A cryptocurrency backed by shares in reddit would probably be treated as a derivative security, and would almost certainly be regulated by the Securities Exchange Commission.

Additionally--not sure what "former SEC" lawyer they talked to, but unless they structure this offering very carefully, they will run afoul of both state and federal securities registration laws. If they structure the offering to avoid those laws (which is legal, i.e., as a private or in-state offering), then the cryptocurrency would be so limited in its availability that only an extremely tiny handful of users would ever be able to own it unless Reddit goes public.