An initial exchange offering (IEO) is a token sale run by a crypto trading platform for the project issuing the token. In an initial coin offering (ICO), the issuer sells directly to buyers. In an IEO, the platform runs the sale, usually lists the token afterwards and puts its name behind the project. The US Securities and Exchange Commission (SEC) warned in January 2020 that this endorsement does not replace legal investor protections. Since 30 December 2024, token sales aimed at the European Union have been covered by the Markets in Crypto-Assets Regulation (MiCA).
How an IEO works
The usual sequence:
- The project applies to a platform. It sends its team details, token design, code and legal setup.
- The platform screens the project. Depth of review varies by platform. Platforms often advertise this vetting as the reason to trust the sale.
- The sale runs on the platform. Buyers need an account there and pay through it. The platform handles the payments and gives out the tokens.
- The token is listed. After the sale, the token usually starts trading on the same platform.
The SEC's definition: IEOs are initial offerings of digital assets, such as coins or tokens, made to raise capital, and they are "offered on behalf of issuers by trading platforms" that call themselves "exchanges". ICOs, by contrast, are offered directly to investors by issuers.
IEO vs ICO
| ICO | IEO | |
|---|---|---|
| Who sells the token | The issuer | A trading platform, for the issuer |
| Where buyers take part | The issuer's own website or smart contract | An account on the platform |
| Screening of the project | None required beyond the law | Whatever the platform chooses to do |
| Listing after the sale | Not guaranteed | Usually on the hosting platform |
| Legal status | Depends on the facts | Depends on the facts, same as an ICO |
The last row matters most. The SEC says an IEO, like an ICO, may involve an offering and sale of securities, depending on the facts and circumstances. Running a sale through a platform does not change its legal status.
What the platform's backing is worth
An IEO's main selling point is that the platform has checked the project and put its reputation on the line. The SEC alert addresses this directly. It cautions investors about "the due diligence and other quality assessments that platforms offering IEOs claim to perform". It also notes that these platforms are often not registered with the SEC and may describe themselves as "exchanges" without being registered as one.
The platform also has its own interests. It gains new users, trading activity and a new listing from the sale. Standards differ from one platform to another, so a token being "sold via IEO" tells you which platform hosted it, not how good the project is.
Can you withdraw from an EU token purchase?
Answer a few questions about how you bought a token in an EU offer to see whether the MiCA right to withdraw could apply.
Are you a retail buyer in a token offer aimed at the European Union?
- Yes → next question
- No → Not covered as described here
Did you buy directly from the offeror, or from a crypto-asset service provider (CASP) placing the tokens for it?
- Yes → next question
- No, I bought it some other way → Not covered as described here
Was the token already admitted to trading before you bought it?
- Yes → The right does not apply
- No → next question
Was it a time-limited offer whose subscription period has now closed?
- Yes, the subscription period has closed → The right has ended
- No, or it is still open → next question
Have more than 14 calendar days passed since you bought?
Under Article 13 of MiCA, a retail buyer in this position can withdraw within 14 calendar days without paying fees or giving a reason, and must be refunded within 14 days. Check the white paper and the offer terms for how to do it.
The withdrawal right lasts 14 calendar days from the purchase, so on your answers it has probably run out.
The withdrawal right ends when a time-limited subscription period closes, even if 14 days have not yet passed.
The withdrawal right does not apply if the token was already admitted to trading before you bought it.
Article 13, as described in this article, covers buying directly from the offeror or from a CASP placing the tokens for it. Other routes are not covered here.
As described in this article, the right to withdraw is for retail buyers in offers aimed at the European Union.
This follows the MiCA Article 13 rules summarised in the article only. It does not cover rules outside the EU, any individual platform's terms, or the details of your own purchase, and it is not legal advice.
What US regulators say
The SEC's Office of Investor Education and Advocacy issued an investor alert on IEOs on 14 January 2020. Its main points:
- Possible securities offering. IEOs "may be conducted in violation of the federal securities laws" and "lack many of the investor protections of registered or exempt securities offerings".
- Platform registration. If an IEO involves securities, the platform may need to register as a national securities exchange or operate under an exemption such as Regulation ATS. A platform may also be acting as a broker or dealer, which can require SEC registration and membership in a self-regulatory organisation.
- Offshore issuers. When the issuer is outside the US, buyers may get little information about it and have limited legal remedies in US courts.
- Red flag. It is a red flag when the IEO and its participants, including the platform, do not address whether federal securities laws apply.
What changed in the EU under MiCA
MiCA (Regulation (EU) 2023/1114) has applied in full since 30 December 2024. Its rules for asset-referenced tokens and e-money tokens started earlier, on 30 June 2024. Most tokens sold in IEOs fall under Title II, which covers crypto-assets other than those two categories. The key rules:
- White paper required. A person offering a token to the public must be a legal person and must draw up a crypto-asset white paper (Article 4(1)). Its first page must say that it "has not been approved by any competent authority in any Member State of the European Union". It must also say that the offeror is solely responsible for its content (Article 6(3)), and that the crypto-asset "may lose its value in part or in full" (Article 6(5)). The information must be "fair, clear and not misleading" (Article 6(2)).
- Small-offer exemptions, with a limit. Some offers do not need a white paper: offers to fewer than 150 persons per Member State, offers totalling no more than EUR 1,000,000 over 12 months, and offers only to qualified investors (Article 4(2)). These exemptions are lost once the offeror says it intends to seek admission to trading (Article 4(4)). An IEO that ends in a listing will usually fall under this limit.
- The platform's own duty. If a platform lists a token on its own initiative and no required white paper has been published, the platform itself must meet the white paper requirements. The issuer and the platform can also agree in writing that the platform takes on these duties (Article 5).
- Safeguarding funds. In a time-limited offer, money raised must be held by a credit institution, and crypto-assets raised by a licensed crypto-asset service provider (CASP) offering custody (Article 10(3)). The result must be published within 20 working days after the subscription period ends (Article 10(1)).
- Right to withdraw. Retail buyers who buy directly from the offeror, or from a CASP placing the tokens for it, can withdraw within 14 calendar days without fees or reasons. They must be refunded within 14 days (Article 13). The right ends when a time-limited subscription period closes. It does not apply if the token was already admitted to trading before the purchase.
What to check before taking part in an IEO
These questions come from the SEC alert and the MiCA rules above. They are not an assessment of any particular sale.
- Is there a white paper, and who wrote it? For an EU sale, look for the mandatory first-page statements. If they are missing from a sale aimed at the EU, that is a warning sign.
- What does the platform say about the law? The SEC treats silence on securities law as a red flag.
- Who holds the money during the sale? For time-limited EU offers, funds must sit with a credit institution or a licensed custodian.
- Where is the issuer based? An offshore issuer can mean less information and fewer legal remedies.
- What did the platform actually check? Ask for the scope of its review, not just a claim that one happened.
- Can you withdraw? In the EU, see whether the 14-day right applies and when it ends.
Limitations
This explainer relies on one SEC investor alert from 2020 and the text of MiCA. It does not cover other countries' rules or any individual platform's terms.
