Nasdaq takes action! Regulation of crypto concept stocks is upgraded, and shareholders need to

# Written by: Zhao Ying  

Source: Wall Street CN  

Nasdaq is tightening its scrutiny of listed companies that raise funds to purchase cryptocurrencies in a bid to inflate their stock prices.  

On Thursday, according to media reports citing corporate documents and insiders, the exchange now requires some companies to obtain shareholder approval before issuing new shares to buy cryptocurrencies.  

This regulatory move could slow down the current cryptocurrency boom, which is pushing an increasing number of alternative tokens into the mainstream market. The vast majority of crypto-related concept stocks are traded on Nasdaq, and the exchange wants companies to slow down before transforming into crypto-focused stocks, ensuring that investors fully understand the associated risks.  

Nasdaq’s new requirements include procedures such as shareholder voting. Industry participants say this may delay transactions and introduce uncertainty to the crypto-fueled rally in the stock market. If companies fail to comply with the relevant regulations, Nasdaq has the right to delist them or suspend their trading.  

## Tighter Regulation Impacts Fundraising Rhythms  

So far this year, 124 U.S. listed companies have announced plans to raise more than $133 billion to purchase cryptocurrencies, according to data from crypto consulting firm Architect Partners. Among these, 94 stocks are listed on Nasdaq, while only 17 are traded on the New York Stock Exchange (NYSE).  

Companies are rushing to accumulate as many tokens as possible, seeking to become the "go-to stock" for specific tokens. Their success largely depends on the speed of fundraising and share issuance. This strategy works best in a rising cryptocurrency market, so any delay could cause companies to miss windows of opportunity.  

Nasdaq’s strict scrutiny represents a balancing act: it aims to profit from company listings while fulfilling its regulatory responsibilities.  

Dan Kahan, a partner at law firm King & Spalding, said that by imposing the shareholder approval requirement, Nasdaq is essentially stating that if you invest in a Nasdaq-listed company, shareholders will usually have a say before the company undergoes truly transformative changes in ownership or operations.  

## Risks from Copying MicroStrategy’s Strategy  

These companies are emulating the strategy of MicroStrategy, led by Michael Saylor. The software maker now focuses primarily on buying Bitcoin; over the past five years, it has accumulated cryptocurrencies worth $71 billion and become a popular stock.  

Recently, companies have begun shifting to purchasing smaller, newer, and less liquid tokens—assets that may be more volatile or vulnerable to market manipulation. Nearly half of the 124 crypto-related stocks tracked by Architect Partners are buying these small-cap tokens, including the Trump family’s World Liberty Token. Critics argue that these transactions could be a way for token holders to sell their tokens to inexperienced stock market investors.  

Heritage Distilling has become a typical example of how Nasdaq’s new rules are impacting businesses. The Nasdaq-listed craft distillery, which specializes in military-themed whiskey, plans to accumulate IP—a relatively new cryptocurrency that serves as the native token of the Story blockchain. Heritage raised funds from investors such as a16z Crypto and Polychain Capital, with part of the financing conducted in the form of IP tokens.  

Nasdaq informed Heritage that its plan required shareholder approval. Last month, the company revised the transaction structure, offering investors prepaid warrants instead of shares; investors can only exercise these warrants after Heritage obtains shareholder approval. In its securities filings, Heritage stated that this move was to comply with Nasdaq’s listing rules and has scheduled a shareholder meeting for September 18.  

Stephen Alicanti, a partner at law firm DLA Piper, said, "This is a new and evolving topic over the past few weeks and months. Some companies have had to change their transaction structures after announcing deals. You have to be extremely careful to comply with Nasdaq’s rules—because if you run into problems a few weeks after completing a transaction, you’ll be in a tough spot where you might need to reverse the deal."  

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