dealing with locally. The guidance document explains the term as: an industry term often used to refer to a token that has one or more specific functions, such as allowing its holder to access or purchase services or assets based on blockchain technology. Again, the OSC comes back to the idea of raising capital. This is the most fundamentally misunderstood point about the OSC's views on securities, because it's obviously true that they regulate raising capital, but that doesn't mean they regulate tokens in general: We have seen many businesses offering tokens to raise capital for the development of their software, online platform or application. In many of these cases, the offering will involve securities despite the fact that the tokens have one or more utility functions. In other words: mixing raising capital with something else doesn't mean the something else isn't caught up in the raising capital problem. The guidance then goes on to refer to investors, which is actually a legal conclusion, because they're only an investor if there's a security. Then they throw in a bit about how the real purpose here is to guard against risk of loss, but that's not helpful at all because plenty of things people buy have a high chance of loss. The person who drives a new Ferrari off the lot loses 1/3 of their purchase, but the risk of loss on buying Ferraris is very much not an OSC issue. This is a reference to the US and Canadian Supreme Court's obiter on the subject, which basically is that if there's a high chance of loss the government should be more concerned, and maybe what wouldn't be a security might become one just because of this, but that wasn't a part of the actual decisions of either case. The OSC knows this, and quickly moves on to just talking about the four issues from Pacific Coin. They say they've reviewed a lot of submissions from potential token launches and ...we have found that most of the offerings of tokens purporting to be utility tokens that we have reviewed to date have involved the distribution of a security, namely an investment contract.. Then the OSC puts forward a paragraph-long set of caveats before listing some examples that they think might be relevant to determining what is or isn't a security under Pacific Coin when it comes to tokens. Most of the examples are contrived, and explained only in terms of a maximal view of what is a security. But, the factors that are relevant to the legal test are below, with the quoted explanations: [Positive] The proposed function of the token is to use software or an online platform or application, or to purchase goods and services...&rdquo. [Negative] Token is for software that does not exist yet: because management's efforts are still needed to develop or deliver the software, online platform or application or goods and services [Negative] The buyer doesn't get the tokens in their hands when they pay: ...the purchaser's reliance on management to deliver the tokens... Management makes statements suggesting that the tokens will appreciate in value, or compares them to other cryptocurrencies that have increased in value.: this is only relevant if the expectation is significantly linked to management's performance. But, no one should be making price predictions anyway, if only because no one knows the future of a market. BUYING TO MAKE A PROFIT BY SELLING: A NON-FACTOR The OSC, and many other securities regulators, have invented an interesting spin on the investment contract test: is someone buying so that they can sell on a secondary market? The OSC specifically mentions this in the 2018 guidance: Although some purchasers may be purchasing the token for the utility function, many purchasers may be purchasing the token in order to sell it on a cryptoasset trading platform or otherwise in the secondary market. This is just not a factor in the Supreme Court case, or any other case about what is or isn't a security. The OSC is wrong to bring it up. Buying and selling are the essence of the economy, and the speculative intent of a buyer does not tell us whether the thing they are buying is a security or not. The lifeblood of Canada's economy is people buying low and selling high, typically by buying in bullk and selling in smaller quantities, or by finding a buyer that the original seller couldn't. Strangely, the OSC considers bulk buying to go towards expectation of profit, but personal use purchases do not. There is no support for this in the case law, or the underlying statute. Shoes bought for wearing and shoes bought to sell in my shoe store are always just shoes. Wholesale trading, retail, mining, and every other industry, all of which are not securities businesses, engage in this everyday and there's absolutely nothing wrong with it. The speculative intent to make a profit by buying and selling may be relevant to taxes, but not to securities. Buying something to make a profit later is not illegal and is not regulated, unless a special law makes it so. The only relevance here is that it goes to the factor in Pacific Coin of an expectation of profit, but the expectation of profit in that case is with respect to the efforts of management. The Supreme Court said it was obvious and didn't look further at the profit factor, but the case makes clear that they were following the American precedent: solely from management's efforts. In the dissent, the Chief Justice says perhaps substantially in brackets. The decision actually incorporates a US watering down of the term solely: the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise. The real rule in Pacific Coin is expressed as: If Pacific does not properly invest the pooled deposit, the purchaser will obtain no return on his investment regardless of the prevailing value of silver; there is nothing that the customer can do to avoid that result. In other words: the customer hands over the money to management, and if they fail to buy the silver then all will be lost. A strange judicial interpretation of solely but here we are. And the OSC in 2018 translated this into To come significantly from the efforts of others. It is not the speculative intent that matters, it's whether the results of the speculation are wholly/significantly/perhaps substantially dependent on the management efforts with nothing the customer can do to avoid that result. In other words: speculative intent is not what matters. Intention to resell a thing later is not a factor either, and, if the person can resell without the involvement of the company, it strongly indicates that there is not a situation like with Pacific Coin's silver buying. The OSC though wants it both ways. They claim in the 2018 guidance that the existence of a secondary market (where prices are determined solely by market participants) is an indicator of an expectation or profit from the efforts of management, because it would be management that gets the token listed on the secondary market. But even where there is no active steps taken to do this, the OSC says that's irrelevant as to whether purchasers expect a profit. NON-USER PURCHASES: A NON-FACTOR The 2018 OSC guidance, the original Howey case before the Supreme Court, and the original Kansas Blue Sky law all view purchases from far away people as being negative. In Kansas, the concern was non-resident promoters selling people on opportunities in other places. In Howey, it was selling orange groves to tourists. In the OSC's guidance it was an offering of a token that permits holders to use an existing application is marketed in Canada, but Canadian residents cannot use the product, service or application. The OSC interprets the above as being about whether or not someone has a subjective intent to make use of the thing. In Howey, the court was concerned that the buyers had little knowledge of oranges. This is the protection angle, and the idea that the law should be interpreted to protect clueless people from being preyed upon. It's a great instinct, but it's not actually the law in Canada, it's only a guiding principle from s. 1.1(a): to provide protection to investors from unfair, improper or fraudulent practices. Although that is a statutory purpose, it is only with respect to securities. The Securities Act is not a law of general application that is intended to stop fraud. There's already such a law: the Criminal Code of Canada. And there's other consumer protection laws too. This purpose is only with respect to securities, and the law cannot go beyond the bounds of securities just because there's something unfair, improper or fraudulent going on. The OSC's guidance is mixing this up. Buying video games to resell them is fine. Buying video game codes that allow people to download video games, and then reselling those? Also fine. The digital nature of this makes no difference. The subjective intent to sell for more makes no difference. The buyers lack of personal use for 6000 copies of some video game is also not relevant. At best, the non-use by the buyer is only a factor in stretching the law, not in telling us what is covered or not. THE NEGATIVE VIEW OF THE OSC How conservative is the OSC's 2018 guidance? They're not even willing to concede that tokens given away for free don't involve an investment of money! The distribution of tokens for free will likely not involve an investment of money. In fairness to the OSC, they do say that the concern is that maybe it's linked to something else that isn't free. But still, the hostility is clear here. And the reason for that is the institutional nature of the OSC and their role in protecting investors from unscrupulous people who prey on them. That said, the actual reality of this guidance and the OSC's enforcement is that they did almost nothing about the thousands and thousands of frauds and capital-raising token projects that were launched from foreign jurisdictions. NON-SECURITIES: THEY EXIST! By January of 2020, the OSC was narrowing their view on what's a security: In some cases, the crypto asset is clearly a security, for example, a tokenized security that carries rights traditionally attached to common shares such as voting rights and rights to receive dividends. In other cases, the crypto asset is a derivative, for example a token that provides an option to acquire an asset in the future. Few would disagree with the above. It's a lot less broad than their earlier guidance seemed to be. In 2021 guidance to platform operators, page 1 shows the reality of the regulation of tokens as securities: if crypto assets that are securities and/or derivatives are traded. If the OSC thought every crypto asset was a security then they would say so, but they don't. And they never have. The OSC has actually issued guidance that's quite accurate, but it's been misread. The 2021 guidance focuses almost exclusively on crypto exchanges. The OSC published a report the year before about a large exchange that failed, and for which they received flak for not doing anything about it, despite complaints about fraud, money laundering, etc. The OSC realized that the right angle was not to go after the creators of tokens but rather to go after the platforms where these things are bought on sold. They did this by applying a novel argument: if a platform doesn't immediately transfer crypto to the user then it's created a security/derivative for that user of the underlying crypto. Other countries did not follow this model. But it doesn't matter, because companies signed up to be platforms and they agreed to those rules. What's the implication of the exchange focus? It's that the OSC implicitly acknowledges that much or all of what's traded on crypto asset platforms is not actually a security, and that's why they reached for the argument that it was about immediate delivery, not the thing being delivered. That view was entirely driven by a desire to regulate platforms like the failed QuadrigaCX, but in this view we see the idea emerge that a lot fewer tokens are securities than they were previously letting on. This is partly a shift in the regulator's stance, and partly a shift in the token landscape as the ICO boom was now well in the rear view mirror. And at this point, the OSC generally lost interest in publishing more guidance. Perhaps because almost everyone started launching tokens through offshore platforms or anonymously, or perhaps because they realized that they weren't going to be able to push harder on the definition of security. CHANGING THE STATUTORY DEFINITION OF A SECURITY: 2021 In 2021, the Ministry of Finance in Ontario published a draft law to replace the Securities Act with one that would have added crypto asset as a new enumerated type of security. This would have given the OSC authority over whatever crypto assets were designated. The OSC thought this would give them discretion to basically do whatever they want: These powers would need to be exercised selectively. While there may be a benefit from OSC regulatory oversight of certain financial assets such as crypto assets that are not already securities or derivatives, there could be other assets or business models that raise fewer investor protection concerns and would not warrant regulatory oversight by the OSC.