The United States Securities and Exchange Commission’s (SEC) Advisor for Digital Assets and Innovation Valerie Szczepanik said that platforms seeking to list initial exchange offering (IEO) tokens for a fee could find themselves in regulatory trouble. Szczepanik delivered her comments at the Consensus 2019 conference on May 13.

Speaking on IEO, Szczepanik — also known as the commission’s “crypto czar” — argued that platforms seeking to list IEO tokens for a fee and attract buyers for an issuer are likely engaging in broker-dealer activity. Szczepanik said:

“If they are not registered they will find themselves in trouble in the U.S., if they have a U.S. issuer or U.S. buyers, if they are operating on the U.S. market.”

Szczepanik further mentioned the case of TokenLot last September, — a cryptocurrency broker-dealer lead by Lenny Kugel and Eli L. Lewitt that marketed itself an “ICO [initial coin offering] superstore” — and said that “it was instructive in this regard.” She stated:

“This was a platform that was assisting to bring buyers to ICOs [...] In that case, there was an enforcement action charging the platform with acting as a unregistered broker-dealer and participating in the distribution in violation of the registration provisions.”

At the time, the SEC’s alleged that Kugel and Lewitt broke the law by failing to register their business in the country. TokenLot agreed to pay a $471,000 fine but did not admit or deny the findings.

In early April, the SEC published a framework, developed by Szczepanik and another Commissioner Bill Hinman, to help market participants ascertain whether or not a digital asset is deemed to be an investment contract, and therefore a security. The framework is intended to serve as an analytical tool that will help operators of ICO and token issuers determine whether their offering is likely to fall subject to federal securities laws.

Szczepanik has previously indicated that assets in the rapidly-growing stablecoin sector could experience issues under existing securities laws.