Consensus 2017: Advice From a Lawyer to ICOs: 'Don’t Be Stupid'

The legality of the ICO as a funding vehicle was discussed on day three of CoinDesk's annual Consensus event.

AccessTimeIconMay 25, 2017 at 9:00 a.m. UTC
Updated Sep 11, 2021 at 1:23 p.m. UTC

One expert blockchain attorney has simple advice for blockchain companies currently navigating regulatory uncertainty.

Though the technology has been up for discussion for years, laws aren't very clear right now with a tangle of regulatory bodies that all might, or might not, have some power over different aspects of the technology. Bitcoin has seen some progress in that respect, but with other projects like ethereum now emerging, an entirely new ecosystem of use cases is springing up.

Much of the conversation during the CoinDesk's Consensus 2017 legal workshop centered on this confusing state of affairs.

Harvard Berkman Center fellow and special counsel at Cooley LLP Patrick Murck argued that, while this regulatory uncertainty might cause problems for businesses, it's actually better that regulators are so far taking a hands-off approach to blockchain companies and letting the ecosystem develop it's own system for weeding out bad actors.

In the meantime, though, he had some advice:

"As long as you're not stupid or have ill-intent, most of the time you're going to be fine. It's amazing how common-sensical this could be. Don't be stupid. Don't have ill-intent."

Uncertainty redoubled

Another trend discussed during the panel, one that very much related to this uncertainty, was the growing spread of initial coin offerings (ICOs).

The potential for ICOs (or token sales) was one of the more prominent themes at CoinDesk's Consensus 2017 conference at large, and it popped up again and again during the day's three-hour legal session.

Advocates argued that the concept is fueling a new, more democratic way of funding businesses inspired by cryptocurrency, but it could also have its downsides amid the recent hype cycle.

"What we have now is the term 'ICOs'. I don't know who started that, but they should be reprimanded for it," Perkins Coie partner Dax Hansen joked, adding that 'token sale' is a term with better regulatory implications. Though, as for the concept itself, he said that many entrepreneurs are using the funding model in legitimate and promising ways.

And, it's indeed an exploding market right now. Davis Polk associate Reuben Grinberg claimed that over half of venture spending in the space now comes from ICOs, rather than older, arguably less democratic, methods of raising money.

A panelist from the Commodity Futures Trading Commission (CFTC) noted that this form of funding is exploding, doubling just in the last few weeks.

"I think you’re right that it's starting to reach a level where regulators will take a look at it. Where that goes, I don’t know," he added.

But even if regulators have held back so far, other legal experts think that more regulatory action could be around the corner. Grinberg, for one, argued that catastrophe might ultimately be what piques the action of regulators.

He said:

"When everyone's making money, then everyone's happy, but when everyone's losing money and their houses – which has happened in the past – then you're going to start to see regulatory actions."

Correction: The article has been revised to clarify Hansen's comments.

Image via Alyssa Hertig for CoinDesk


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.