&rdquol The Capital Markets Act was not passed. The law was not changed. The term security does not include crypto assets. And if the OSC, and the Ministry of Finance's lawyers, thought that the law didn't already include crypto assets then why include the change? For one, this would have made the entirely discretionary Restricted Dealer system have a statutory basis. Two, it would have given clear authority to regulate. Surely the OSC asked for this, knowing that the current law is not as broad as they'd previously been suggesting (but not saying - I think the OSC's staff notices were confusing but not actually wrong). 2025: WHAT'S A CRYPTO ASSET? In guidance issued to funds, the OSC clarified that when they're talking about crypto assets they're talking about: the Canadian securities regulatory authorities will generally consider a crypto asset to include any digital representation of value that uses cryptography and distributed ledger technology, or a combination of similar technology, to record transactions. This is based on the PCMLTFA definition explained in part two of this series. Here the OSC (and other regulators) are going with an exceedingly broad definition that's aimed at anything that involves databases running on many computers. Arguably it captures essentially every type of digital thing that has value. Strictly speaking, it should just be something that is a digital representation of value but that's not how FINTRAC views it, and it's probably not how the OSC views it either. In any event, it's not important because what the OSC and CSA think about their own made up term has no relevance, since the Capital Markets Act was not passed and no similar law has been passed elsewhere in Canada. What matters is only the definition of security, and it does not include crypto asset as an explicit category. The OSC's views on crypto assets are certainly relevant to funds, which are regulated by the OSC, but not to people who make tokens outside of a funds context. SIDE NOTE: STABLECOINS The OSC has issued guidance on stablecoins, and anyone who wants to launch a stablecoin should pay attention to that and carefully think about it. Not only because there's special considerations, but also because the OSC regulates the platforms where the stablecoin would be sold. If the OSC tells its registrants they can't buy or sell a certain stablecoin then they probably can't, even if that stablecoin isn't a security. PUTTING IT TOGETHER: WHAT HAVE WE LEARNED? The OSC never said all tokens are securities. At the height of the 2017/2018 boom, they said most of what they were seeing was unlawful raising of capital. They've certainly issued a lot of other guidance that wasn't positive, and they've taken enforcement actions (and sent a lot of letters that didn't lead to enforcement). But it's simply untrue that they've ever said tokens are securities. They've always said that raising money using a token is unlawful unless rules are followed, and in that, they are correct, because the law says that. Substituting paperwork for a token doesn't change the nature of it. But it's not correct to say that selling something is the same as raising capital and this is where people have gone wrong in understanding regulatory pronouncements. Crypto enthusiasts have always wanted an explanation from the OSC (and other regulators) about what is or isn't a security, but that isn't their job. The OSC's job is to enforce the Ontario Securities Act and it's not to tell people what doesn't qualify as a security. WHAT ABOUT ENFORCEMENT? Guidance is not the only means by which the OSC expresses itself. It has also launched many enforcement actions but almost of them were about frauds, not genuine, honest token sales. Which ones weren't frauds? BCZero: Who doesn't want to buy a token for an off-road truck racing team in Czechia? Although the case settled in 2019, the token lives on, with the last transfer having happened in August of last year. CoinLaunch Corp. through them under the bus by conceding that it was a security, but BCZero's creators were never present and don't seem to have participated in any way. The OSC concluded it was an investment contract, but this was not a contested matter, and the two sides (one of which was also the OSC) agreed to say that it was a security, as part of a settlement with CoinLaunch, a company that helped market BCZero. CoinLaunch paid $50k to the OSC to settle the matter - they weren't interested in fighting about whether BCZero was a security or not. They said it was an investment for raising equity. Even worse? The other token they marketed was a security token, so even winning on the BCZero battle wouldn't have won the war for CoinLaunch. Because if you call something a securities token, and it's for raising funds for a resort in Portugal, and it's a fractional interest in the resort's profits, then you're probably going to get in trouble. Cryptobontix: page 40 of the whitepaper contains the probably honest and very legally unhelpful statement that Raised investor contributions shall be under the custody and use of Cryptobontix Inc.. This was some sort of gold, crypto mining, and who-knows-what investment system. Interestingly, the Capital Markets Tribunal did not find the tokens to be investment contracts but the way they were sold plus the characteristics of the tokens made the whole thing an investment contract (demonstrating nuance thinking by the tribunal). The OSC referenced the BCZero case here, but the tribunal pointed out that was a settlement. They conclude that, but for the representations made (which were terribly done, quite problematic, and surely not guided by counsel), there would have not been an investment contract. The key part of the decision is below (although other parts are more questionable). In the end, this is a fraud case also, and that colours the whole thing. IN THE MATTER OF TROY RICHARD JAMES HOGG, CRYPTOBONTIX INC., ARBITRADE EXCHANGE INC., ARBITRADE LTD., T.J.L. PROPERTY MANAGEMENT INC. and GABLES HOLDINGS INC. So far as I can tell, every case decided by the CMT or the OSC has been a fraud case or it's the (settled) BCZero case, in which the actual project wasn't before the tribunal. THE CAPITAL MARKETS TRIBUNAL It is worth pointing out that the above are all decisions by the Ontario Securities Commission about the Ontario Securities Commission. The Capital Markets Tribunal is a division of the Ontario Securities Commission that adjudicates decisions of the Ontario Securities Commission in an independent manner. Anyone with even an inkling of how institutions works should be suspicious of an organization that investigates itself. There is a real court above the administrative tribunal, but no case concerning crypto/tokens/crypto assets/crypto-assets/virtual currency has ever made it that far. I think it's likely that an actual court would be less sympathetic to the OSC's views than the OSC itself. Even though the CMT does push back, we should maintain a health skepticism that the results to-date truly represent the law. SUMMING UP The case law is thin. It's mostly frauds, and one settlement. There's nothing to say a token that isn't sold as part of a capital raising scheme is unlawful. This is consistent with OSC guidance, and the law, but it's inconsistent with the prevailing view of tokens in Canada. The next part of this series will explain where people have gone wrong in their views on the above materials. *** Part 5: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-five/index.html Launching A Token As A Canadian Business Part 5: Raising Capital Is The Regulated Area PUBLISHED ON APRIL 1ST, 2026 In part four and part three we saw that the OSC and other provincial securities regulator regulate the raising of capital. The key learning here is that if a token is a stand-in for a thing that is regulated, then that token will be regulated just like the thing it stands in for. If I make a token that is redeemable for narcotics, that'll be unlawful, but only because the dealing in narcotics is regulated. Similarly, if a token represents a capital raise, or the token in combination with other things is sufficiently similar to a capital raise, then that's where the securities regulators will get involved. RAISING CAPITAL OR EARNING REVENUE? A product that is sold to a customer is generally booked as revenue, not as capital. Domino's doesn't consider the selling of pizzas to be raising capital, and they're right. Tokens should never be described as being for raising capital, and they shouldn't be marketed in the same way as capital raises are. Is the token project providing information similar to what an investment pitch would have? This question is almost always just relevant to primary sales, which are the first time that the creator of the token sells the token to someone. For the secondary market, the buyer won't have the direct relationship contractually, and it probably won't have the same information. More importantly: a secondary market sale doesn't give money to the creator, so it's hard to argue that it's for raising capital. So the main way that the secondary market is engaged is either an error in the primary market sale, or that the token itself has securities-like qualities. SECURITIES-LIKE PROPERTIES Does the token have the properties of a security? For example: paying a dividend, or offering revenue or profit-sharing? Securities laws look for look-alikes, so if something is too similar to a thing that's clearly a security, then it's probably in the danger zone. Obviously this means never using securities words, but it goes beyond that to the substance of what it is. WHAT'S A SECURITY? REALLY? Over the last 8000 words of this series I showed the genealogy of securities laws in Canada, and how the government says they apply to tokens. But what the cases really show is something different than what the government says. In Pacific Coin (see part three), the promoters went wrong when they offered margin. There are countless dealers in silver coins today, and the OSC never tried to regulate them under the logic of this Supreme Court case. The reason why is that the case actually is about something a little bit different than how it's commonly held. The promoters took the money from customers and mixed it with their own money and efforts, which is how customers could pay 35% down for the silver. Customers were speculating on 100% of silver using 35% of the money, and the remaining amount was the efforts of the promoters. Furthermore, the only buyer of the silver was the company. You bought from them and then sold back to them. This is a closed system in which money goes in, and profits (maybe) come out, and the margin part is essential because: he has no title to any physical property but only a claim against Pacific. If a token is sold to someone and then they receive it, the person does not have a mere claim on the creator of it. They have received an actual thing. This is different from Pacific Coin. But what if the token still has a dependence on the creator? Because, for example, they're going to be using the money used from the purchaser to go buy oranges, sell them, and return some portion of the hoped-for profits to the token holder? That sounds like an agreement to share in the profits from the sale of oranges, which is where the discussion crosses over into securities law. But the same would be true if this was done entirely on paper. In the bad cases there are always two things going on: the underlying thing (oranges or bags of silver) which is permitted and the investment scheme overlaid (Howey or Pacific Coin) that is not. It is not the oranges or bags of silver that are the source of the legal problem when it comes to tokens. It is almost always the overlaid investment scheme. Or, in a few cases, the creators of the tokens have deliberately constructed a system of revenue/profit-sharing that's offside because the thing itself is a security. Will management and the customers be splitting the profits on a venture together? That's probably a security. Will management get the customers money and use it to build a