[caption id="attachment_194" align="alignleft" width="242"]<img class="wp-image-194 size-medium" src="http://www.thecrowdfundinglawyers.com/wp-content/uploads/2017/09/Hurricane_Harvey_2017-242x300.jpg" alt="" width="242" height="300" /> Hurricane ICO[/caption]
<p>Always hip with the times, the SEC just unleashed its own hurricane, Icarus (ICO for short). Instead of dowsing with rain, <a href="http://www.mythweb.com/encyc/entries/icarus.html">Icarus</a> threatens to burn those seeking crypto gold.</p>
<p>Icarus has caused refugee blockchain companies to scurry for shelter. Although forecasters had <a href="https://www.coindesk.com/what-secs-involvement-means-blockchain-distributed-ledger-bitcoin/">predicted</a> the storm for months, would-be ICOs reeled at the inferno.</p>

<h3 style="text-align: center;" data-tadv-p="keep"><strong>DAO shattered the calm seas </strong></h3>
<p>The SEC conceived Icarus in a summer <a href="http://www.sec.gov/litigation/investreport/34-81207.pdf">report</a> on the now-infamous DAO <a href="https://www.crowdfundinsider.com/2017/07/119886-sec-ico-dao-announcement-decoded-explained-simple-laymans-english/">disaster</a>. DAO was a tokenized universe allowing crowd investors to participate, direct, and profit from decentralized company projects. Hackers cracked the code and ruined the fun. A year later, the SEC claimed DAO tokens were securities subject to registration. This meant the ICO market, topping <a href="https://www.crowdfundinsider.com/2017/08/121240-sec-office-investor-education-advocacy-warns-potential-ico-scams-suspends-trading-several-companies/">$2 billion</a> this year alone is on ice.</p>
<p>Some blockchain companies are now sheltering under the SEC’s umbrella. Filecoin a red hot ICO producing upwards of <a href="https://www.crowdfundinsider.com/2017/08/121075-protocol-labs-files-two-form-ds-sec-regarding-enormous-filecoin-ico/">$200 million</a> has filed <a href="https://www.crowdfundinsider.com/2017/08/121075-protocol-labs-files-two-form-ds-sec-regarding-enormous-filecoin-ico/">two Reg D</a> notices; one for the presale to venture capitalists and the second for the crowdsale using a “SAFT” based on the <a href="http://www.thecrowdfundinglawyers.com/2017/06/27/are-safes-unsafe-for-equity-crowdfunding/">SAFE</a> popular with <a href="https://www.thecrowdfundinglawyers.com/reg-cf/">Reg CF</a>.</p>

<h3 style="text-align: center;" data-tadv-p="keep"><strong>Defiant ICOs are facing the storm </strong></h3>
<p>Others have ignored the warnings and will try to weather the storm. BitBounce’s Credo has <a href="https://www.crowdfundinsider.com/2017/07/119968-credo-ico-pushes-forward-sec-warns-sector-possible-enforcement-actions-stewart-dennis-responds-sec-announcement/">plowed ahead</a> with ICO plans sans SEC registration claiming Credo’s token don’t meet <em>Howey</em>-test markers. If wrong it could endure years of SEC <a href="https://www.coindesk.com/dao-report-understanding-risk-sec-enforcement/">haggling</a> before final resolution. The SEC has already begun to <a href="https://www.crowdfundinsider.com/2017/08/121240-sec-office-investor-education-advocacy-warns-potential-ico-scams-suspends-trading-several-companies/">crack down</a> on other ICO-related concerns including First Bitcoin CapitalCorp., CIAO Group, Strategic Global, and Sunshine Capital.</p>

<h3 style="text-align: center;" data-tadv-p="keep"><strong>Compliant ICOs will follow private exemptions </strong></h3>
<p>For those wishing to avoid any future SEC-induced storms, three possibilities emerge:</p>

<ul>
 	<li><a href="https://www.thecrowdfundinglawyers.com/reg-d/"><strong>Reg D</strong></a>: Perhaps the easiest because of the small regulatory burden and lack of limits, Reg D requires no upfront SEC compliance. Companies only notify the agency after the raise. Drawbacks include a verification process for accredited investors and a lack of liquidity, as investors must hold the securities for 90 days.</li>
 	<li><a href="https://www.thecrowdfundinglawyers.com/reg-cf/"><strong>Reg CF</strong></a>: As currently configured, Reg CF is not ICO friendly because of its $1.07M one-year limit. But companies may stack Reg CF with Reg D to capture unaccredited investors. Reg CFers, however, must hold the securities even longer, one year, unless sold to accredited investors among other exceptions.</li>
 	<li><a href="https://www.thecrowdfundinglawyers.com/reg-a/"><strong>Reg A+</strong></a>: This may be the most interesting. The “mini-IPO” option requires more upfront costs as the SEC must pre-qualify the offering and limits exist based on investor income. But once live the ceiling is $50M and even better instruments are <a href="https://www.crowdfundinsider.com/2017/08/120850-dont-panic-us-securities-exemptions-initial-coin-offerings/">instantly tradeable</a> making the secondary market most like the wild-West ICO of yore (this summer).</li>
</ul>
<p>The SEC is still sorting the ICO market and asking for input. But the commission should forecast calm seas and a light regulatory burden if the US is to remain competitive in this emerging securities market.</p>
<p>Russia-based platforms could gobble significant ICO infrastructure and innovation.  For instance, Waves recently <a href="https://www.crowdfundinsider.com/2017/06/102547-cryptocurrency-exchange-exmo-lists-waves-list-offered-coins/">announced</a> users can deposit US dollars for token backed 100% by dollar reserves for its ICO offerings. It also <a href="https://www.crowdfundinsider.com/2017/07/118899-hanging-ten-deloitte-cis-partners-waves-provide-ico-blockchain-solutions/">partnered</a> with Deloitte CIS for ICO and customized blockchain solutions.</p>
<p>The SEC will decide whether US-based blockchain companies and investors are in for clear sailing or in the eye of the storm.</p>
<p>By <a href="https://twitter.com/thecrowdfundlaw">Jossey PLLC</a></p>