Your ICO Marketing Communications May Be a Legal Time Bomb

initial coin offering ico legal

Lots of new projects are positioning themselves in a risky legal position as they launch their new cryptocurrency ICO in a hurry and without a proper ICO Marketing Communications strategy. This is a legal time bomb. Such legal time bombs may explode soon. How can you avoid this?

Tokens are registered security offerings

Assuming the project has established its token as a security and it is registered with the proper authorities. Are you certain that your marketing communications aren’t violating any laws relating to the marketing activities?

Securities regulations in many jurisdictions apply to the issuance of the security as well as participation. They apply to the promotion of the new cryptocurrency ICO offering. When you do not comply with these rules, you can face criminal and civil charges. So projects must be careful when using certain languages across marketing communications in whitepapers, social media posts, terms, and conditions.

Tokens aren’t registered security offerings

When you fail to register your token as a security, or you qualify for exemption, or you plan to offer a utility based token, it becomes more complex.

Your ICO marketing communications may be used by the authorities to find out whether the token being offered should classify as a security.

Where the project is promoting the token as a money making venture, you are promoting a security. It does not matter whether the token is a utility token. Utility tokens which include an investment component can be classified as securities.

According to the widely used Howey Test, there is an investment contract when the investors expect some profits from the investment.

How to reduce the risks

Educate your team

Your team must be aware of these loopholes. You need to educate your team on the particulars of the ICO as well as the advertising laws linked to it.

Don’t use investment-based terms or language that misleads or exaggerates.

The days of marketing your ICO thoughtlessly with spammy marketing tactics have ended. It is important to be transparent and honest and ensure that no terms or language misrepresents what the project is offering the community.

Keep all external communications restricted and consult with regulators before starting.

 

https://smartereum.com/ico-listings-calendar-and-reviews/

Princess Ogono is a writer, lawyer and fitness enthusiast. She believes cryptocurrencies are the future. When she's not writing, she spends time with her adorable cat, Ginger and works out often.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.