A: Raising funds through an ICO is legally possible —but only if you navigate securities laws, money‐transmission rules and (often) state “blue‐sky” requirements. Below is a roadmap to the U.S. legal framework you must consider; I’ve included statute citations and SEC guidance where relevant.
1. Determine Whether Your Token Is a “Security”
Key Point: If your token meets the definition of an “investment contract” under U.S. law, it’s a security. Selling a security to U.S. investors without registration (or a valid exemption) violates the Securities Act of 1933 and the Securities Exchange Act of 1934.
Conduct a “Howey analysis” for your token. Retain counsel to document why—factually and legally—you believe it’s not a security (if that’s your position). But be prepared that the SEC will likely view it as a security offering.
2. If It’s a Security, Register or Find an Exemption
Choose the exemption that best fits (e.g., 506(c) if you have only accredited investors and want to market openly). File Form D for Reg D, or engage an SEC-registered crowdfunding portal for Reg CF, or go through Form 1-A for Reg A+. Each has different reporting burdens and limitations.
3. State (“Blue‐Sky”) Securities Laws
Even if you rely on a federal exemption like Reg D Rule 506, most states impose their own registration or notice filings.
For each state where you permit a sale, either file the required Form U-2 (for 506 offerings) or register/claim exemption. Most startups rely on the uniform notice procedure under 506 to simplify compliance.
4. Anti-Money Laundering (AML) / Know-Your-Customer (KYC) Rules
Even if you structure your ICO as a non-security (which is rare), you must still comply with anti-money-laundering laws if your token is considered a “virtual currency” under FinCEN’s rules.
If you accept USD (or other fiat) in exchange for tokens, register as an MSB with FinCEN, build out an AML compliance program, obtain state money-transmitter licenses where required (e.g., New York BitLicense), and integrate a robust KYC/AML vendor at token sale.
I have been heavily involved in this space since 2017 - feel free to reach out John@BenemeritoLaw.com
