Most Americans would not walk into an underground casino and gamble with their life savings. Yet, this is what consumers may be doing when they speculate on cryptocurrencies today. As a result, some have seen their investments wiped out by unscrupulous characters, fraudulent coin offerings and scams.

Would-be investors, dazzled by the hype and unaware of all the risks, must beware the risks inherent to this volatile space.

To be sure, there are individuals and exchanges trying to drag this world into the sunlight. They are trying to ferret out fraud, sideline scams and ensure reasonable regulation in the hope that these technologies can improve the way that financial tools and other services are provided in a digitally connected world.

Yet, today, with hundreds of competing cryptocurrencies in play — including bitcoin, ethereum and many others — it is still difficult to tell the difference between the legitimate actors and the scam artists.

With hundreds of competing cryptocurrencies in play it is still difficult to tell the difference between the legitimate actors and the scam artists.

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The Securities and Exchange Commission (SEC) in January shut down an allegedly fraudulent initial coin offering (ICO) from a company called AriseBank. The SEC alleged that the ICO an “outright scam,” alleging that AriseBank falsely advertised that it would offer FDIC-insured bank accounts through nonexistent banks. The SEC also accused AriseBank of failing to disclose to investors that many of its founders and executives have criminal backgrounds.

Similarly, in December of 2017, the SEC charged PlexCorps with fraud after its founder raised $15 million and promised thousands of investors that they would make 13 times their investment in just a month. In filing its charges, the SEC described the PlexCoin ICO as "having all the characteristics of a full-fledged cyber scam." While the SEC has frozen PlexCorps’ assets, it has cautioned that some investors will not be able to recoup the funds they invested.

The bad information circulating about buying and trading cryptocurrencies is even worse. All across social media platforms you will find pump and dump cons, pyramid and Ponzi schemes and scams where a coin doesn’t even exist.

So what should be done?

First and foremost, investors need to wise up and U.S. regulators need to step up. Investors need to understand that in these early days, a gamble on cryptocurrencies or any other application of blockchain technology is just that — a gamble. People should not speculate with money they cannot afford to lose, and they certainly shouldn’t gamble with borrowed funds. Earlier this year, major banks stopped letting people buy cryptocurrencies with credit cards because of a ballooning risk of defaults.

People should not speculate with money they cannot afford to lose, and they certainly shouldn’t gamble with borrowed funds.

Meanwhile, the SEC, the Commodity Futures Trading Commission and other regulators have not agreed on whether to regulate new digital tokens as an equity or a commodity.

Recently, the SEC directed crypto exchanges and ICOs to register with them in an attempt to rein in the worst abuses. Yet this is not enough.

This fundamental question of who regulates this world and to what extent needs to be sorted out quickly to protect consumers and build confidence in the entire ecosystem. And the lead agency needs to have the budget necessary to launch investigations and bring cases against bad actors.

Furthermore, if the underlying blockchain technology is going to affect consumers’ ability to obtain credit or otherwise affect their finances, there needs to be an ability to correct mistakes and ensure transparency.

With all the fraud and uncertainty surrounding cryptocurrencies, investors are flying practically blind. If regulators step in and begin to exact more accountability from the players in cryptocurrency and blockchain markets, it may allow legitimate players in this space to flourish. But for now and the for foreseeable future, cryptocurrency is a bad bet for American consumers.

Tim Chen is CEO and co-founder of NerdWallet. Chen also sits on the Consumer Advisory Board of the CFPB (Consumer Financial Protection Bureau). Prior to founding NerdWallet, Chen was a hedge fund analyst at Perry Capital investing in payment processing firms, credit card networks and technology companies. He also worked as an equity analyst at Credit Suisse First Boston.