The Securities and Exchange Commission (SEC) warned investors Thursday that those firms and brokers who offer cryptocurrency investments are often breaking federal trading laws.

In a joint statement, SEC Chairman Jay Clayton and commissioners Kara Stein and Michael Piwowar also said the agency faces severe challenges in recovering losses for jilted cryptocurrency investors.

The SEC has reviewed cryptocurrencies that are traded as securities, holding them subject to the same disclosure laws as other commonly traded assets. The agency has blocked initial coin offerings (ICOs), sales of cryptocurrencies meant to raise capital for a business, that don’t follow federal trading laws.

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“It is clear that many promoters of ICOs and others participating in the cryptocurrency-related investment markets are not following these laws,” the SEC said in its statement.

The SEC said those who purchase cryptocurrencies are entitled to protection under federal securities laws, but would have limited success getting restitution.

“If you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment,” the agency said.

The SEC issued the warning in a statement praising a report from the North American Securities Administrators Association on the risks of cryptocurrency investing.

Other federal regulators have been skeptical about the future and utility of cryptocurrencies, but don't see them as a threat to financial stability.

Outgoing Federal Reserve Chair Janet Yellen last month called bitcoin “a highly speculative asset” with no inherent value and limited use. Randy Quarles, the Fed's vice chairman of supervision, said in November that the widespread use of digital currencies could threaten financial stability, adding that central banks should “tread cautiously” when considering creating their own.

The Commodity Futures Trading Commission has warned investors that digital currencies’ volatility could add unexpected risk to trades and contracts. And Comptroller of the Currency Joseph Otting said last month that bitcoin “doesn’t seem to be coming into the banking system,” and wouldn’t affect its “safety and soundness” for the foreseeable future.

--Updated at 2:28 p.m.