EXCLUSIVE—While the U.S. is unlikely to ban token sales outright, those looking to raise funds with an ICO (or Initial Coin Offering) should make sure they’re paying close attention to risk.

This is according to Joshua Ashley Klayman, co-head of the blockchain and smart contract group, Morrison & Foerster.

“It doesn’t look like [regulators] are going to be shutting down token sales, in general, and it also doesn’t look like they will be taking the path South Korea did, which is banning them to all but accredited inrevestors,” Klayman told Bank Innovation. However, that doesn’t mean potential ICO sellers have free rein—an entrepreneur planning to fund his business via tokens must “be mindful of security laws,” Klayman said.

The issue at hand for token sellers is one that has plagued cryptocurrency holders and users for years: as yet, there is still no definitive answer on whether digital currencies or tokens are or are not considered securities.

The closest that issue has come to a resolution is the SEC’s conclusion that some ICOs could be securities offerings—meaning, avoiding having one’s company ICO labeled as a security offering is entirely up to the company. How does a company actually avoid that?

Well, it’s all in the risk, Klayman said, citing the SEC’s recent shutdown of the Munchee ICO, which received a cease and desist order from the regulator earlier in this week. “The key was the way that Munchee was selling [the tokens]—they were promoting the sale like it was an investment,” Klayman said.

While Munchee called its coins “utility tokens,” that didn’t make them utilities in the eyes of the SEC, which proves that “the method of sale is very important,” Klayman said.

As U.S. entrepreneurs and companies move forward with ICOs, keeping an eye on these risk models and disclosures will become all the more important, especially as tokens and digital currencies become more regulated.

To learn more about the latest developments in financial regulation and cryptocurrency, join us on March 5-6, 2018 at the Parc 55 in San Francisco for Bank Innovation 2018. Click here to register.