Durov vs SEC: 7 Years from Blocking Gram to Bringing It Back

Seven years between blocking the Gram ICO in October 2019 and officially returning the Gram name on June 1, 2026, mark the longest and most consequential crypto-industry standoff with the US SEC. This period shaped not only the fate of Telegram and TON but also a precedent for the entire industry: what constitutes an investment contract in the ICO era, where the boundaries of decentralization sit, where the line between cryptocurrency and security really is.

This piece walks through the full timeline, focusing on the legal arguments, the SEC’s evolution from 2019 to 2026, and the lessons Durov took from this battle.

Timeline of key events

2017–2018: ICO as an investment contract

When Telegram prepared the Gram ICO in 2017–2018, the legal team worked on a structure they believed did not fall under US securities law:

• Accredited investors only. No retail ICO — qualified investors only.
• SAFT structure. Simple Agreement for Future Tokens — a legal instrument designed specifically to avoid security classification. The SAFT idea: selling SAFTs is a security, but the tokens received post-launch are a commodity.
• Reg D registration. Telegram registered the ICO under Regulation D, the private-offering exemption.

The SEC found the whole construction insufficient:

• Despite “accredited only,” some tokens were resold to secondary investors without proper restrictions
• The SAFT theory fails if the future-token situation itself satisfies the Howey test
• Reg D registration is valid only if anti-resale conditions are observed

2019: the SEC files suit

October 11, 2019 — the SEC files suit in the Southern District of New York (SEC v. Telegram Group Inc., No. 19-cv-09439).

The SEC’s main arguments:

1. Gram = investment contract. Howey test satisfied on all four prongs. Buyers invested money (1), in a common enterprise — Telegram’s blockchain (2), expecting profit (3), from the efforts of Telegram’s team (4).
2. Secondary market reasonably expected. Telegram should have known investors would resell Gram to retail right after mainnet — making it an unregistered public offering.
3. No valid exemption. Reg D doesn’t apply because Telegram didn’t prevent secondary resale.

Telegram countered:

1. Gram = utility token. The token’s purpose is paying network fees, not investment.
2. Decentralized network. Post-launch, Telegram doesn’t control Gram — there’s no “efforts of others” in the Howey test.
3. No primary public offering. SAFT is a security (agreed), but Gram is not.

2020: Telegram loses

March 24, 2020, Judge P. Kevin Castel issues a preliminary injunction siding with the SEC:

“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 judge’s key logical move: SAFT + Gram together = one integrated security offering — you can’t split them.

This is catastrophic for the SAFT theory, which had been the hope of an entire sector of crypto projects.

May 12, 2020, Durov publishes “We have made the difficult decision to abandon TON.” Telegram withdraws the appeal and moves toward settlement.

Settlement: the cost of the lesson

June 2020 — final court order, key terms:

1. Refund of $1.224 billion to investors (net of already distributed)
2. Civil penalty of $18.5 million to the SEC
3. 5-year ban on issuing Gram in any form (until May 2025)
4. 3-year obligation to notify the SEC of any Telegram crypto projects (until June 2023)
5. Distribution restrictions — cannot deliver tokens even to existing investors

This is the largest SEC settlement in crypto ever, with the toughest terms.

The silent era 2020–2024

During this period, Telegram:

• Open-sourced TON under Apache 2.0
• Distanced itself from Free TON / TON
• Made no official integrations with TON
• Fully isolated the blockchain product line from the messenger

But:

• Wallet by Telegram (2022) — effectively a TON wallet, dressed up as a “third-party product”
• Premium (2023) — separate Stars currency, legally unrelated to TON
• Notcoin, Hamster Kombat (2024) — TON-based apps, but Telegram “doesn’t endorse them”

This is strategic ambiguity — Telegram leverages TON infrastructure without breaching SEC obligations.

2024–2025: SEC softens

January 2025 — new US administration. Appointments:

• Paul Atkins — SEC chair (former Patomak Global Partners partner, pro-crypto)
• Hester Peirce — head of the SEC crypto task force (“Crypto Mom,” pro-innovation)

Early SEC actions:

• February 2025: Coinbase case dropped without action
• March 2025: Binance suit withdrawn
• April 2025: spot Ethereum ETFs approved (following spot Bitcoin ETFs in January 2024)
• May 2025: SEC formally declares memecoins are NOT securities

In parallel:

• FIT 21 (Financial Innovation and Technology Act) passes Congress
• CLARITY Act under discussion, drawing the security/commodity line
• Stablecoin regulation (GENIUS Act) approaches final version

Expiration of the SEC’s Gram ban

May 2025 — the 5-year SEC ban on issuing Gram expires. Telegram is legally free to use the Gram name.

