An initial coin offering (ICO) is a way for a project to raise money by selling newly created crypto tokens directly to buyers. Those buyers usually pay in another cryptocurrency. It is often compared to an initial public offering (IPO), but the two differ. In an IPO, a company registers with a regulator, sells shares and goes through underwriting. An ICO token may carry no ownership stake at all, and the rules depend on where it is sold. In the US, a token sale that works as an investment contract is a securities offering. In the EU, public token offers have required a registered white paper since 30 December 2024. The newest development is in the US. On 18 August 2026 the SEC proposed "Regulation Crypto Assets", which would create purpose-built exemptions for token fundraising. The comment period closed on 20 October 2026, and no final rule has been adopted.
How an ICO works
Most token sales follow the same basic sequence:
- The project publishes its plan. This is usually a white paper describing the network or product, the token's purpose, how many tokens exist and how the money raised will be used.
- Tokens are created. They are typically issued by a smart contract on an existing blockchain rather than on a new chain of their own.
- The sale runs. Buyers send cryptocurrency and receive tokens, sometimes in several rounds with different prices. For example, Ethereum's own 2014 sale opened on 22 July 2014, ran for 42 days and accepted bitcoin.
- Tokens are distributed and may later trade. Whether buyers profit depends on the project delivering and on market demand, and neither is guaranteed.
Private and public sales
- Private sales are limited to selected buyers, often institutions or wealthy individuals. They usually come with minimum investment sizes and lock-up periods.
- Public sales are open to a wider audience. In most jurisdictions they also bring the heaviest disclosure obligations, as described below.
What a token can represent
A token can give access to a product or network, act as a payment unit, or represent a claim on the project's success. The legal treatment depends on what the token is and how it is sold, not on what the project calls it.
ICO vs IPO
| ICO | IPO | |
|---|---|---|
| What is sold | Tokens, which may or may not carry rights | Shares of equity |
| Who sells | The project team, directly | The company, through underwriters |
| Disclosure | Varies by jurisdiction; a white paper is common | Registration statement reviewed by the regulator |
| Ownership | Often none | Shareholder rights |
ICO, IEO and IDO
- ICO: the project team sells tokens directly, with no intermediary vetting the offer.
- IEO (initial exchange offering): a trading platform screens the project and hosts the sale for a fee. The screening is only as good as the platform doing it.
- IDO (initial DEX offering): tokens launch through a liquidity pool on a decentralised exchange, with no central party running the sale.
Does MiCA's white paper duty cover your token offer?
Answer a few questions about an EU public token offer to see which of the MiCA rules described in the article apply.
Is the token an asset-referenced token or an e-money token?
Is the offer addressed solely to qualified investors?
- Yes → White paper duties do not apply
- No → next question
Is the offer made to fewer than 150 persons per Member State?
- Yes → White paper duties do not apply
- No → next question
Does the offer total no more than EUR 1,000,000 over 12 months?
- Yes → White paper duties do not apply
- No → next question
Does the token give access to goods or services that do not yet exist?
Article 4 covers crypto-assets other than asset-referenced tokens and e-money tokens. Those tokens fall under MiCA's stablecoin titles (Titles III and IV), which applied from 30 June 2024 and are not covered in this article.
Under MiCA, the white paper duties do not apply to offers to fewer than 150 persons per Member State, offers totalling no more than EUR 1,000,000 over 12 months, or offers addressed solely to qualified investors.
The offeror must be a legal person, draw up a crypto-asset white paper, notify it to the regulator, publish it and follow the rules on marketing communications. Regulators do not approve the white paper; the offeror alone is responsible for its content. Retail buyers who purchase directly from the offeror, or through a service provider acting on its behalf, have 14 calendar days to withdraw.
The same Article 4 conditions apply: legal person, white paper drawn up, notified and published, and marketing rules followed. Because the token gives access to goods or services that do not yet exist, the offer may last no more than 12 months from publication of the white paper. Eligible retail buyers have 14 calendar days to withdraw.
This covers only the MiCA rules described in the article for EU public offers: it does not cover US rules, other MiCA titles or national requirements, and it is not legal advice on any specific offer.
The rules in the United States
2017: the DAO Report
On 25 July 2017 the SEC published a Report of Investigation into "The DAO". It found that the tokens the organisation offered and sold were securities, so federal securities laws applied to them. For years afterwards, the working question for US token sales was whether the sale was an "investment contract" under the Howey test. If it was, the sale had to be registered or exempt.
March 2026: a token taxonomy
On 17 March 2026 the SEC and CFTC issued a joint interpretive release. It is titled "Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets" (Release No. 33-11412). It sorts crypto assets into five groups: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. The first four are generally treated as outside securities law unless they are the subject of an investment contract.
August 2026: Regulation Crypto Assets (proposed)
The SEC proposed Regulation Crypto Assets on 18 August 2026 (Release No. 33-11434, File No. S7-2026-27). It was published in the Federal Register on 21 August 2026, and comments were due by 20 October 2026. According to the SEC, the proposal includes:
- A one-time exemption for offerings of up to $5 million over a four-year period.
- A recurring exemption for offerings of up to $75 million in each 12-month period. A Harvard Law School Forum summary describes it as two tiers: up to $20 million with unaudited financial statements and up to $75 million with audited ones.
- Principles-based narrative disclosure under both exemptions. The larger exemption adds financial statements and ongoing reporting.
- A conditional safe harbor from the "investment contract" language in the definition of "security". It would apply once an issuer has completed or permanently ceased all essential managerial efforts it promised.
- Preemption of state registration for securities issued under these exemptions and for certain secondary trades.
This is a proposal. The final rule may differ or may not be adopted.
The rules in the European Union (MiCA)
The Markets in Crypto-Assets Regulation (Regulation (EU) 2023/1114) has applied since 30 December 2024. Its stablecoin titles (Titles III and IV) applied earlier, from 30 June 2024. Under Article 4, anyone offering crypto-assets other than asset-referenced tokens or e-money tokens to the public must meet several conditions:
- be a legal person;
- draw up a crypto-asset white paper;
- notify the white paper to the regulator;
- publish the white paper;
- follow the rules on marketing communications.
According to ESMA, regulators do not approve these white papers, and the offeror alone is responsible for their content.
The white paper duties do not apply to:
- offers to fewer than 150 persons per Member State;
- offers totalling no more than EUR 1,000,000 over 12 months;
- offers addressed solely to qualified investors.
Two more rules protect buyers:
- Time limit for pre-launch utility tokens: if the token gives access to goods or services that do not yet exist, the offer may last no more than 12 months from publication of the white paper.
- Right of withdrawal: retail buyers who purchase directly from the offeror, or through a service provider acting on the offeror's behalf, have 14 calendar days to withdraw.
What to check before taking part in any token sale
- Who is legally behind it, and in which jurisdiction.
- Whether a white paper exists and was notified to a regulator where the rules require one.
- What the token gives you: access, voting, a revenue claim, or nothing enforceable.
- Supply and allocation: how much goes to the team and insiders, and when their tokens unlock.
- Your right of withdrawal, if the offer falls under MiCA.
