A United States District Court has granted an injunction against Telegram, preventing the visitor from issuing its GRAM tokens at the present fourth dimension.

Court says that GRAMS are securities under Howey test

Per a March 24 filing granting the Securities and Commutation Commission's request for a preliminary injunction, the Court wrote that:

"The Court finds that the SEC has shown a substantial likelihood of success in proving that  the contracts and understandings at outcome, including the auction of 2.nine billion Grams to 175 purchasers in exchange for $1.vii billion, are role of a larger scheme to distribute those Grams into  a secondary public market place, which would be supported by Telegram'southward ongoing efforts. Considering the economic realities under the Howey test, the Court finds that, in the context of that scheme, the resale of Grams into the secondary public market would be an integral part of the sale of securities without a required registration statement."

The SEC and Telegram: A Detest Story

The Telegram courtroom case has been ongoing since Oct last year, post-obit the 2022 initial money offering (ICO) for the Telegram Open Network (TON).

As with many ICOs, the SEC has taken the stance that under the 1934 Howey Test, such offerings plant the sale of unregistered securities.

Telegram had held that since information technology filed a Grade D 506(c) Find of Exempt Offering of Securities prior to the first round of its offering, it was authorized to sell tokens to accredited investors.

Even so, the Court noted in granting the injunction that since Telegram intended for the Gram tokens to reach the secondary market, disqualifying them from exemption:

"Telegram's auction of Grams to the Initial Purchasers, who volition  function equally statutory underwriters, is the beginning pace in an ongoing public distribution of securities and, as such, Telegram cannot receive the do good of an exemption from the registration requirement under either section 4(a) or Dominion 506(c)."

In a sentence that may deliver a blow to many issuers of tokens through the ICO model, the Court rejected Telegram's argument that the Gram would become a commodity once actualized and therefore fell exterior the purview of the SEC.

"The Court rejects Telegram's label of the purported security in this example. While helpful as a shorthand reference, the security in this case is non merely the Gram, which is lilliputian more than than alphanumeric cryptographic sequence. Howey refers to an investment contract... that consists of the full set of contracts, expectations, and understandings centered on the sales and distribution of the Gram. Howey requires an exam of the entirety of the parties' understandings and expectations."

Concluding that the courtroom must stop the delivery of GRAM tokens, the filing reads:

"The Court also finds that the commitment of Grams to the Initial Purchasers, who would resell them into the public market, represents a near sure hazard of a future impairment, namely the completion of a public distribution of a security without a registration statement.  An injunction, prohibiting the delivery of Grams to the Initial Purchasers and thereby preventing the culmination of this ongoing violation, is advisable and will be granted."

This is a breaking story and will exist updated.