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June 22, 2018
Article by Brattle Economists Makes Sense of Initial Coin Offerings

Brattle Principal Ioannis Gkatzimas and Senior Associate Sujay Dave have written an article on initial coin offerings (ICOs) published in Securities Regulations Daily.

The article, “ICOs: What are they and what does the future hold?” delves into what makes these offerings unique as well as the rules and challenges of using and investing in them. ICOs are a relatively new form of funding often used by early-stage companies. Companies sell the digital tokens to investors who can then trade the tokens on a number of digital token exchanges.

The authors note that ICOs are quicker and relatively less expensive than other fundraising methods. ICOs have also opened up investment opportunities to people that may not otherwise have been able to make similar early-stage investments. On the other hand, ICOs are an easy target for hackers and scammers with millions of virtual dollars already stolen. ICOs are also not subject to typical initial public offering (IPO) disclosure requirements, leaving investors to perform their own due diligence. With the anonymous nature of the transactions, ICOs could also be used by money launderers.

The article notes that ICOs have been subject to minimal regulatory oversight to date, but the authors believe greater oversight is coming soon. For example, certain tokens may have to be registered with the SEC in the near future. Security litigators and financial experts are likely to follow developments in this closely as the technology and regulatory landscape evolves.