On August 19, 2019, INX Limited (together with its affiliates, “INX”) filed a Form F-1 with the Securities and Exchange Commission (“SEC”) stating their intention to raise up to approximately $130 million through a registered initial public offering (“IPO”). If approved by the SEC, this would be the first security token sale registered with the SEC.

A Form F-1, required under the Securities Exchange Act of 1933 for foreign issuers to register securities that will be offered publicly in the United States, is a type of registration statement and prospectus that contains much of the same information and disclosures as a Form S-1 – the standard form filed by U.S. domestic corporations for new issuances of securities. The information and disclosures required are extensive including, but not limited to, information about the business and its financial condition, the securities offering, management and executive compensation and risk factors. The F-1 must also include audited financial statements and their footnotes.

INX is Gibraltar-based and intends to create two different trading platforms and a security token. INX Digital, Inc. (“INX Digital”), a wholly-owned subsidiary of INX Limited, intends to operate a cryptocurrency trading platform and INX plans to obtain money transmitter licenses with hopes to be operating in eight U.S. states by the end of 2019 with most other states to follow by the end of 2020. INX Services, Inc. (“INX Services”), also a wholly owned subsidiary of INX Limited, intends to operate an approved alternative trading system for security tokens and INX plans to register INX Services as a licensed broker-dealer.

The prospectus describes INX Limited’s plan to sell 130 million INX tokens (the “Tokens”). The Tokens will be ERC-20 compliant – meaning compliant with the technical standard and certain defined rules for issuing and implementing the most common kind of tokens on the Ethereum blockchain. Holders of such tokens will be entitled to 40% of INX’s net cash flow from operating activities, excluding any cash proceeds from an initial sale by INX of the Token, however holders are not intended to be considered equity holders. Once the trading platforms are functional, holders will also be able to use the Token as a form of payment for transaction fees on the INX Services platform and will be entitled to a discount on such fees. The Tokens may not be used for payment for transaction fees on the INX Digital trading platform, but holders of Tokens may receive promotional discounts on transaction fees on such platform.

While many see this as a significant milestone in the cryptocurrency landscape, INX has a long road before it will be open for trading and fully compliant with all U.S. and state regulatory laws. Most importantly, the mere filing of a Form F-1 with the SEC has no bearing on the registration status of the securities offering. Only if and when the SEC deems the prospectus “effective” will INX be permitted to conduct a token sale in the United States.