By CCN Markets: YouNow, a live video streaming startup, has filed a public offering circular with the U.S. SEC for a native cryptocurrency called the Props token. The company is not looking to sell this digital asset to investors; instead, they want to distribute it and are seeking compliant 'mining' of Props in the U.S.
The filing has been done through the SEC's A+ exemption, which entitles a successful company to offer and sell securities to U.S. investors. However, YouNow's application for this exemption raises an interesting consideration for the SEC, as the company would not be selling the asset.
The intention is to bring "utility tokens to non-accredited investors and consumers in a way that is compliant with the SEC through this public offering," explained Adi Sideman, YouNow founder and CEO, to Reuters.
Props Under SEC Scrutiny
YouNow is a broadcasting service that allows its users to stream their live video content, or to interact with other streamers. This service is comparable with Periscope or Twitch for online gaming.
What differentiates YouNow from other broadcasting sites is the Props reward project which is under the SEC's scrutiny. It is a blockchain and smart contract platform operating on Ethereum and using ERC-20 tokens as the basis for its cryptocurrency.
Props is an open-source project that boasts its parent company, YouNow, as the first app on the network. By offering earnable tokens, YouNow is setting up a reward scheme for network participants that comes with additional benefits. According to a press release:
"Upon qualification, YouNow users may earn Props Tokens by, for example, creating content on the app. Users hold Props to get in-app benefits and real upside potential."
YouNow claims to have 47 million registered users and started the Props project in 2017.
The project draws similarities to many other decentralized blockchain networks, as it seeks to reward those who participate with cryptocurrency. For YouNow, this could help increase content creation and participation on the site as well as bolster the underlying Props project. The press release went on to state:
"YouNow, the first app on the network, intends to distribute a significant portion of its own tokens to millions of its users. Tokens are to be allocated to users based on their current status ('level') on YouNow, which signifies the contribution they have made to the network to date.
This approach to regulation by YouNow is being viewed as extremely cautious. The SEC's scope usually encompasses the selling and distribution of securities. If this filing is approved, however, the company will be cleared to distribute the cryptocurrency without registering the tokens as securities.
Investing in the Props project are some notable names, including Union Square Ventures, Venrock, and even well-known Youtube star Casey Neistat.
YouTube’s Biggest Star PewDiePie Swaps Stream to Blockchain Video Platform https://t.co/KV2QU8QmSV
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Venrock partner David Pakman said in a Medium post:
"Over the past two years, the team focused on launching Props in a manner compliant with U.S. regulators and now, pending final approval by the SEC, there is the opportunity for apps to integrate and 'mine' a legally compliant digital token.
Regulation has become vital to the advancement of blockchain projects. The SEC has become key in determining the nature of blockchain-based assets in the U.S, either propelling their legitimacy or sometimes regulating them out of existence. For this reason, it is essential startups like YouNow are on the right side of regulation before embarking on token projects.