Chris Concannon, the president of CBOE Global Markets, is one of Wall Street's biggest crypto advocates. However, the trading veteran thinks investors should “lay awake at night” worrying about the uncertainty hanging over the market for initial coin offerings, the popular crypto crowdfunding method.
Concannon who is also the CEO of BATS Global Markets, said that the market for ICOs is about to undergo major regulatory changes leading to the SEC classifying ICO tokens as securities and then pursuing industry participants and seeking litigation.
According to Concannon, the “reckoning” will come in two waves.
First, the U.S. Securities and Exchange Commission (SEC) will classify ICOs as unregistered securities and the holdings of investors would be “rendered valueless.” This would subsequently cause the second wave, as a slew of class-action lawsuits are filed against the companies behind ICO projects.
If the SEC ultimately decides that the lion share of ICOs are unregistered securities, then many players in the market could find themselves in a legal quagmire. The SEC could come up with an entirely new designation for ICOs. And it's not clear to some market observers whether the agency would retroactively go after all market participants. Robert Hockett, a professor of financial regulation at Cornell University, said you would likely only see the SEC take legal action in certain circumstances.
Either way, the story doesn't change for investors. If the SEC deems ICOs as unregistered securities, then their holdings would be rendered valueless. This, according to Concannon, would trigger the second wave of reckoning.
While US officials have been repeatedly criticized for their unclear stance on cryptocurrencies and ICOs, earlier this month SEC Chairman Jay Clayton cleared some things up by categorically stating that ICOs would not be given special regulatory treatment and that many of the ICOs on the market were indeed selling securities and that the SEC would take action to regulate them.
The ICO market, which is known for its fair share of both fraud and big dreams, has allowed some tech startups to raise billions of dollars from a wide-spectrum of investors. In 2017, the ICO market broke funding records, raising a fiat equivalent of $4 billion. Using data from from Token Report, it is estimated that ICOs will raise $7 billion in 2018.