business, that will then make money, and then the customers get back their money plus a profit? That's probably a security. TURNING LEGAL THINGS INTO ILLEGAL THINGS Almost everything in the Canadian economy is not a security. Even things that might look like raising capital, for example, Starbucks sells gift cards that give it access to cheap capital so that it doesn't have to borrow as much money. That is a deliberate part of the strategy of gift cards, but it does not mean that the gift card is raising capital. Even the OSC isn't going to say that the gift cards are a security, no matter what the accountants at Starbucks write internally about the function of gift cards within their enterprise. And the reason is that the gift card isn't itself a security, and the customer doesn't participate in any kind of profit-making system with Starbucks. Starbucks gets all the benefit! But, if instead, Starbucks told customers that their gift card balances would earn 35% of the money that Starbucks saves on interest expenses globally and it's paid as a monthly payment? Probably they've just turned gift cards into an investment contract. It's always easy to construct systems that are illegal under securities laws in Canada. The two best paths to doing this are to give back a portion of an investment's returns, or to raise investment capital using the thing. If Starbucks tried to raise money by telling everyone to go out and buy gift cards that Starbucks will later convert to stock, that would obviously transform the gift cards into an element of a larger capital raising scheme that's not permitted. CONCLUSION The two danger areas are: 1. Raising capital using a token, where the token is merely a stand-in for other paperwork that represents a capital raise, transforming the customer into an investor 2. Constructing a system of revenue/profit-sharing in which management and a customer share in the return of some business that was funded by the customer, transforming the customer into an investor Tokens need to stay out of these regulated areas, and if they come close to them, the creators need to speak to a securities law expert, just like they would with raising capital. The next post in this series will explain what this means for token creators. Securities laws were not intended to cover products, only securities, which are fundamentally different from the general types of products and services that Canadians are familiar with. The difference between these two areas is the difference of opinion in what sorts of tokens are allowed to be launched in Canada. *** Part 6: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-six/index.html Launching A Token As A Canadian Business Part 6: The Special Categories Of Prohibited Tokens PUBLISHED ON APRIL 1ST, 2026 The previous posts in this series (part 1, part 2, part 3, part 4, and part 5) establish what's regulated and why. The primary issue that's arisen for token creators in Canada has been provincial securities laws but, when properly understood through a neutral lens (i.e. not through the lens of the regulator itself) is far more limited than most people understand. To put this altogether, I've explained below what the special categories of tokens are that have challenging legal regimes that apply. Despite what most people think, Canada is still a country generally governed by the rule of law, and the rule of law is that if something is not forbidden then it's permitted. If there is no legal reason why a token can't be launched, then it can. Below are some special situations where maybe they can't be launched. Or, if they can be, that there's significant rules that are relevant to the viability of doing this in Canada. The special categories that are danger zones are: 1. Stablecoins 2. Tokens that are securities 3. Tokens that embody an investment scheme (and also tokens that are an essential element of an investment scheme) 4. Tokens that otherwise embody some other illegal activity, like drug trafficking SPECIAL CATEGORY: CANADIAN DOLLAR STABLECOINS Launching a stablecoin is a special category because the government has issued special guidance about this, and there are open questions about them. But, most importantly, the provincial securities regulators have regulated crypto exchanges and they've told them what their criteria must be for having stablecoins on the platform. So even if someone can legally launch a stablecoin, if it doesn't conform to the exchange-level rules, then there won't be any Canadian platforms carrying the stablecoin, which severely undermines the token. An example of this is QCAD, a stablecoin that I was the original lawyer for but haven't represented in many years. QCAD recently was granted exemptive reflief under securities laws. Anybody who is considering a stablecoin should carefully pay attention to QCAD and USDC, and the relevant securities law implications in Canada. This is an unusual example of the interplay between platform regulation and the stablecoin creator, because a Canadian Dollar stablecoin has a unique reliance on Canadian crypto platforms. This is not the case for most tokens, where the primary markets will not be in Canada. It would be interesting to see someone launch a non-CAD stablecoin from Canada and see how that would play out, with no reliance on local exchanges. But for a domestic-targetted stablecoin? There's no solution to the exchange problem, since the exchanges have voluntarily signed themselves up to follow whatever the OSC and other provincial regulators demand of them. There's also special new legislation, the Stablecoin Act that was just passed as part of the omnibus budget act. This isn't relevant to most companies though because the market for CAD stablecoins is relatively small. Stablecoins are generally a winner-takes-all market for non-USD, and even for USD stablecoins there's a few clear winners and many small projects that are undoubtedly losing money due to the nature of stablecoins as a business. SPECIAL CATEGORY: SECURITIES TOKENS There are two sub-categories here: 1) the token is the security or 2) the token embodies an investment contract (i.e. investment scheme). A token that's intended to be a security is generally not permitted. An example of this is a token that's supposed to represent a stock in a company. Over a decade ago, a Canadian company called Havelock Investments tried to start an unregulated exchange for these kinds of tokens, and it was quickly shutdown. Today there's a number of token securitization platforms that work properly, but they're generally just for accredited investors. There's also a new world of tokenized stocks/ETFs that opened up this summer, but these are all run from foreign jurisdictions. These are explicitly designed to be a tokenized version of the underlying security. Real estate tokens suffer from this problem. If someone launched a token that worked like Pacific Coin's system, in which there's a derivative or a loan component to an underlying asset (so it's leveraged), such as silver, then that token very likely wouldn't be permitted either. Because it's not about the token, it's that these sorts of systems are generally prohibited by securities laws. The token part is irrelevant, it's the surrounding investment system that matters. If the token simply embodies that system, it will be prohibited the same way as Pacific Coin's business system was prohibited. Even though the difference in this example is that the token is the investment contract, whereas in Pacific Coin the bags of silver were fine and the investment contract was the overall system around the silver. Essentially, a securities token is a token where the token either is or stands for a system that isn't permitted under securities laws. That's a little circular in the definition, but that's ok - Canada has securities laws and they must be followed. Exactly what qualifies as a security and what doesn't is something securities laws are well-versed in. But the thing to keep in mind is: does the customer buy the token, and then management receives that money and uses it in some sort of business, and the splits the revenue/profit with the holders of the tokens? If the answer is yes, there's a high chance of a security being involved. Especially where it involves money (or crypto used as money) for the payment part. If it involves loyalty points, access to something, or other kinds of non-financial incentives, then maybe it isn't like a security, because generally securities are investments into something, and the investor expects a financial reward. This is a large topic, and it's covered in the previous posts in this series, but in short: if the token is a security itself, then that's not going to work for a Canadian business to launch it. Generally securities like this need to only be sold to accredited investors, and there's many special rules about how that works. There are so many in fact that most companies don't bother doing this once they find out what's involved. Even worse: if it's a security then generally dealers/exchanges in Canada, the US, and other places, can't offer trading in it, which usually means it is a non-starter for crypto projects that operate globally (as most do). To recap: what's prohibited is a token that is the security, because if it is unlawful to sell the security, it's unlawful to sell the token version of that security by the same means. This is an important distinction because, for example, it is legal for a public company to sell its own stock, but it has to do so in compliance with a great many rules. If a public company made a token of its own stock and sold that token, the applicable rules would not be more favourable than selling the underlying stock (although, see my notes about how this is being solved by third party token creators using international trusts and dealers). It's also prohibited to make a token that embodies an investment system, because the investment system is prohibited, not because the token is prohibited. If the Pacific Coin company had sold its system as a token, instead of as a contract people sign and money they send from their bank account, it wouldn't have somehow been transformed into a lawful activity. SPECIAL CATEGORY: OTHERWISE UNLAWFUL TOKENS As I mentioned in a previous post, a token that stands for narcotics trafficking is just as illegal as the narcotics trafficking itself (maybe more so actually!), and the tokenized nature of it is irrelevant. This is the general rule. When the token is a stand-in for a thing that is unlawful, the use of the token doesn't legalize the underlying activity. The token is a neutral technological tool that can be wielded in any way the creator wants, just like email, databases and word processing software. It is the use that people make of it that triggers special laws. If a company made a token that worked like store credit for 1g of opium in Canada, and then it sold those tokens to Canadians, the concern would not be securities laws, it would be drug trafficking. *** Part 7: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-seven/index.html Launching A Token As A Canadian Business Part 7: The American Experience Is Educational PUBLISHED ON APRIL 1ST, 2026 The previous posts in this series (part 1, part 2, part 3, part 4, part 5, and part 6) describe the regulators who have taken an interest in tokens, the applicable legal regimes, the history of those rules, and what provincial securities regulators have said about tokens being securities. Having canvassed this, it's time to look at the American experience, because, under similar legal rules, the federal securities regulator recently issued guidance that surprised many people by saying that a number of types of tokens are permitted. CLEAR GUIDELINES IN THE US The Chairman of SEC had this to say about their guidance released two weeks ago (jointly with the CFTC, a commodities regulator that's subsumed within the provincial securities regulators of Canada): After more than a decade of uncertainty, this interpretation will provide market participants with a clear understanding of how the Commission treats crypto assets under federal securities laws. This is what regulatory agencies are supposed to do: draw clear lines in clear terms. Page 13 lays out the five categories, of which the first three are said to not be securities (unless combined with an investment scheme, as was the case with Howey/Pacific Coin): (i) digital commodities (ii) digital collectibles (iii) digital tools (iv) stablecoins (v) digital securities Parts 5 and 6 of this blog series explain why the last two are special categories in Canada too. These two categories