SEC Regulations on ICOs Could Create Token BlackMarket

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As noted in prior articles, the SEC’s (Security and Exchange Commission) insistence on pressing for greater regulations in the space could backfire against them if they choose to be too draconian in their pursuit.

For those that are unaware, if a company does register their ICO as a token specifically, then they are not permitted to sell the token to any individuals that do not qualify as ‘accredited investors’.

For those that are unaware with the phrase, ‘accredited investor’, the definition is posted below:


For those having trouble reading the excerpt posted above it states that an accredited investor must:

· Have an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR

· Has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence)

What Are the Implications of Those Restrictions?

Both of those qualifications are ones that would limit the sale of any ICO to only those that are firmly rooted within the top 1% of earners in the United States and would be even more restrictive when considering the entire population of the planet.

Since the cryptocurrency market hasn’t reached the type of mainstream acceptance that the stock markets have, registering with the SEC more than likely isn’t a viable option for many projects that are looking to gain the funding necessary to launch themselves in the space and it doesn’t look like the SEC has created any plans to ease their regulations either.

Thus, if they do happen to become so draconian as to impose these regulations or force ICOs to submit to registering with the SEC, then it is more than likely that the SEC will not curb the presence of ICOs. Projects will more than likely continue to offer their ICOs on various obscure platforms and market themselves in much the same way.

Since these companies can accept cryptocurrency, then mix it up in a way that makes it difficult if not impossible to track, then ‘cash out’ to fiat via some other means, it is very likely that they will be able to usurp legal authorities with ease for a while.

This would have a net negative impact on the cryptocurrency space as a whole because projects that are being released as ICOs would then have justification for their obscurity and obfuscation of details by claiming that they are merely trying to avoid punitive action. Investors would also be less likely to blow the whistle on illicit ICOs because they don’t want to face the potential penalties that would be incurred by admitting that they participated in the activity to begin with.

Even ICOs that do decide to register with the SEC may become victims because accredited investors may legally participate in the ICO, then re-distribute the tokens to those that didn’t qualify as accredited investors at a premium rate for the convenience of service. This could easily lead to an underground marketplace where ICO tokens are being sold with each other.


In conclusion, the SEC must tread lightly with its ruling if it wishes to place some sort of regulation on the industry without being too Draconian in nature.

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