The booming market for initial coin offerings of 2017 has collided head-on with U.S. securities laws in 2018.While upwards of $6 billion was raised via this method last year, the overheating market and preponderance of free-wheeling actors has raised the eyebrows of both regulatory authorities and plaintiffs’ lawyers in the United States.During a CoinDesk webinar last week discussing ICO regulation, Sara Hanks, CEO of CrowdCheck — a crowdfunding consultancy, explained that the level at which many ICO issuers had been flagrantly circumventing or just plain ignorant of existing U.S. securities laws was astonishing.Photo credit: Flickr Creative Commons“The world was going crazy and people were just sort of making this stuff up. We’d see these references to do an ICO instead of an IPO and saying ‘These aren’t securities,’” she said. “That’s not going to work.”But the market has begun to reach an equilibrium of sorts.“We are seeing a return to sanity in terms of people realizing that, yes, what you’re offering are securities,” she continued.Indeed, a combination of enforcement actions, subpoenas, public statements and thinly-veiled indications that the ICO market is “on notice” by regulators, such as the Securities and Exchange Commission and Commodity Futures Trading Commission, has created a chilling effect throughout this new quickly emerging ecosystem.“The people getting the message best are those who are getting subpoenas,” Hanks added. “Nothing concentrates the mind like having the regulatory authorities knocking at your door.”Further, the SEC has signaled quite clearly that it sees little differentiation between so-called “utility” tokens and those labeled as securities. Because of that, any ICO issuer that does not outright register their tokens as securities or qualify for an exemption runs a risk of being sued for issuing unregistered securities and, if there was any deceptive marketing involved, outright fraud.The U.S. tranche of the crowdsale of Sweetbridge’s Sweetcoin discount token has unfortunately been caught in the crossfire, forcing it to postpone the sale indefinitely until a no-action letter from the SEC is issued or some other means of legal assurance is provided.But Sweetbridge is hardly alone in this regard. Most token-issuers are either now avoiding the U.S. altogether or registering their token under one of the exemptions created by the 2012 JOBS Act, such as Reg D, Reg A+, Reg CF and an alphabet soup of others that crypto-industry followers are surely familiar with to some degree.Regulation D is most popular route, as it allows a path to raising funds by issuing tokens to accredited investors — that is, someone who has a net worth of over $1 million or who earns more than $200,000 per year. However, tokens sold in this manner are locked up and cannot be traded for 12 months.While the Reg D route is certainly an option for the Sweetbridge crowdsale, it would fundamentally go against the project’s core ethos: that of financial inclusion and providing an opportunity for the little guy to compete with the big guy. The wealthiest one percent of the population are doing just fine without access to interest-free loans.Reg A+ is also an avenue that many ICOs are looking to. It allows for up to $50 million to be raised from both accredited and non-accredited investors and the shares are freely tradable immediately thereafter.However, Sweetbridge’s heavily-decentralized global structure means that the reporting requirements required to pursue this exemption are simply untenable. After all, in a decentralized economy comprised of member entities around the world, who would be responsible to do the reporting? Ideally, the blockchain would be responsible for doing this, and that could be a solution down the road, but at this point in time’s just not a feasible answer.But that’s not reason to lose optimism. As Hanks and other participants in the CoinDesk webinar emphasized, the world of blockchain and crypto is iterating extremely rapidly and U.S. regulators are actually getting up to speed on this new technology much more quickly than they normally do when new paradigms arise.US Token Freeze Leaves More Questions Than Answers was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.