are not discussed below, as they're less interesting than the broader classes of what sorts of tokens look good from a legal perspective. CATEGORY 1: DIGITAL COMMODITIES They have in mind send/receive value transfer systems, whether as a native coin of a blockchain or as a token layer above it. Specific examples mentioned: Aptos (APT); Avalanche (AVAX); Bitcoin (BTC); Bitcoin Cash (BCH); Cardano (ADA); Chainlink (LINK); Dogecoin (DOGE); Ether (ETH); Hedera (HBAR); Litecoin (LTC); Polkadot (DOT); Shiba Inu (SHIB); Solana (SOL); Stellar (XLM); Tezos (XTZ); and XRP (XRP). The distinction the SEC draws is that these tokens derive their value from a market and relate to a crypto system that is functional. The functionally could be rather slight, such as in the case of SHIB token, or it could be a part of a complex blockchain as a native unit such as SOL, ETH or BTC. It could have technical rights, such as participating in a staking system, governance rights for a crypto system, which could even include voting on treasury expenditures. They also confirm the obvious non-securities use case of being the unit of measurement of computation on the network, as with ETH or SOL, where smart contracts require the native unit for doing things, and the more the program does, the more units are consumed. There is no digitized version of a security or an investment contract with this category. CATEGORY 1: TOKENS FOR PROGRAMS Without creating a new category, page 16 alludes to the idea of having tokens for computer programs, where a portion of the on-chain activities go to token holders. This is an increasingly popular type of token, exemplified by DEX tokens where some % of fees of the smart contract system are used to increase the value of tokens or to direct payments to token holders. Users of a functional crypto system use the system’s native digital commodity to interact with the system’s features and functionalities. A functional crypto system incorporates economic mechanisms that reward voluntary cooperation and coordination among the system’s users. Users are encouraged to participate in a functional crypto system based on its economic mechanism design, and developers are incentivized to build crypto applications for functional crypto systems that successfully attract users. A functional crypto system does not have a central party54 that oversees participation or distributes rewards to users. As a result, the value of a digital commodity is intrinsically linked to the programmatic functioning of the associated functional crypto system. Therefore, given that a digital commodity is associated with a functional crypto system, a purchaser would not reasonably expect to profit based on the essential managerial efforts of others. CATEGORY 2: DIGITAL COLLECTIBLES This category includes NFTs but also fungible tokens like Fan Tokens (explicitly mentioned as being not a security.) A digital collectible is a crypto asset that is designed to be collected and/or used and may represent or convey rights to artwork, music, videos, trading cards, in-game items, or digital representations or references to internet memes, characters, current events, or trends, among other things. They also explicitly endorse $WIF, a meme-based token. This may be one of the least professional citations I've ever seen in regulatory guidance. But it's there for a reason: the more pointless the thing, the less likely to be considered a security. So-called meme coins are explicitly endorsed on page 18 as non-securities (and previously endorsed separately last year). But tokens don't have to be pointless. The SEC points out that an image token could be associated with licensing rights (I've helped to set up such a system for NFTs - there is a market for this). Or they could be stylizing items in a video game, which although outwardly pointless, has meaning to the players of the game. People are social creatures, who love style, design, brands, and imagery, and these can themselves become a market. Unquestionably there is a massive market for digital collectibles, and the SEC is endorsing the idea that just because it has a blockchain incarnation doesn't mean it's any different from non-blockchain collectibles, virtually all of which have never come under scrutiny for being securities. The SEC has no problem with a token that starts off as being pointless (they don't use that term) but later transforms into being useful with a crypto system (page 18): a crypto asset may be offered and sold initially as a meme coin that has no functionality within an associated functional crypto system (and no related representations or promises to create such functionality or crypto system) and that derives its value from the asset’s artistic, entertainment, social, or cultural significance, but later become a digital commodity because it becomes functional within an associated functional crypto system. The SEC then specifically endorses the idea that speculative intent is not what determines the nature of the token, noting the analogy to art markets: Like a physical collectible, a digital collectible’s value is not based on the expectation of profits from any essential managerial efforts of its creator following creation but rather on supply and demand, which in many cases depends on the subject matter, popularity, or scarcity of the digital collectible, as is the case with physical collectibles. For example, buying a digital collectible with the hope that its subject matter, popularity, or scarcity will increase its price is like buying a piece of art with the hope that market forces will create demand for the art and increase its price. Lawyers and government regulators have wrongly considered speculation and intent to make a profit as a relevant freestanding factor, but it is only so in conjunction with other factors that are actually relevant to the determination of a security. The SEC's explanation goes on to note that of course the creator of the art might impact the value of it at a later date, but the inquiry is about whether or not they undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits. CATEGORY 3: DIGITAL TOOLS This is an interesting way to categorize tokens that lawyers haven't commonly done in the past. The SEC's category is digital asset that are like a a membership, ticket, credential, title instrument, or identity badge. Examples include NFT-based tickets or ENS domain names (which make it easier to send to an address on Ethereum by providing a DNS-like system to resolve names to addresses). Page 21 has a great analogy. The SEC compares these tokens to membership of a museum. Yes, the buyer of the ticket has an ongoing reliance on the museum, and the museum services are delivered later (and are subject to change) but the key is that there's no way to realize a profit from the efforts of the museum operator. They go on to say that resale value improvements aren't relevant. What's relevant is the promises made at the beginning, with respect to profits: The price at which the digital tool may be resold, if it may be resold at all, is based upon its functional utility rather than any expectation of profits from any essential managerial efforts of its developer. While the value of a digital tool may be impacted directly or indirectly by the activities of the developer, the creator of a digital tool typically does not make representations or promises to undertake any essential managerial efforts from which a purchaser would reasonably expect to derive profits. CATEGORIES 4 AND 5 Categories 4 and 5 in the SEC's ontology aren't helpful for the Canadian discussion because there's a different legal regime for stablecoins and because tokens that are intentionally securities are not the focus of this blog series. But for anyone who wants to learn about these, and how they differ from the other categories, can read from pages 21-24. WRAPPED TOKENS Although not a part of the categorization scheme, page 54 of the guidance explains why wrapped tokens (i.e. a token bridged to another network by depositing them and wrapping that in another token that can be moved onto the other network) are not securities either. The logic isn't as well spelled out for this one, but basically it's that the wrapped tokens are just receipts for the underlying tokens, and since the underlying tokens aren't security, the receipts aren't either as they are held on a 1:1 basis. THE HARDER QUESTIONS: INVESTMENT CONTRACT OR NOT? If it was easy to say what's an investment contract, the highest courts of Canada and the US wouldn't have ended up struggling with it. The SEC tackles this issue at page 24. Key factors: 1. How does the creator/promoter/issuer/maker market the token? Profit expectations depend on marketing/representations, not on subjective belief. The reasonable expectation part of the Howey test is with respect to what is said to buyers (whether directly, or perhaps through secretly authorized third parties, as they mention on page 26). And this is more than just 1:1 chats with other buyers that weren't known to the specific buyer, when determining what someone's reasonable expectation was/is. 2. Explanations of how the investment of money leads to a return. Explaining the people, funding, timelines, resources, and details of how the buyer will profit from all of this in the end? That would probably fulfill this leg of the Howey test. In contrast, representations or promises that are vague or contain no semblance of an actionable business plan, such as those lacking milestones, funding, or other plans for needed resources, likely would not create reasonable expectations of profit. 3. Page 28 explicitly repudiates a past view that the SEC has put forward, which is that the investment contract doesn't go with the token, unless there's some reason for that to be the case. In other words: there's a difference between primary and secondary sales, with respect to the promises/representations made by the token project. They suggest one trigger point could be delivery of the token to the buyer, after which the investment contract doesn't move with the token. Another possibility is that the promises are fulfilled or abandoned (pages 29-33). 4. Crypto mining and what I call technical staking (including liquid staking) are given as examples of non-securities activities, whether done on their own or with others as part of a mining pool. Receipt tokens for liquid staking systems are also not securities because although they are receipts, they are not receipts for securities, since the underlying staking activity isn't a security either (page 53). There is a potentially important caveat in footnote 131 about this, but the general idea is endorsed strongly. PROMOTING AMERICA Page 65 explains that one reason for the SEC to address the confusion (that they created) is to encourage more crypto asset market activity in America that would otherwise go offshore. This is a very sensible idea, but Canadian regulators generally don't explicitly mention points like this as their reasons for doing things. Essentially the SEC is walking back some of their previous positions, partly due to a change in administration, partly due to a maturation of the market, and partly due to losing in court on some points. Regulators don't exist to merely push an aggressive view of the law, they take stock of how court cases have gone and they modify their positions accordingly. That's a correct way to approach the law, and regulators in Canada share this philosophy (even if they don't always do it). Courts usually have the ultimate say about what the law is. *** Part 8: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-eight/index.html Launching A Token As A Canadian Business Part 8: NRFM Is The One Rule For Tokens PUBLISHED ON APRIL 3RD, 2026 A Canadian token creator needs to know one rule: No ROI From Management. This is the true rule of Pacific Coin and Howey. Token creators in Canada have to take this rule to heart, and they have to think of this rule as they make their systems, because if they obey the rule, they can likely launch their token in Canada without accidentally stepping into the danger zone of securities laws. Repeat after me: No ROI From Management. THE ACTUAL RULE OF PACIFIC COIN NRFM covers off the legal test for an investment contract, which is the #1 category that token creators run afoul of (although there's other categories - see part 6). It's a formulation of the actual rule of Pacific Coin that is much easier to understand than the four part test, which has been stretched by regulators and courts beyond the actual decision (part 4). Unlike the constitution, Supreme Court judgements