CBOE President and COO Chris Concannon claim, “The reckoning will come in two waves.” There’s a big shakeup happening in the ICO market, and it should be keeping investors up at night.”
Concannon, who is also CEO of BATS Global Markets noted that the ICO market is about to experience significant regulatory alterations which will result to the SEC terming ICO tokens as securities and then tracking industry participants and finding legal action.
According to a Wall Street trader, the announcement could usually be dismissed as FUD, yet Concannon has for a while being one of Wall Street’s most important cryptocurrency supporter, with CBOE introducing Bitcoin futures trading in 2017. Concannon is of the opinion that the SEC will first seek ICO market participants individually before issuing class-action lawsuits against the ICO teams and projects as a whole.
Even though US officials have constantly being condemned for their uncertain decision on cryptocurrencies and ICOs, the SEC chief Jay Clayton earlier this month made some definite clarifications by stating that ICOs would not be given special regulatory treatment and that a lot of ICOs on the market were surely selling securities and hence the SEC would take measures to control them.
Any ICO selling token that basically represents a future share in the profits of the ICO project are to be termed as securities, and according to Concannon, the “waves” of forthcoming regulations should be taken seriously. This year, the SEC summoned dozens of cryptocurrency firms, and if Concannon is right, that is just the starting point.
This year alone, more than $5 billion dollars have been raised through ICOs, with some projections going higher than $7 billion. The SEC will now be determining which of the projects which received funding and issued tokens were actually releasing unregistered securities, something that could serve as trouble for both the project teams and investors in legal terms.
“The actual party that offered the unregistered coin, they could have been involved in issuing an unregistered security,” Concannon said. “Anyone who sold that off could be deemed an unregistered underwriter.”
According to Cornell University Professor of financial regulation Robert Hockett, it is uncertain if the SEC would retroactively take legal action against all market participants at this point.
“I don’t think it is the case that people involved in the business are going to be prosecuted against as if they have been violating the law,” Hockett said. “But there is a little bit of a room for an exception with something particularly egregious.”
The greater concern goes to investors, ICOs considered as unregistered securities could be termed as totally useless, which is where Concannon’s prediction, the disastrous wave comes in.
“If you sold someone an unregistered security you are liable to them if they decide to take them to court,” Concannon said.
If things turn out according to the Concannon’s description, US investors could be in big trouble as investors rush to limit losses and defend themselves against other parties in the same situation by taking legal actions.
A number of class-action lawsuits have been seen in the market.
Professor Hocket believes that this type of lawsuits may definitely hold up in a court of law.
“If they can prove investors were defrauded and misled by people who were better suited to understand the regulatory framework, but still instilled in investors a — no pun intended — a false sense of security, then some suits would have merit.”
Hocket noted this is a normal process for any famous new asset which starts unregulated.
“It is a legal life cycle of every new asset that becomes highly popular,” he said. “It was true for tulips, junk bonds, and mortgage-backed securities, and now crypto,” he said.