ICOs May Face a Two-Fold Regulatory Reckoning
The initial coin offering (ICO) market finds itself in some troubled waters as it could soon face a two-fold regulatory “reckoning”, according to CBOE Global Markets President, Chris Concannon.
Concannon says that the reckoning will come in two waves. First, the U.S. Securities and Exchange Commission (SEC) will label ICOs as unregistered securities and the holdings of investors would be “rendered valueless.” This would subsequently result in the second wave, as a slew of class-action lawsuits are filed against the companies behind ICO projects:
“The reckoning will come in two waves. First, the SEC will go after ICO market participants. Then, class-action lawsuits against the teams behind ICO projects will surge.”
Concannon said that ICO investors “should lay awake at night” worrying about the volatile ICO market. Concannon explained that if someone offered an unregistered coin, they would technically have issued an unregistered security, and according to the law it would be considered an “unregistered underwriter.”
“If you sold someone an unregistered security you are liable to them if they decide to take them to court.”
Whether the SEC would prosecute past ICO projects is still unknown. Professor of financial regulation at Cornell University Robert Hockett said the SEC would likely take action in extenuating circumstances:
“I don’t think it is the case that people involved in the business are going to be prosecuted against as if they have been violating the law. But there is a little bit of a room for exception with something particularly egregious.”
In 2017, the ICO market raised a fiat equivalent of $4 billion and broke funding records previously set. This year according to predictions, they will raise $7 billion. Financial regulators have repeatedly requested the public to obey existing laws, and have taken action against those who have failed to do so. In a large-scale probe into suspicious crypto investment products dubbed, “Operation Cryptosweep,” U.S. and Canadian regulators from 40 jurisdictions have opened up to 70 investigations.