are not a living tree, and they mean the same today as they meant 50 years ago. Pacific Coin is still relevant, and still the leading case in Canada. A proper reading of the case is essential to understanding what securities laws mean in Canada. The Pacific Coast Coin Exchange of Canada Ltd. got in trouble when they offered margin, not just bags of silver, because now management's risk management, ability to obtain financing, and market access become relevant to the buyer (part 5). The return in Howey was 10% a year, and the return in Pacific Coin was based off the 35% deposit of the purchase price (i.e. margin). In both cases it is obvious that the return to the investor is based on management's work. MARCH 2026 GUIDANCE FROM SEC & CFTC The recent American guidance (part 7) makes it clear that there's often a degree of dependence on the creator of a product but the question isn't whether there's a manager, or whether there's a promoter. The correct test is whether they: undertake essential managerial efforts from which a purchaser would reasonably expect to derive profits. What is an essential managerial effort? This is something more than Apple supporting their smartwatches, or improving the operating system of iPhones over time. It's more than simply offering iCloud to make phones more useful. Amazon sells licenses to e-Books that can only be exercised in relation to their Kindle readers but there's no ROI (return on investment). That's what people have missed about these legal tests, because they've been reading the vague test from Howey and trying to imagine how broadly the words can be construed. This is a misreading. The guidance makes it clear what these cases are about, and why many classes of tokens are excluded from the definition. Even if someone could stretch the words to make them fit. The American guidance is actually the best explanation of the Canadian legal position, even though it's for a foreign country. The test in Canada literally is just the American test, and although there's some minor deviation in how the law has developed, the core of the law is identical. The concern (at least when it comes to tokens) is always about the ROI from management. HOW NRFM COVERS THE CATEGORICAL VIEWS Tokenized stocks, interests, dividends, and leverage all are related to ROI from management. Tokenized stocks because the underlying stock's securities character doesn't disappear when it's tokenized, interest/dividends because that's an obvious financial return delivered by management, and leverage because that's a service that depends on management (to achieve a higher return to the person who gets the leverage). An on-chain crypto lending system like Morpho allows someone to achieve leverage, but not through the managerial efforts of Morpho. Because there's no ROI from Morpho this system is not leverage in the same sense as in Pacific Coin. It is not the existence of greater risk/reward that matters, it's the role of management. Where there is no management, because there is no business, but rather only a computer program running on a decentralized network, there will often not be an ROI from management. Accordingly, it would be a very tough battle for any regulator to try to win in court on the argument that the existence of subjective intent to achieve leverage makes Morpho an investment contract system like Pacific Coin's was. That is not what securities laws are intended to regulate. They are not about the intentions of the buyer, or about the system of amplifying risks. The Ontario Securities Act is not aimed at regulating business practices writ large, it's aimed at regulating things in the world. If it is not a security, it is not in scope. The simplest examples are the native units of a blockchain network. Something like SOL isn't a security because the creators of SOL don't provide any kind of financial return to holders. The fact that Solana actively markets that people can earn yield/returns on SOL staking is also not financial return from management, because the rewards come from the technical system itself emitting more SOL (for validating transactions). This is technical staking, and it's explicitly endorsed by the SEC/CFTC in the latest guidance. A Canadian court would almost certainly come to the same conclusion as the SEC, if the case were well-argued, because although the creators of the system even frame it as a return, what matters is whether that return comes from management's work. With SOL staking, management's role was merely in setting up a system to allow people to do it, and they do not actively take part in the system or manage it today. All work is the result of humans, and the human touch at the beginning does not forever and always taint the activities as being an investment contract. PROTOCOL FEE TOKENS The US guidance doesn't touch on what I call Protocol Fee Tokens, such as RAY or UNI, in which a smart contract system automatically buys the token, effectively transferring part of the economic value of trading to the owners of the tokens. The question to ask with FPTs is the same as for all others: is there an ROI from management? The existence of ROI, even on a calculable basis (i.e. trading volume x Z% fee take) isn't sufficient. Was the money (or equivalent) somehow earned by managerial efforts? Or was it a computer program that did it? Some projects lie about how their systems work, or they have a centralized aspect that undermines the argument, but in general, if there's no management that's factoring into the returns, then there's not going to be a security. In a truly decentralized system there is no management. And the ideal time for people to obtain the tokens is when management's role has disappeared from the system, which the SEC guidance explicitly endorses as a possibility. It's not simply the case that just because a person was once involved that their managerial efforts in the past will lurk as a shadow forever over the securities classification of the token they helped to make. NEW UNITS OF A THING The SEC has too many categories. They could have simplified to NRFM as the expression of the rule, but they wanted to provide people with a more understandable ontology. But by providing categories they make it seem like the categories have something to do with the conclusions - they don't. Bitcoin isn't a security because there's no ROI from management. The fact that some people have earned a return by speculating/gambling is irrelevant in the same way every other good in the economy works! People buy limited edition Beanie Babies today, or collectible trading cards, and their desire to flip for a profit is irrelevant to what the thing is. Even if the trading card company is promoting the cards or promising not to release similar ones in the future, it is not their managerial efforts that earn a return for the buyer. Trading or speculative intent, or use in gambling, are irrelevant attributes of a thing. Or, if they are relevant, they're generally relevant to the thing not being a security, contrary to the instinct most people have about this. If a person is intending to gamble using a thing then that strongly suggests the return is not from management. People buy all kinds of junk meme coins, and they may hope to make a fortune on pump and dump schemes, but that doesn't mean the meme coins are securities. The SEC explicitly recognizes that meme coins are not ever going to be securities. This is the same logic as for a bare ERC-20 token. The error/illegality/scam part is where buyers are promised to receive something later that will be done with the revenue, in the nature of a financial benefit. It's at this point that we see that just about anything can be transformed into an investment scheme. Nike might hype up their chief shoe designer and let me buy whatever they'll make in 6 months, and give me a rebate based on shoes sold, etc. At some point, even things far from the world of securities can enter back into it. Orange groves have nothing to do with securities, but Howey and his company managed to make them into an investment system. THE UNDERLYING MATERIAL OF INVESTMENT CONTRACTS: SINGH V. TRUMP, 2016 ONCA 747 Howey's orange groves were a long time ago, but people to this day are regularly transforming non-securities into investment contracts. A Toronto condo investment scheme involving Donald Trump and various companies was the subject of a 2016 ONCA decision that shows how real estate (clearly not a security) can be transformed into an investment contract. Too many people have been distracted by the similarities between crypto and stocks to see that the real rule is not about the underlying subject matter but rather in how an investment system is designed around a non-security. Investment contracts based on these sorts of systems are easy to avoid, and sellers of tokens should be scrupulous in avoiding the sorts of things that went on with Trump's condo investment scheme in downtown Toronto back in the mid-2000s. It's worth noting that the OSC explicitly blessed that scheme as not being a security, but that didn't change the actual nature of the scheme (which was an investment contract). NRFM: PRESALES OF TOKENS It is at this point that a careful reader will probably be wondering why this discussion so far hasn't talked about one of the biggest securities enforcement risks: preselling tokens. Presales are common in business. Video games are regularly sold weeks or months in advance of launch. Tesla took deposits years before delivering cars. But in all normal commercial contexts, the buyers are merely promised the thing. There may be a roadmap, and it may be explained by management, but what is being sold must be the thing. Presales have always been a tricky subject for crypto, and often the focus of litigation by securities regulators, because it is obvious that this is the point where there's the greatest dependence on management. A presale that's too long in advance of the product is a bad idea because it might be the case that management is taking the money from the purchasers to not just make the thing the purchasers are buying but rather to invent it. Any time money is going into R&D, that's probably investment. But, this is only where R&D is a part of the sale. Normal companies do R&D, and that's good, but they don't tell people when they buy things that some of their money will go to R&D. Similarly, they don't tell people how the purchase price will be allocated internally to various streams of development (marketing, staff, profits for management, etc.) Presales, when done right, are fine. They're an ordinary commercial activity. But there has to be close proximity in time between the purchase, and there has to be a clearly identifiable character of the thing being purchased. It's also best if presale buyers are in the same shoes as later stage buyers (albeit with a discount). NRFM: THE ONE RULE ROI is something more than delivering the thing that's purchased. ROI is a process by which management involves itself in the affairs and that managerial effort generates a return. Anyone making a token should consider whether they're going to be providing any return on investment (ROI) to token buyers/holders. This is not the same as asking whether value will be provided. This doesn't mean not following through on the development roadmap. Too many people (and courts, tribunals and regulators) have gotten sidetracked by trying to consider whether management's efforts must be solely, significantly, or some other strong degree of relationship. For a token creator, the ideal state is to have high value but not ROI from management. This is feasible and actually quite common with tokens launched in the last few years. The SEC guidance lists many examples of tokens that they think are totally fine, and that's not because the tokens are all meme coins with no value (and even there, the artistic value, community value, or entertainment value may be significant to the people who buy it even if it's not apparent to the rest of us). So what kinds of value can management deliver, in relation to a thing they sold? As the US guidance points out (part 7): an artist has an ongoing relationship with their art, and the value of it, but that relationship is not in the nature of a financial return. Ironically, many people in crypto have gone wrong by making clear what they should have made vague. It's simple to provide financial returns (it's the easiest type of return to do, especially with crypto where every unit has value and transfers are what blockchain systems are for), and almost always the wrong choice. By adopting a law-aware development stance