The Securities and Exchange Commission has issued a statement warning celebrities that they may be violating the law if they make paid endorsements of cryptocurrencies without disclosing the payments.

Just a few months ago, there would have been no need for such a warning because there were very few celebrities endorsing blockchain products (though Mike Tyson has been endorsing Bitcoin products since at least 2015). But with billions of dollars flooding into initial coin offerings, celebrities like Floyd Mayweather and Paris Hilton have begun promoting new cryptocurrencies on social media.

Readers of Ars will be shocked to learn that these celebrity-endorsed blockchain technologies have not exactly been the cream of the crop. A September investigation by Forbes reported that the Hilton-endorsed currency, called LydianCoin, was founded by a man "being sued by at least four former employees for harassment and discrimination" and who is facing possible jail time related to domestic violence allegations.

Last week, The New York Times dug into Centra, one of the cryptocurrencies Mayweather has given a paid endorsement. Centra's website listed a president who seems not to exist—his photo was of "a Canadian physiology professor who had no relation to Centra." Centra claimed it would offer a Visa- or Mastercard-based debit card for spending the cryptocurrency, but Visa and Mastercard say the company has never approached them about the project.

Now the SEC is firing a shot across the bow of celebrities who do paid endorsements of cryptocurrencies.

"Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion," the SEC wrote in a Wednesday statement. "A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws."

Promoting token sales could also lead to "potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers."

This analysis depends on whether the tokens in question meet the legal definition of securities—something that's far from clear right now. Some cryptocurrencies, including Bitcoin, are likely to be classified as "utility tokens." While a utility might go up in value over time, their primary intended use is not as an investment vehicle. Bitcoin, for example, was designed as a new kind of payment network.

Unfortunately, the SEC has only made one significant ruling on the topic, writing in July that a blockchain-based investment scheme called the DAO amounted to an unregistered security. The SEC declined to press charges in that case, and it hasn't ruled on whether any other coin offerings have run afoul of securities law.

But that might change. "The SEC will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws," the agency wrote on Wednesday.

While SEC regulations are specific to the sale of securities, the Federal Trade Commission has broader regulations governing paid celebrity endorsements on social media more broadly. Guidelines first drafted in 2009 require celebrities to disclose when a product endorsement is the result of a paid endorsement deal.