The US Securities and Exchange Commission has said tokens “are subject to the requirements of the federal securities law.”
Those “tokens” represent securities, says the SEC. It adds, “…the Commission deems it appropriate and in the public interest to issue this Report in order to stress that the U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale.”
Stephanie Avakian, co-director of the SEC’s Enforcement Division, said:
“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets.”
The SEC also warned about risks for participants:
“Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities laws, your ability to recover may be significantly limited,” the bulletin read.
The SEC like many regulatory agencies, is basically interested in control. Protecting the investor is fairly far down on the list and the SEC is not set up to do it anyway. The market protects investors, probably not manmade laws and regs.