What investors need to know

So, what do you need to know about ICOs before investing? Start with some basic research on Investor.gov and take note of the following:

[+] Products can be sold and traded internationally. Recognize that these products are often sold on markets that span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. Although the SEC actively enforces securities laws, risks can be amplified, including the risk that market regulators may not be able to effectively pursue bad actors or recover funds.

[+] Research your financial professional. Understand the opportunity that is being presented, and do your homework on the individual who is doing the presenting. Is the offering legal and is the person offering this product licensed to do so? Make sure you visit investor.gov for more resources before you invest. Arm yourself with knowledge from this Investor Bulletin.

[+] If an investment sounds too good to be true, be cautious. As with any other type of potential investment, if a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost.

[+] Understand how the product is traded. Many platforms for trading digital assets refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.

What market professionals need to know

As SEC Chairman Jay Clayton has stated, tokens and offerings that feature and market the potential for profits based on the entrepreneurial or managerial efforts of others contain the hallmarks of a security under U.S. law.