projects can usually make a legal token. When people do the simple and easy thing, without any regard to securities laws, it is quite easy to accidentally make a security. This is a rather unique aspect of blockchain systems that isn't found in other technologies. But, with the rise of LLMs being used for legal advice, probably more and more companies will be able to better navigate around the danger zone of securities laws. REVISITING THE CANADIAN EXPERIENCE Despite the abundance of information requests that the OSC and other provincial securities regulators have sent out over the last decade (thousands?), the enforcement record is relatively slim when it comes to non-frauds (part 4). A close examination of the law (part 5), the history of it (part 3), and what it means, shows that tokens that obey the NRFM rule are very likely to not be securities. No law was ever passed in Canada, since Bitcoin began, that has expanded the definition of security to include tokens that don't have a return on investment from management (although one was proposed in 2021). Too many people have been afraid to launch tokens because they believe that all tokens are securities. This view mostly stems from the 2017/2018 ICO boom, when tokens were being sold as investments, and often in connection with frauds. People misread the OSC's statements, where they told people most of what was coming to them was investment contracts. Of course that's what was coming their way! But that doesn't mean all tokens are that, or even that most tokens are. The OSC's concern always has been with investment schemes (and particularly, illegal ones), which is a mandate that goes back to the first Blue Sky laws in the American midwest in the early 20th century (part 3). THE ACCIDENTAL SECURITY Too many people have accidentally made investment contracts by offering financial returns and by promising that management would make it happen. Management should restrict themselves to making products and accurately describing them. If people think they can buy low and sell high - that's great. If people think they can make use of it - that's great. If people think a token will be popular in the future - that's great. What's not great is if they think there will be a financial return based on their purchase, and that return is from management's work. This is the similar test for securities, where courts will ultimately rule that if it's similar to a stock (or other well-established categories of securities, whether explicitly mentioned in legislation or not) then it's going to be a security also. But if the similarity to a stock is merely the similarity to how stock markets work, and that the token can be traded 24/7 on various sites/DEXs/wherever, that's not the right kind of similarity. The existence of a broad market is not what makes something a security. SUPERFICIALLY SIMILAR MARKETS DO NOT CHANGE THE CHARACTER OF THE THING BEING EXCHANGED StockX is a website for selling shoes (e.g. Jordan Jumpman Jack TR). It shows prices with graphs that look a bit like a stock market. It has stock in the name of the site. And it's operated for years in the United States and Canada because it's clearly not selling stocks or marketing stocks. The superficial resemblance to stock trading is intentional and legally irrelevant. NRFM: JUST DO IT Canadians that don't want to follow securities laws are always welcome to start their business in another jurisdiction (Cayman + BVI is a popular combo that I'm a fan of). Other places have other laws. But, the securities laws in Canada apply when people sell to Canadians. And the same for the US, France, Japan, etc. Most countries have securities laws that are more or less the same as Canada and the US (but often with less active regulators), so by complying in Canada companies are ensuring that their tokens are complying in almost every place. That means that dealers and exchanges can carry their token all over the world, which achieves the global liquidity and usefulness that makes blockchains interesting. When a token doesn't follow the NRFM rule then it is generally limited to being sold in the exempt market (i.e. accredited investors AKA the top 1-5% of earners). Some small changes to how a project is run and how it markets its tokens can make a big difference. Typically this is done by changing the design/business practices, rather than by trying to obtain an opinion that a thing is not a security. Lawyers can't make a security into a non-security (because substance triumphs over form), but they can help teams to make a different token that isn't a security. And the way to do that is to follow the rule: NRFM. It's taken about 19000 words to get to this point, but it's a simple point, and it's one that's practical. Far more tokens are permitted in Canada than people know. *** Part 9: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-nine/index.html Launching A Token As A Canadian Business Part 9: Fourteen Token Types That Are Legal In Canada PUBLISHED ON APRIL 5TH, 2026 The previous post in this series explains the rule for tokens: NRFM. But what does this mean in practice? What sorts of tokens can be launched in Canada? 14 LEGAL TOKEN TYPES Native Units: The coin used by a blockchain for system-level transactions (i.e. not user-created tokens), where no return can come from management because it's truly decentralized. No management = NRFM. Standard Tokens: An ERC-20 token (or Solana Token, etc.) with no special logic will generally not be a security in and of itself. Free Tokens: Tokens that are given away for free are generally not securities because there's no investment by the recipient. No investment = no investment contract. Meme Coins: Tokens that do nothing, and with no claims by the creator about it, do not have a return in any remotely financial sense. No return = NRFM. Image NFTs: Non-fungible tokens that are a license to an image or other artistic work, and where the buyer receives the whole interest in something (usually an IP license), are hard to characterize as securities. In most cases these are just digital versions of artwork. Fan Tokens: Tokens that have a community around them, branded by the creator, where benefits are in the nature of fan service are not typically going to have a return in any profit-minded/financial sense. Returns in the nature of feelings about a community, or attention from a celebrity, are not what investment laws are aimed at. Loyalty Tokens: Tokens that do nothing, but have a business that will allow them to be cashed in for their services/products - these are the digital asset version of standard loyalty points. Wrapped Tokens: Tokens that can be redeemed for a transfer on another chain are SEC/CFTC-blessed, and ought to not be securities in Canada but it is less clear than for other token types. Liquid Staking Tokens: Tokens proportional to coins/tokens at risk in a technical staking systems, that can be redeemed for an underlying staked coin/token (similar to wrapped tokens conceptually), should not be securities because the thing they are for is not a security either. Typically there's no management in these either, so that would be the NRFM. Fee Protocol Tokens: Tokens that earn a portion of the fees of a smart contract system are not under management control because actually decentralized. No management = NRFM. Canadian Dollar Stablecoins: Tokens that can never earn a profit for their purchaser, and therefore have no reasonable expectation of profit from management's efforts, aren't securities but there is the new Stablecoin Act. Store Credit Tokens: Canadian Tire Money is legal, and so is the digital asset version of it - the use of a token does not change the character of the thing. Debt Tokens: Some smart contract systems for over-collateralized lending have an intermediate token (debt token) that may be bought, sold, or traded, and may even have a return attached to it as part of the larger debt system, but it isn't a return on investment from manager = NRFM. Governance Tokens: Merely having a right to make votes about a decentralized system, or even a business, does not make something a security. Voting is often a part of shares, but it is also a part of many other things, and voting is just not a relevant consideration on its own. No return (and perhaps no management at all) = NRFM. SECURITIES IN AND OF THEMSELVES The above list of token types assumes that there isn't a surrounding investment scheme. As explained in prior posts; anything, whether orange groves, bags of silver, or condos can be turned into an investment scheme by a promoter. But this is a separate inquiry than whether the token itself is a security. WHAT DOES LEGAL MEAN? The above tokens should be ruled to not be securities by a court in Canada. That doesn't mean the OSC, AMF or another provincial securities regulator would like it, and there could be correspondence about it or even (probably misguided) enforcement action. Then, if reviewed/appealed, the securities regulator's decision would likely not stand, but this would be a long way off, and rather expensive to deal with. I'm not oblivious to the expensive reality of dealing with provincial securities regulators, and have helped many clients with resolving them (all successful - without negative legal consequences for the founders). So anybody attempting to stake out their ground should do so in the manner least likely to attract securities regulatory interest, such as avoiding the words commonly associated with securities and generally following a more conservative path, where possible. The golden age of tokens in Canada is not yet here, and it may take a bit of convincing by entrepreneurs. US VIEWS HAVE EVOLVED Of the token types above, the SEC/CFTC explicitly mentions many of these as being allowed. The others can be inferred by analogy, but I am not channelling the US guidance with this list of legal token types. It is the underlying reasoning that leads to the conclusion, and since both Canada and America have the same general tests for what is a security, the reasoning carries across the border. And in fact, the Canadian securities laws are all derived from American laws, and were reformed under pressure from America. It is very likely that Canadian regulators will follow what US regulators have laid out for them. WHAT DOES ILLEGAL MEAN WITH SMART CONTRACTS? In the case of a debt token, even if it actually is a security, if that's not being sold to anyone by management, what's the importance of it? It's an issue for the dealers that might want to trade in it, but so long as there's an AMM that'll work with it, or offshore exchanges, is that a problem? Some kinds of technically unlawful tokens may be unlawful in a way that's not legally relevant to the creators of the system. When working through these issues it's important to think about how the creators might run afoul of securities laws, and a lot less important to think about how users of a system might technically run afoul of those laws, because securities laws were not made to go after users of systems, they were meant to go after managers/promoters of investment systems. INVESTMENT SYSTEMS Investment systems/schemes/arrangements like in Howey and Pacific Coin are always subject to scrutiny as an investment contract. For example: a company sells a token and promises that in six months they'll make something great with the money, and the buyers of the token now will earn a profit from the money they put in now, because great things will happen with that money. The example would be worse if the company doing it spoke mostly about their team, advisors, and how they'll allocate the money to ensure the best result for the people who buy now. Estimating returns, or hyping up some reason for why gains will be made, and the buyers can cash out in six months? Even worse: they discuss it in the same way they would a capital raise, and refer to it internally as raising capital or getting investment? There's always a point where a legal asset becomes part of an unlawful investment scheme, and token creators have to be mindful not to simply substitute a token for an investment raise. Raising capital is undoubtedly regulated in Ontario (and the other provinces.) SO WHAT'S NOT ALLOWED? It's generally difficult to construct a token, without a surrounding business system, that is a security. Where the token's smart contract has properties that provide a return, the return would have to be related to a larger system, run by management, because otherwise it's likely a technical feature of the system that is beyond the control of management. A properly constructed smart contract system, without