Cryptocurrency fundraising has brought in billions of dollars this year, mostly from retail investors. The process known as an initial coin offering exposes those investors to serious risks, according to the CEO of Nasdaq.

"To make it no rules at all, when companies can just willy-nilly take people's money and offer no information at all, with no governance, that sounds to me like you're taking advantage of people," Adena Friedman said at the Future of Fintech conference in New York Wednesday.

The victims are typically first-time investors, like "Auntie Mae in Iowa," and have almost no access to information, she said. While the Securities and Exchange Commission requires companies to provide retail investors the same information as banks or bigger investors in IPOs, this cryptocurrency process has almost no oversight.

"In ICO space none of that is available, and it's all being bought by retail," Friedman said. "I have real concern on lack of transparency, oversight, and accountability that these companies have as they're going out to raise capital through an ICO."

In an initial coin offering, or ICO, coins or tokens are put up for sale as a form of crowdfunding. Instead of voting rights or dividends that come with shares of a company, "utility tokens" promise access to a network, platform or service. But they're often backed by an abstract idea or nothing at all.

In late May, Cayman Islands start-up Block.one had raised $4 billion, eclipsing the world's biggest initial public offerings on stock exchanges this year while its flagship product was not even live yet.

The SEC has cracked down on ICOs, which raised $6.6 billion in 2017 and have hit $9.1 billion this year, according to research firm Autonomous Next. The financial watchdog has warned of pump-and-dump schemes in ICOs, shut some down and charged one backed by Floyd Mayweather and DJ Khalid with fraud. SEC Chairman Jay Clayton has said he hasn't seen an ICO that doesn't classify as a security.

"I sympathize with SEC saying these are really securities offerings," Friedman said. "I support the SEC on that."

Friedman told CNBC in April that once regulation is smoothed out and the space "matures," Nasdaq would consider becoming a digital-currency exchange. But for now, she said, Nasdaq is taking the partnership route.

In April, the company announced a collaboration with cryptocurrency exchange Gemini, founded by early bitcoin investors Tyler Winklevoss and Cameron Winklevoss. The deal gives Gemini access to Nasdaq's surveillance technology to help make sure the platform provides a fair and "rules-based marketplace" for their own participants, Gemini CEO Tyler Winklevoss said in a statement.

Friedman said, "We feel more comfortable partnering with someone as opposed to becoming one of those markets — at this point because it is a completely unregulated market."

Cryptocurrencies such as bitcoin could have a massive impact on the future of finance, Friedman said. But in the near term, "the jury's out."

"We have to assume this is something that could become something really interesting and a real layer of the internet," she said. "It could also die on the vine and become the Beanie Baby phenomenon."