The consequence is that ICO participants should be more cautious, Obie said.
“Investors or people buying the ICOs will have to ensure that whatever they purchase will be compliant with U.S. securities laws, and potentially you’ll have more ICOs outside the us that will not take us investors,” Obie said.
What Happens to Past ICOs?
It’s unclear, but the SEC signaled it wants to caution and have a dialogue with issuers instead of bringing charges forward.
Matt Kluchenek, partner and global head of derivatives and hedge funds at law firm Baker McKenzie LLP, said there will likely be flexibility with founders who have already issued tokens.
“What happened in the past is probably safe activity but if they want to continue to fund raise with tokens they will need to reconsider whether that fundraising complies with federal securities laws,” Kluchenek said.
For Obie, issuers are at risk if they don’t make sure they’re following SEC requirements.
“There are no easy answers for those who feel that they may have overstepped,” Obie said. “They should be looking for good counsel so that appropriate steps including dialogue with the SEC can be taken.”
What’s Next for Markets?
We might see a more restrained U.S. ICO market as compliance with SEC rules in some cases requires greater disclosure from companies and for participants to be accredited investors.
That won’t necessarily mean fewer cryptocurrencies, as even more ICOs might be done outside the U.S. Blockchain companies in the U.S. might go to more traditional funding mechanisms, such as venture capital and private placements, Kluchenek said.