managerial control on an ongoing basis, is likely outside the scope of the return on investment being from management (part 8). This is surprising for most people, who have heard that the problem is with the tokens. That's rarely the case. The vast majority of tokens actually don't have any special technical features or connection to any smart contract system, they're merely used within a larger business system created by management. This thinking can be found in the 2024 Hogg decision from the Capital Markets Tribunal at paragraph 105 (quoted below). Paragraphs 105-107 from Hogg WHY NOT USE THE FOUR PART TEST FROM HOWEY? Anyone who's been following the crypto securities debate for the last decade will be wondering why I don't advocate for simply following the four part test of Howey as stated in Pacific Coin. The reason why is that it's impossible to understand, easily misapplied, and is not even the full basis of what a court might consider to qualify as an investment contract. The 2024 Hogg CMT decision points out the Risk Capital Approach could be taken. All of this is really best to securities lawyers to debate. Businesspeople should instead think in terms of No Return On Investment From Management (NRFM), as explained in part eight. Although there may be a degree of involvement by management in returns that may be acceptable, the point is that if this exists there is a securities law danger. It's not helpful for regular people to try to parse the decisions of courts without the benefit of reading the legislation and many other cases that help to understand what Pacific Coin decided. Canada has a number of great securities lawyers, who have lived and breathed this law for a large part of their professional career, and they know about crypto. Email me (addison@cameronhuff.com) and I'll send you some names. WRAPPED TOKENS & FEE PROTOCOL TOKENS It's worth pointing out that wrapped tokens and Fee Protocol Tokens are less obviously non-securities than other types of tokens. For Fee Protocol Tokens in particular, there's a heightened danger of being linked to an investment scheme, and anyone looking to launch one of these tokens will likely have to act more carefully than for some of the other token types. The surrounding circumstances of the sale of the tokens are likely to be the real issue, not the token itself. RECAP: WHAT'S LEGAL? Most tokens are legal, as tokens. Some tokens may be enmeshed in unlawful schemes to raise capital without following the rules for raising capital. The next post in this series takes a closer look at the methods of sale and how that impacts the investment contract concept which may make a token sale prohibited even where the token itself isn't a security. *** Part 10: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-ten/index.html Launching A Token As A Canadian Business Part 10: Presales, Primary Vs. Secondary, And Sales Methods PUBLISHED ON APRIL 11TH, 2026 This is the 10th article in my series on launching tokens in Canada. This post contains some of the practical tips that I've given to token projects over the last few years (all of which have not had any regulatory or private legal actions against them). The goal is to minimize risks while selling, both in the initial phases of a project and later. The latter part of this post concludes by explaining how securities laws impose a useful type of discipline that moves people away from failed projects and short-term thinking. Following the law can be a powerful advantage in the market. CONSERVATIVE RULES OF THUMB FOR SELLING Before getting into the different ways to sell and the issues, what are the rules of thumb for avoiding securities law problems when selling tokens? A. Don't talk about future functionality in connection with selling tokens B. Don't engage in price speculation before or during token sales C. Don't sell in advance of a token being minted D. Prefer secondary over primary sales E. Consider raising capital to get to launch, then selling tokens once the system exists F. Don't over-promise G. Describe tokens and systems in technical terms, not business terms H. Don't publish tokenomics diagrams The rules of thumb below apply only until all the tokens are sold. Once a project isn't going to be involved in selling tokens anymore, there are fewer or no issues. But even before that, these rules are really guidelines that help to understand the issues, which are explained below. FREE CRYPTO: MODERN PROJECTS AREN'T LIKE BITCOIN When considering how to minimize the downsides of Canadian laws (and maximize the upsides of being a Canadian project), the best thing a token project can do is to give away the tokens. With Bitcoin, this took place through cryptocurrency mining. That wasn't intended as a legal solution, but it avoided the investment contract question (see part 3 of this series). FREE VS. PAID There's a strain of thinking that infects many areas of law: things that are free shouldn't have high burdens on the people who provide them. This similarly applies with securities law, where giving away a token might completely sidestep legal concerns. But this isn't very useful advice for most projects, where there is not a super-programmer like Satoshi Nakamoto willing to produce public goods for nothing. In real life, most of the time, things cost money, and anybody making an interesting system needs to figure out how to pay for expenses (like programmers, servers, managers, lawyers, accountants, etc.). What if it's free? Great lawyer thinking (and even features in the 2012 advice that Perkins Coie gave Ripple in the landmark 2023 decision). Not very useful. But yes, if a token isn't sold and is merely given away, probably there's little to discuss with securities laws. SYSTEM EXISTS: RAISING CAPITAL VS. SELLING A system that doesn't exist yet will be far more likely, in connection with a token, to be seen as a capital raise (see part 5). This is how investment works: people give money to build a business and launch a product or service. The investment is necessary because the thing does not yet exist to be sold. But if the thing does exist, and is being sold, it's far more likely to be seen as a commercial sale. Where there is an already operating system that generates some sort of return for the token holders, it's also important to ask whether that's due to the activities of management or not (part 8). So the first question is: does the whole system exist, with all of the elements? If the answer is that some of the elements haven't been made yet, the project needs to consider scaling back their marketing and only talking about what actually exists. Many people have gotten into legal trouble by saying what their vision is, selling tokens, and then building that vision. If instead they merely described what exists right now, and sold tokens for it, they'd have a lot fewer problems. TOKEN(S) EXIST: PRESALES VS. POST-LAUNCH SALES The more uncertain the nature of the thing being bought, the more likely it will be viewed as an investment and not as a commercial sale. Presales are normal, and routine in many industries, but many crypto projects have run into trouble by conducting presales that look a lot like an early investment round. The worst type of presale of a token is where the token does not yet exist at the time of the presale. This can almost always be avoided by simply making the token on-chain! If the token exists, it's merely a matter of waiting until it's delivered. If the token doesn't exist, it's a more speculative question about what the buyer will receive. There's a lot more room to argue that the nature of what is being sold was not as definite, and therefore more likely to be in the nature of investment. Investment is generally into a broad idea of a business, whereas sales are generally of a specific thing. Presales should be for a specific thing, and the more specific the better. But they should not be for future things that don't yet exist. Too many projects want to talk about roadmap, and the amazing things that will one day exist, but there is both a securities law problem with that and also a practical problem: what if it doesn't happen? Marketing people and visionary CEOs love to think that their optimistic visions will come true, but the reality of software is that there are delays, unexpected challenges, and pivots. Functionality that might not exist ought not to be promised. Presales that are too far in advance of delivery are vulnerability. Presales that are too vague are vulnerable. Presales that are too specific, about things that don't exist/might never exist, might even be fraudulent. MARKET(S) EXIST: PRIMARY VS. SECONDARY If a token is sold directly by a project to a buyer there's a much higher chance of that being investment then sales into an established market. This is at the heart of the 2023 Ripple decision (settled in 2025 for $125m). When a person buys a token on a marketplace they don't know they're buying from the creator of the token, and so it's much harder to have a subjective intent of contributing capital to something. In the case of Ripple, 99% of market volume was not Ripple itself transacting, and the judge found this to be a very persuasive fact in determining that people couldn't have had a subjective intent to invest when almost certainly their buy transaction wouldn't result in money in Ripple's pockets. Primary sales are when projects sell to a specific buyer, with a contractual relationship between them. Primary sales are much more likely to attract regulator scrutiny. If a project sells its own token on a secondary market, and there's a lot of other trading activity, that's a great fact. If there's no other trading activity because, for example, it's a DEX launch and all the liquidity is from the project, then this is less favourable. But at least with a DEX launch it's harder to make representations to buyers. The type of market sale is really about the representations made. Large token buyers (common for primary sales) usually ask due diligence questions, and if those are answered, those are probably representations. It's very difficult to sell a lot of tokens to a sophisticated buyer without making representations, and these should always be carefully scrutinized. This is important for seecurities laws, but also because the buyers might sue on the misrepresentations that might be made by eager salespeople. When people are in selling mode they do not tend to speak like lawyers. REPRESENTATIONS DEFINE THE SALE Over and over again, the case law and regulatory actions show people who wanted to convince people to buy, and said something they shouldn't have. If they had only stuck to an accurate technical description of what they were doing, their problems would have been avoided. When I work with teams I constantly hear that they have to say these things to get a sale. Well? Then you're taking a risk. Businesses are all about risk, so that may be fine, but it's rare people truly understand the risk they're taking. They know they're about to get millions now, and maybe problems later - is that a hard decision? It takes significant restraint (which comes from leadership) to make sure a token has a durable future, free of securities law problems and lawsuits from disappointed purchasers. Projects should talk about the technical merits of what they're building. Most of the time, with crypto, there's technical details. If there's purely business details; describe them fairly, honestly and accurately. When tokens & systems are accurately described they're far less likely to be illegal securities. TOKENOMICS DIAGRAMS: DON'T DO IT I always advocate against publishing tokenomics diagrams. Everyone involved in crypto has seen these. They're a pie chart showing who gets what, and how money will be spent. Often they contain detailed budgets, and explain how much marketing will be done with $X. They are created largely because other people create them (and thus become a sort of informal standard), and to a lesser extent because some buyers/exchanges demand to see them. Tokenomics is sort of astrology for crypto, or perhaps more generously: technical analysis. Buyers want to know a bunch of numbers and plans, so that they can guess at how the token will perform, with the assumption that the numbers help with the analysis. I'm skeptical that they empirically do help with knowing the future, and if this is true, then perhaps it's fine to publish these because they have no meaning at all! But probably they're still relevant to the legal analysis even if they're useless, because they're representations that may be used as part of a decision to buy. It would