Author: Yueqi Yang

Compiled by: Block unicorn

According to company documents and informed sources, Nasdaq is intensifying its scrutiny of companies listed on its exchange that raise funds to purchase and hoard cryptocurrencies to boost their stock prices. This move could slow the cryptocurrency frenzy sweeping the mainstream market, especially involving increasingly exotic tokens.

The Nasdaq Stock Exchange is the venue for the vast majority of cryptocurrency stock trading, and it requires some companies to obtain shareholder approval before issuing new shares to purchase cryptocurrencies. Nasdaq wants these companies to slow down and ensure that investors are informed before the companies transform into cryptocurrency stocks.

Industry insiders say that Nasdaq's requirements (including shareholder voting) could delay trading and bring uncertainty to the cryptocurrency frenzy in the stock market. If companies fail to comply with the regulations, Nasdaq can delist or suspend their stocks.

Companies are racing to accumulate as many tokens as possible to become the preferred stock for a specific token, a capability that depends on their speed in raising funds and issuing shares. This strategy works best when the cryptocurrency market is rising, so any delays could cause companies to miss out on opportunities.

Nasdaq's move responds to the astonishing transformation in the cryptocurrency space since President Donald Trump took office. Trump relaxed cryptocurrency regulations, leading to explosive growth, some of which benefited his family's cryptocurrency business. Washington's securities regulators have taken a backseat, while Nasdaq has become the primary regulator enforcing its own stock listing rules and reviewing these transactions.

According to cryptocurrency consulting firm Architect Partners, 124 U.S. listed companies have announced plans to raise over $133 billion to purchase cryptocurrencies this year. Among them, 94 stocks are listed on Nasdaq, while only 17 are on the New York Stock Exchange.

Nasdaq declined to comment on this report. The New York Stock Exchange also refused to comment on how it handles cryptocurrency stock issuances.

These companies planning to purchase cryptocurrencies are emulating the strategy of Michael Saylor. Saylor's software company now primarily focuses on buying Bitcoin, accumulating $71 billion worth of cryptocurrency over the past five years, making it a hot stock.

Recently, companies have turned to purchasing smaller, newer, and less liquid tokens, which may be more volatile or easier to manipulate in the market. According to Architect, nearly half of the 124 cryptocurrency stocks are involved in purchasing these smaller tokens, including the Trump family's World Liberty token. Critics argue that such transactions may be a way for token holders to sell tokens to inexperienced stock market investors.

Informed sources revealed that Nasdaq recently informed some listed companies that, under certain circumstances, their shareholders need to approve plans to raise funds to purchase cryptocurrencies. The exchange aims to protect the rights of existing shareholders, especially when the raised funds are in the form of cryptocurrencies. For example, the Trump family used its own tokens to purchase shares in Alt5 Sigma, which then raised funds to buy more Trump tokens.

Stephen Alicanti, a partner at DLA Piper law firm, stated, "This is a topic that has been evolving over the past few weeks and months." He noted that some companies had to change their transaction structures after announcing deals. "You have to be very careful to comply with Nasdaq's rules because if you complete a transaction but discover issues weeks later, you could find yourself in a bad situation where you need to unwind the deal."

One company affected by Nasdaq's rules is Heritage Distilling, a craft distillery listed on Nasdaq that offers military-themed whiskey. The company plans to accumulate a relatively new cryptocurrency called $IP, which is the native token of the Story blockchain that helps creators track and monetize their intellectual property. Heritage raised funds from a16z Crypto (the crypto division of Andreessen Horowitz), Polychain Capital, and other investors, who are also venture capitalists in the Story Protocol (which develops the Story blockchain). Part of Heritage's funding was raised in the form of $IP tokens.

According to the proxy statement disclosed by the company, Nasdaq informed Heritage that its plans require shareholder approval. The company modified its transaction structure last month, offering investors pre-paid warrants instead of shares, and investors cannot exercise these warrants until shareholder approval is obtained. Heritage stated in its securities filings that this move was to comply with Nasdaq listing rules and has scheduled a shareholder meeting for September 18.

Nasdaq's scrutiny reflects a balancing act: it profits from companies going public while also needing to act as a regulator. Dan Kahan, a partner at King & Spalding law firm, stated, "Especially with the shareholder approval requirement, Nasdaq is essentially saying that if you invest in a Nasdaq company, shareholders typically have a say before any significant changes in ownership or operations occur."

The cryptocurrency industry generally welcomes these stocks as they can attract new investors, such as institutional investors who cannot or do not want to directly engage with cryptocurrencies. Reports indicate that more transactions are in preparation, including cryptocurrency fund management company Pantera planning to raise up to $1.25 billion to transform a listed company into a Solana holder.

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