STO (Security Token Offering)

An STO (security token offering) is an offering of securities represented as tokens on a blockchain network: in the U.S. it needs SEC registration or an exemption, and in the EU an approved prospectus (Regulation (EU) 2017/1129) or an exemption, in addition to the MiFID II rules. It differs from an ICO, which sells tokens the issuer presents as not being financial instruments, although if they are in fact securities, securities rules still apply.

In the United States. A tokenized security is still a security: the format does not change its nature (SEC Release No. 33-11412, section III.E, March 17, 2026). If the token is a security (because it represents stock or debt or, otherwise, because it is an investment contract under the Howey Test), the offering is registered or relies on an exemption:

• Regulation D: Rule 504, up to $10 million, or Rules 506(b) and 506(c), the latter only with verified accredited investors.
• Regulation A+: up to $75 million in Tier 2, open to non-accredited investors within limits, for U.S. or Canadian issuers only.
• Regulation Crowdfunding: up to $5 million in 12 months, through a broker-dealer or a funding portal.
• Regulation S: not an exemption but the rule under which Section 5 does not apply to offerings made outside the U.S., with no directed selling efforts in the country (17 CFR 230.901 and 230.903).

Anyone intermediating the placement must be registered as a broker-dealer (Exchange Act, Section 15(a)) or, under Reg CF, as a funding portal. A platform that matches orders from buyers and sellers must register as an exchange or operate as an ATS run by a broker-dealer (17 CFR 240.3b-16 and 242.301), and a transfer agent is involved depending on the case. The proposed "Regulation Crypto Assets" (comments due October 20, 2026) does not target the tokenization of traditional securities. Guide: asset tokenization in the U.S.

In the European Union. A security token is a financial instrument: it is governed by MiFID II (Directive 2014/65/EU), MiFIR and, in Spain, Law 6/2023, and it falls outside MiCA (Art. 2(4)(a) of Regulation (EU) 2023/1114). A public offering requires an approved prospectus (Art. 3 of Regulation (EU) 2017/1129), unless an exemption applies, such as offering only to qualified investors, to fewer than 150 persons per Member State other than qualified investors, or with a minimum investment of EUR 100,000 (Art. 1(4)). Guide: how to launch an STO in Europe.

Official sources: Release No. 33-11412; 17 CFR 230.506; 17 CFR 230.251; 17 CFR 227.100; 17 CFR 230.903; Regulation (EU) 2023/1114, MiCA; Regulation (EU) 2017/1129; Law 6/2023 (BOE).

Framework verified as of October 13, 2026. At Unknown Gravity we build the platform, smart contracts and integrations for the offering, with the client's legal counsel and, in the U.S., registered intermediaries. We are not a broker-dealer, funding portal or law firm. Talk to us.