probably be better if everyone stopped publishing tokenomics diagrams, but in the world where they're required, projects should know they're taking added risk by publishing these kinds of documents. The risks involved and details are a bit too complicated to toss into this already quite long blog post series, but suffice to say that nobody is doing themselves a legal favour by publishing a tokenomics diagram. SHORT-TERM THINKING WITH SELLING A great many problems in crypto are due to short-term thinking. A project that sells a token now, that's deemed to be a security later, may cause their tokens to be delisted from exchanges/dealers - a very bad outcome. That said, since most tokens are not in and of themselves securities (part 9), this is more likely to just create regulatory liability or potential litigation from disappointed buyers, rather than fatally condemning the token to being a security. Many people have correctly concluded that because the chance of regulatory action or lawsuits from buyers is very low, they should discount this risk and do whatever improves sales. Some lawyers oblige these kinds of founders, but they're doing a disservice to their clients and the law by doing so. Usually with only a few changes, a project can have a drastically lower risk of problems. CANADIAN REGULATORY ACTION Canadian projects that sell tokens are at higher risk of enforcement action by their local regulators than foreign companies. I wish this wasn't the case. I wish regulators enforced the law equally against projects that sell to Canadians, no matter where they are based, which would align with the law. That is not the case, and it's a widely known fact that regulators aggressively target local companies and essentially ignore the much larger world of bad actors abroad. This is unfortunate, but it just means that Canadians need to do an extra-good job, which isn't such a bad thing. There are advantages to operating lawfully in Canada. A Canadian business that develops a successful model can more easily attract investment than a Cayman/BVI/Seychelles/Panama/Cyprus/etc. offshore entity. The trade-off of going offshore is complexity, cost, and lower investability. A Canadian company may have to sell more conservatively, and may have to choose methods that are lower risk, but the upside is probably a more sustainable business, and certainly a more investable one. Projects that are merely about a money grab right now have soured everyone on the space, and continue to take away attention from the people building interesting and good businesses based around tokens. Yes, it's hard to come up with useful, good, lawful ideas for tokens. Most people won't come up with the next DEX idea, decentralized lending concept, or algorithmic stablecoin. Innovation is hard. Tokens are still not that widely used in the general economy. The problems are well known. But the projects that crack these problems stand to make fortunes for themselves, and immensely benefit the world because crypto systems are global by default and can serve gigantic user bases at extremely low costs. We are still in the early stages of discovering what this new technology can do, and anyone who looks only to the bad investment schemes, frauds, and failed dreams is ignoring the impressive technological development that's happened over the last 15 years. Following the tips in this blog post will probably make selling tokens more difficult, and might reduce the initial amounts made from selling, but a long-term business can likely sell more tokens later when it's fully established and popular. Many crypto projects are focused entirely on tomorrow and not on what would happen if they succeed. Selling too many tokens early in the process might be disastrous when compared to how much more money could be made by selling later. The price graph for almost every successful crypto project shows a huge run up over time, which supports the idea of holding tokens as a war chest for later. Best of all: the tokens sold later are far less likely to attract securities problems. LONG-TERM THINKING Interesting things cost money, and investors aren't the only way to get that money. It's possible for a project to sell a token and use that for building interesting things, but it has to be done in the same manner as Nike selling shoes so that they can do more R&D on shoes. The more a token looks like selling shoes, the less likely it will be to have problems. This sometimes requires a degree of long-term thinking, but I continue to believe that the best blockchain projects are the ones that think long-term, don't sell too much too early, and are honest and accurate about what they're doing. Following Canadian securities laws doesn't have to be a negative. Following the law can actually be positive for a project because it requires making changes that are ultimately usually quite healthy for long-term success. *** Part 11: https://www.cameronhuff.com/blog/launching-a-token-as-a-canadian-business-part-eleven/index.html Launching A Token As A Canadian Business Part 11: Conclusion PUBLISHED ON APRIL 11TH, 2026 Over the last two weeks, I've published what Gemini tells me is the equivalent length of a Master's thesis (24000+ words) on the topic of launching tokens in Canada. My goal with this series is to challenge the orthodox view that launching a token in Canada is illegal. For years, lawyers have advised their clients to steer clear of Canada. But is that advice well-founded? What's the real state of the law? Has anything changed over the last decade? My thesis is that lawyers and regulators alike have failed to properly understand the nature of tokens, the developments since the 2017/2018 boom, and changing thought south of the border (see part 1). It's up to entrepreneurs to decide if Canada will be the home of the next great thing in crypto but I believe there's no legal barrier to the majority of projects launching here. These posts capture my experiences working with some of the best lawyers in North America, and seeing how the cases, regulatory decisions, and projects have unfolded. TOKENS THAT CAN BE LAUNCHED People want to know what tokens can be launched. Part 9 of this series provides a simple guide to 14 token types: Native units, Standard tokens, Free tokens, Meme coins, image NFTs, fan tokens, loyalty tokens, wrapped tokens, Liquid Staking Tokens, Fee Protocol Tokens, Canadian dollar stablecoins, store credit tokens, debt tokens, and governance tokens. Even better: this post explain the logic for each type. SELLING TOKENS How can projects sell tokens? What methods are higher or lower risk? Part 10 summarizes the law on the tricky subject of presales, primary vs. secondary sales, and what shouldn't be done if a project wants to have a long-term future. For most token-focused projects, part 10 will be the most immportant post to read in the series. TOKEN INNOVATION IN 2026 AND BEYOND This blog post series is the most comprehensive write up of Canadian law about tokens, and especially so for the modern era of tokens. This isn't 2017 anymore. And with the release of the mid-March guidance by the SEC/CFTC, this isn't even February anymore. There's a new world of digital assets that is opening up, and it goes far beyond price speculation or pump.fun meme coins. Serious Canadian projects are going to appear that bake tokens into their systems. People will develop new decentralized business machines that make money for token holders, without any involvement of management. The Internet opens up information flows and stablecoins open up payment flows. Token innovation is just beginning. IS THIS TRUE? Parts 9 and 10 are what most people want to read. Read the above links if you want to know quickly what the risks are, and then focus on what matters. I hope that people will bring these points to their lawyers, ask ChatGPT/Gemini/Claude, or at least discuss it with their cofounders. Risk management is best done with eyes wide open. And, in the best case scenario, the risk is actually far less than expected, or even zero. But is my view correct? This blog post series starts at the beginning, not the end, to explain why today's understanding depends on a century of legal developments. For anyone who wants to understand the rationale for the above two posts, they'll need to read from the beginning, starting with the statutes, regulators, and historical developments. REGULATORS: FEDERAL & PROVINCIAL The Bank of Canada, FINTRAC, and provincial securities regulators are the major actors in Canada to pay attention to. Part 2 looks at the federal regulators. Part 3 looks at the history of securities regulation in Canada and how it draws on the American legal tradition. Part 4 is a detailed examination of the role of provincial securities regulators, their historical enforcement actions, and what they've said about crypto. This is then summarized in part 5 as being largely about raising capital. A nuanced look at the OSC as a particular example shows that their views have been misunderstood. TOKENS AS SECURITIES OR NOT People have not properly understood what sort of tokens are problematic in Canada, so part 6 attempts to summarize this, drawing on the previous posts about securities law. Jumping over to the US, part 7 analyses the mid-March SEC/CFTC guidance that is widely seen as a major change in the views of American regulators. This follows last year's end to enforcement proceedings against many US crypto projects. There's no reason to think the same logic won't apply in Canada. IGNORE HOWEY: AN EASIER EXPLANATION OF INVESTMENT CONTRACT Part 8 suggests that too many people have tried to apply the Howey Test without deeply understanding what it's about. The law of tokens is not merely a few words, and tech people have misunderstood what a legal test is. It's far better to view the rule as a different formulation: No ROI From Management (NRFM). Part 8 explains why NRFM is the best way to understand both Pacific Coin (the leading Canadian Supreme Court case) and subsequent developments since the 1970s. GLOBAL COMPETITION OF JURISDICTIONS: CAYMAN/BVI I've helped many Canadians (and others) set up Cayman/BVI structures that have operated well and not one of them has faced regulatory action or lawsuits about their token sales. But is that because they were offshore? Typically the answer is no. The best way to run a token project is to consider global legal compatibility anyway. Yes, there may be tax advantages to being offshore, but even that is often overstated when considered in context. There's more to jurisdiction than just tax. Whether or not offshore is the right path, Canadians should strongly consider whether they need to do it. Offshore structures are often expensive, complex, and may be uninvestable. Founders should always consider their home jurisdiction first, before rejecting that in favour of abroad. IS THIS THE FINAL WORD ON TOKENS IN CANADA? No. This blog post series explains why the door is open, but it remains to be seen what projects will launch. Technological developments are uncertain, and digital assets are still in their infancy. There's been a lot learned over the last decade, and a lot of hard lessons for industry participants, but all of that has paved the way for a general acceptance of the ideas of crypto. Crypto wallets aren't an alien concept. Stablecoins are being used. Crypto ETFs exist on traditional stock markets. Great inroads have been made, and all of this opens up the opportunities for the next phase of development. Hopefully this series helps people to understand the true nature of Canadian laws with respect to crypto projects. I've been an advocate of crypto for 12 years now, and it feels like finally the pieces are coming together. The Canadian landscape is much better than most people recognize, whether for technical developers or large companies that figure out how blockchains can add value. I believe that next phase is domestic projects, whether Canadian, American, European, etc. I believe that next phase is professional, long-term, and legally sound. I believe it's possible for that next phase to begin right now. ***

Postscript About LLMs For Legal

As impressive as these systems are, it's difficult to prompt them properly to get right answers, and sometimes even if you do prompt it properly, it won't give the right answer. But it's still helpful to better understand the issues. Sometimes that's more important than the right answer. And if you're using this for anything important, you should speak to a real lawyer who knows what they're talking about because there's incredible nuance to this and the right path is fact-specific.