While crypto startups and ICO issuers worry about social media platforms cutting their ads, they could be missing an even more intimidating threat – regulators.

Crypto entrepreneurs reeled late last month after Facebook announced it would be banning “misleading or deceptive” ads about financial products and services, including bitcoin and ICOs. These stakeholders saw a crucial advertising avenue dry up, but according to some, the drought isn’t over yet.

“The regulators will look at advertisements put out by the company. That’s always something they’re going to look at,” said Johanna R. Collins-Wood, an associate at Pepper Hamilton and member of the law firm’s blockchain group.

Others agreed and voiced concern about the industry where you never have to look too far to find suspect advertisements.

Indeed, crypto advertising is a immensely popular Wild West of sorts, where all token sales, legitimate or otherwise, are all vying for attention. And all the issuers and entrepreneurs in the space are still grappling with just what kinds of claims they can make in their marketing.

If the industry doesn’t police itself, regulators are sure to come knocking.

Just recently even, on February 22, France’s stock market regulator, the L’Autorite Des Marches Financiers (AMF), released a statement about looking to curb advertising on cryptocurrency-tied derivatives.

And others may soon follow. According to Collins-Wood, some of the regulators that have already taken a more keen notice of the crypto industry as of late will certainly use advertising to build their cases.

For instance, the Securities and Exchange Commission (SEC) Commodity Futures Trading Commission (CFTC), which held a joint Senate hearing on cryptocurrency earlier this month, will look at whether companies have made fraudulent claims in their ads, she said, adding:

“If they’re looking to bring a case against a company, they will certainly review all the public statements that the company has made and that would obviously include advertisements.”

‘More blatant than others’

Above and beyond financial regulators looking at advertisements to build fraud cases, though, formal guidelines for ads and marketing are less clear at this point.

Many of the regulators that oversee false advertising claims have yet to announce any specific policies on the nascent industry.

“There are a lot of shades of false advertising and misleading advertising. Some are more blatant than others,” said Carl Johnston, a corporate securities lawyer at FisherBroyles LLP.

Case in point, last year, a crypto ad made the rounds on Facebook with a stolen logo from the New Zealand Herald newspaper and an image of the former New Zealand prime minister John Key with a fake quote claiming he invested in bitcoin.

And in Australia, the continent’s securities watchdog received more than 1,200 crypto scam complaints, with one complaint detailing how an exchange advertised that it was an existing Australian company to gain consumer’s trust.

Though, maybe the most mainstream example is that of Japanese exchange Coincheck, which ran a TV ad campaign touting, only to be hacked to the tune of $533 million shortly after.

Several industry observers have since accused Coincheck of downplaying its security protections and criticized for skimping on security spending in favor of lavish ads. Indeed, the CEO of SBI Holdings reportedly called the company “scum of scum” for the spending.

As these instances pique regulators interest to the industry as a whole, some believe advertising regulation is not far away, and looking to the regulations facing traditional companies is probably a good place to start for determining how those rules will be laid down.

“We certainly do have laws against false and misleading advertising,” Johnston said.

Quiet for now

Although Johnston didn’t have any insight into whether the Federal Trade Commision, the government agency charged with overseeing these complaints in the U.S. was active in this area yet.

He told CoinDesk:

“I follow pretty much everything about ICOs that I can and I haven’t seen the FTC’s name a lot.”

The FTC did not respond to requests for comment.

And advertising standards groups have yet to chime in on the subject also. New Zealand’s Advertising Standards Authority told CoinDesk it had not received any crypto-related ad complaints, and the UK’s ad standards body said they had received less than 10 cryptocurrency-related ad complaints so far.

A spokesperson from the UK Advertising Standards Authority continued, “And none have resulted in us finding grounds for an investigation.”

Although, the spokesperson did point to the Financial Conduct Authority (FCA) as the regulator in charge of financial ads, but when asked, the FCA said it has no position on crypto ads.

Speaking to the trend to make sure ICO tokens are compliant with securities guidelines, Collins-Wood said:

“Lawyers are telling clients to focus on offerings that are compliant with securities laws. When you do that, that actually opens up avenues for appropriate and compliant advertising and in many ways eliminates a lot of these issues.”

Effects on startups?

It seems like many are taking a wait-and-see approach.

For instance, even though Russia’s equivalent to Facebook, VK, banned crypto ads last year, the social media platform lifted the ban in August 2017, stating that the restrictions were removed “to open even more opportunities for the active development of the cryptocurrency market.”

With more than a million people on the social network following cryptocurrency communities, the company also said it would reject crypto ads that violated its rules by promoting unsupported guarantees.

No other social network has taken a similar position yet. A Twitter spokesperson said it had no comment on cryptocurrency advertising. And Google pointed to its existing policies on misleading ads, which it said would apply to cryptocurrency.

But even if social media platforms moved to tighten up their procedures, it might have minimal impact on the ecosystem.

According to Midori Kanemitsu, CFO of bitFlyer, which ran both a social media and television ad campaign, the Facebook ban had minimal effects.

“Our understanding is that our TV commercials have contributed to a large increase in users,” Kanemitsu said.

As such, bitFlyer remains cautious about the claims it makes in its advertising.

“We never advertise large returns, low risks, etc. like the advertising from other organizations. For our internal regulation, we look to existing self-regulatory agencies for other industries,” Kanemitsu said, adding:

“We are not legally restricted as to the contents of our ads, but we have constructed careful internal self-regulatory procedures that require us to avoid expressions that may be misleading, and we take ad review very seriously.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in bitFlyer.

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