The president of the Chicago Board Options Exchange (Cboe), the first US company to sell futures contracts on Bitcoin, has warned that “two waves of reckoning” will come down on issuers and then holders of ICOs (initial coin offerings) in the US, Business Insider reports.
Chris Concannon believes investors in ICOs should be very concerned about regulatory uncertainty hanging over the ICO marketplace.
He believes the first wave of consequences will involve SEC officials going after issuers of ICOs, followed closely by a second wave of lawyers bringing class action lawsuits against ICO architects on behalf of investors claiming they were somehow misled.
Although SEC officials have lately made comments indicating that they do not consider Bitcoins and Ether securities, glaringly absent from these comments was a pardon on ICOs.
According to BI, over $7 billion has been raised in ICO token sales this year alone.
Cryptographic tokens are often sold on the premise that they will one day allow holders to access services on a network to be built with proceeds of the token sale.
But many argue that the practice has largely devolved into a way of issuing thinly-veiled unlicensed securities.
Most ICO crowdsales to date have occurred long before companies have even a prototype let alone assets and independent revenue streams.
The crypto token-issuing project EOS recently raised $4 billion dollars in an ICO to fund construction of an industrial blockchain meant to compete with Ethereum.
Concannon disputes the argument that tokens are bought and sold for reasons of future utility.
“The actual party that offered the unregistered coin,” said Colcannon, “they could have been involved in the issuing of an unregistered security.”
“Anyone who sold that off could be deemed an unregistered underwriter,” he said.
Although Cornell securities law professor Robert Hocket told BI that the SEC would likely only take action against companies responsible for the most “egregious” misconduct, if the SEC declares ICOs unregistered securities, there is risk, says BI, that investors’ “holdings would be rendered valueless.”
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Several securities lawyers spoke on the weekend on a marathon panel convened by ICO-loathing Bitcoiner Tone Vays to discuss the SEC’s recent blessing of Ethereum.
Lawyer Steven J Palley joked that the decision did little to move ICOs into the clear.
“We’re not going to see less class action work as a result of this, right?” he asked.