Trying to understand the risk in an ICO It seems as far as regulators are concerned there are two types of ICO A Utility ICO and a Security ICO A company called Playchip sounded interesting since the company claims to have a turnover of more than $400 Million ( not sure which currency) they have 6 businesses all linked to various sports with online betting comp etc It seems their ICO is a "Utility" coin generation and not considered as a security! And because it is a "Utility " token they claim it is not mandatory to have any disclosure of current company financials or a prospectus WTF! At the end of the day we as a investor are risking our real money in a business concept nothing more nothing less, am I correct? If I am correct then the basic question is why such " Public fund raising" is not scrutinized at the same level as that done in a IPO event! In this case the regulator is so smitten by this technology hype that they have forgotten their role ! Can somebody in simple English explain why the risk is not the same or even more because in a ICO you dont get voting rites or the regulatory reporting may not be as stringent as that of a public listing so here we have millions being raised form masses with very little over site I tried to ask ASIC and all they do is point to their website and all it says is an ICO may or may not a be a security WTF ( again) end of rant
Taken off a website on this topic: "Utility tokens, also called user tokens or app coins, represent future access to a company’s product or service. The defining characteristic of utility tokens is that they are not designed as investments; if properly structured, this feature exempts utility tokens them from federal laws governing securities." In other words, utility coins exist for their utility in the associated business. In this case sounds like you can gamble with them, but that they arent designed to draw investments. Think of it this way: You can play Skeeball at a carnival and get tickets for prizes. Those tickets are sort of like a currency since they can be traded for sweet plastic rings. Would you ask for those to be regulated by a securities agency? Probably not. The analogy holds here for investment, too. Probably dont invest in Skeeball tickets.
Bill had a good answer, and I would also add the example of frequent flyer miles as a "utility token" equivalent - assuming you could buy and sell frequent flyer miles on the open market. That being said, 90% of ICOs are scams, 9% aren't scams but blow up anyway, and the other 1% MIGHT break even or even make a profit over time.
ok understand the definition and the logic why then they dont need to be regulated! it is like a grocery store doing an ICO where you exchange your real currency in to the Grocery store token, but why ?t why one has to purchase the Utility tokens... one can just participate by using real currency You see I am purely looking at it as an investment and its risk reward, SO these companies are promoting the "Tokens" as a stag profit type IPO opportunity! ( Discount for pre sale) SO for me there is risk and in this case of Play chip I dont want to BE A CUSTOMER BUT an investor with the company! hence the question