But: Telegram doesn’t issue a new Gram. Instead, in 2026, Durov rebrands the existing Toncoin to Gram. Legally this is a fundamentally different operation.

Legal distinction: Gram 2018 vs Gram 2026

Gram 2018 (security per court ruling)

• Issuer: Telegram Group Inc. (BVI)
• Sale: primary sale via SAFT
• Buyer expectation: profit from Telegram efforts
• Issuer obligations: launch mainnet, deliver tokens
• Howey test: passed (per SEC and court)

Gram 2026 (not a security under any reasonable interpretation)

• Issuer: none (decentralized network, native asset)
• Sale: no sale — just a rebrand of an existing decentralized asset
• Buyer expectation: none (no new issuance)
• Issuer obligations: none
• Howey test: doesn’t apply (no investment contract)

A chasm separates these two Gram versions under SEC classification.

Why the 2026 rebrand is legally safe

Legal analysis of the Toncoin → Gram rebrand:

Argument 1: there is no sale

A rebrand is not a sale. Existing holders don’t exchange tokens, don’t receive new tokens, don’t pay Telegram. Display name simply changes.

The legal category of the rebrand is transparent re-labeling, not a security offering. Unambiguously outside SEC regulatory scope.

Argument 2: decentralized

Gram 2026 is the native coin of a decentralized network where Telegram is one of ~350 validators (largest, but still one of many). This isn’t a centralized corporate cryptocurrency — therefore the Howey “efforts of others” prong doesn’t apply.

Argument 3: 2025 SEC position

Under the new administration, the SEC publicly stated memecoins aren’t securities. If a memecoin with no utility is not a security, then Gram with real utility (network gas, staking, DeFi) certainly isn’t either.

Argument 4: SAFT lesson learned

In 2018, Telegram tried to bypass the Howey test via the SAFT structure and lost. In 2026, Telegram isn’t doing a new offering — no SAFT, no private sale, no crowdfund. Just rename of an existing asset.

Lessons for the crypto industry

The Telegram vs SEC case left four lessons that still shape practice:

Lesson 1: SAFT theory is not enough

After Telegram, SAFT structures became legally risky. Many projects shifted to fully decentralized launches (mainnet → token → token distribution to network users) — Optimism, Arbitrum, Wormhole.

Lesson 2: Decentralization is a spectrum

“Sufficiently decentralized” is a fuzzy test. Ethereum (per the SEC’s Hinman speech, 2018) — sufficient. Telegram-2018’s level — insufficient. Where the line sits remains debated.

Lesson 3: Pre-sale + retail = risk

Any structure with private sale + retail expectation is toxic to the SEC. The era of “private VCs at $0.10, retail at $1.50” ended after Telegram. New launches avoid that private-sale tier with such markup.

Lesson 4: Better quiet than loud

Post-2020, Durov shifted to minimal communications about crypto. The “don’t attract regulator attention” style became standard for project leadership.

Future risks for Gram

Despite the legal safety of the rebrand, long-term risks exist:

Risk 1: if Telegram conducts a primary sale of new Gram

For instance, if MTONGA step 5 involves a secondary Gram emission via some Telegram product — that could revive the Howey test.

Risk 2: if the SEC changes course

The new administration is in for a while, but not forever. A future Congress may restore a tough stance. And Telegram with the largest validator stake is the main target.

Risk 3: if the EU takes a harder line

The EU has MiCA and a more structured crypto approach. If the EU classifies Gram as a security, it creates problems for European users.

Risk 4: if Gram is actively promoted

SEC “touting rules” apply to security marketing. If Telegram starts promoting Gram as “an investment” (vs utility), that may shift its legal category.

Sources

• SEC v. Telegram Group Inc., No. 19-cv-09439 (S.D.N.Y. 2020) — court records
• SEC Settlement Order, June 26, 2020
• Telegram Statements (May 2020, via @durov)
• SEC Chair Paul Atkins, 2025 statements
• Hester Peirce, “Token Safe Harbor Proposal”
• Andreessen Horowitz, “State of Crypto Report 2025”

Further reading:

• Full circle: Gram 2018 → Gram 2026
• SEC vs CFTC: Toncoin classification in the US
• Main rebrand explainer
• Durov and TON: 9-year journey