CEO/FOUNDER
L.W. DUSTY BROGDON

Are ICOs like IPOs?

ICOs have been compared to Initial Public Offerings (IPOs) of corporations.

There are some notable similarities – both of them are used to sell a stake and raise money, and both have investors who see the potential and risk their capital in order to make a potential profit.

However, there are significant differences as well.
ICOs are mostly supported by early enthusiasts and not professional investors.
In that respect, they are similar to ‘kickstarter campaigns’, but with the backers having a financial stake in the project. ICOs are also not regulated or registered with any government organization and there are usually no investor protections other than what is built into the platform itself.

The first indication that a government agency was looking into ICOs came in mid-2016. This was in response to The DAO, a crowd-funded vehicle on the Ethereum smart contract being attacked and drained of funds.

The SEC (the government agency responsible for protecting investors and capital markets in the United States) is said to be looking into The DAO.

Smith + Crown has developed a handout on ICOs.
You can download it here : smithandcrown_ico_handout_v2.0.

​​Most ICOs today are marketed as ‘software presale tokens’ akin to giving early access to an online game to early supporters. In order to try to avoid legal requirements that come with any form of a security sale, many ICOs today use language such
as ‘crowdsale’ or ‘donation’ instead of ICOs. They also use legal disclaimers and language to the participants that this isn’t
a securities sale. It is unclear whether this is sufficient for global jurisdictions to treat it differently from a securities sale.
To date, the matter hasn’t been litigated in a court of law.

The first indication that a government agency was looking into ICOs came in mid-2016. This was in response to The DAO,
a crowd-funded vehicle on the Ethereum smart contract being attacked and drained of funds. The SEC (the government agency responsible for protecting investors and capital markets in the United States) is said to be looking into The DAO.