The SEC is continuing to step up its rhetoric on initial coin offerings (ICOs).

Speaking before the Practicing Law Institute’s Institute on Securities Regulation in New York today, Chairman Jay Clayton described the market as opaque and vulnerable to manipulation. In his full remarks, he went on to characterize tokens issued for startup or open-source project fundraising as ripe for misconduct, mentioning them alongside penny stocks and hidden fees on investment products.

He told attendees:

“[I]nvestors often do not appreciate that ICO insiders and management have access to immediate liquidity, as do larger investors, who may purchase tokens at favorable prices. Trading of tokens on these platforms is susceptible to price manipulation and other fraudulent trading practices.”

Citing the SEC’s findings from its examination of the DAO meltdown, Clayton also reiterated that cryptocurrency exchanges need to either be registered or get an exemption.

He added that “the Commission will continue to seek clarity for investors on how tokens are listed on these exchanges and the standards for listing; how tokens are valued; and what protections are in place for market integrity and investor protection.”

The SEC chairman described penny stocks and ICOs as “topics that have proven over time to be fertile ground for fraud on investors,” though he admitted further policy is needed on the issue.

He concluded:

“The SEC may not yet have policy or rulemaking answers in these areas, but we are on the lookout for ways to fight the type of opacity that can create an environment conducive to misconduct.”

Jay Clayton photo via YouTube