Initial Coin Offerings (ICOs): What They Were and How They Ended

An initial coin offering sold tokens directly to the public to fund a project that did not exist yet. No underwriter, no prospectus, no accredited-investor gate, no jurisdiction. Between 2017 and 2018 the format raised roughly $5.6 billion and then $11.4 billion in successive years, and by 2020 it had effectively stopped being used.

It is worth understanding anyway, and not for nostalgia. The ICO is the closest thing capital markets have produced to a controlled experiment in what happens when disclosure, custody and vetting are removed and everything else is held constant. The answer is on the public record, in dollars.

What an ICO actually was

A project published a whitepaper describing what it intended to build, minted a token on an existing chain — usually Ethereum — and sold it for bitcoin, ether or cash. Buyers received the token. What the token entitled them to varied, and this is the part that most contemporaneous coverage skipped: in the typical case it entitled them to nothing. Not ownership, not a claim on cash flows, not a vote, not a seat at a liquidation. Often it was a promise of future access to a service that had not been built.

That is the structural difference from an equity offering, and it is not a matter of degree. A share is a claim; a utility token is a coupon for a product that may never ship, priced as though it were a claim.

What the enforcement record shows

Regulators took the position that many of these tokens were securities regardless of what the issuer called them, and litigated it. The outcomes are specific:

• Telegram raised $1.7 billion for its TON network and settled with the SEC in June 2020, returning $1.2 billion to purchasers. The network did not launch as sold.
• Kik raised nearly $100 million selling “Kin”. A federal court granted the SEC summary judgment in September 2020, holding the sale should have been registered; Kik paid a $5 million penalty.
• LBRY raised over $11 million. The District of New Hampshire granted the SEC summary judgment in November 2022, finding LBRY Credits were sold as securities.
• Block.one raised about $4 billion for EOS across a year-long sale — the largest ICO ever conducted — and settled with the SEC for a $24 million penalty. That is roughly 0.6% of what was raised.
• Ripple was sued in December 2020 over some $2 billion of XRP sales. In July 2023 the court split the question: sales to institutional buyers violated the securities laws, programmatic sales on exchanges did not. A $125 million penalty ordered in 2024 was cut to $50 million in the 2025 settlement that ended the case.

Read the Block.one line again, because it is the one that generalises. A $24 million penalty against a $4 billion raise is not a deterrent; it is a cost of doing business, settled without admission. The enforcement record is real, but it arrived years late and recovered a small fraction of what moved. An investor relying on regulators to make them whole after the fact was relying on the wrong mechanism.

The outcomes, honestly

Two ICOs are routinely cited as proof the format worked. One of them is a fair example and one is not.

Ethereum raised around $18 million in 2014 and delivered a functioning general-purpose blockchain that has since settled a substantial share of all on-chain activity. It is a genuine success, and it is also a single observation from the very beginning of the format, before the 2017 boom it is used to justify.

EOS is the counterexample dressed as a success. It raised two hundred times what Ethereum did — $4 billion — and never became a significant platform. By 2025 the token traded near $0.57 against a peak of $18.87 during the sale period. Any article listing EOS beside Ethereum as a comparable outcome is describing the size of the raise, not the result.

The failures are less ambiguous. The DAO raised about $150 million and a flaw in its code allowed a large share of it to be drained; the Ethereum community hard-forked the chain to reverse the theft, which resolved the loss and demonstrated that “immutable” was a design goal rather than a property. BitConnect was a Ponzi scheme that promised fixed high returns and collapsed. Tezos raised $232 million and spent years in internal litigation before shipping.

What replaced it, and what the rules are now

The format did not evolve so much as get absorbed into regimes that require the disclosure it was built to avoid. In the European Union, Regulation (EU) 2023/1114 (MiCA) has applied since 30 December 2024, and it requires that any public offer of a crypto-asset, or admission of one to trading, be accompanied by a white paper that is properly drafted, notified to a regulator and published. Trading venues have suspended or delisted tokens whose issuers did not complete that process, with transitional deadlines for some providers running to mid-2026.

That is, in substance, a prospectus requirement. The thing that made an ICO an ICO — selling to the public with no notified disclosure document — is what MiCA removed.

Why this still matters

Token sales have not disappeared; they have been renamed. Exchange-led sales, security token offerings, points programmes, airdrops with retroactive allocations and public sales on launchpads all raise money from the public against a token whose holder rights need reading carefully.

The question the ICO era answered is the one to carry forward, and it is not “is this a scam”. It is narrower and more useful: what does this token entitle me to, who is obliged to deliver it, and what happens to me if they simply do not? For most of the $17 billion raised in 2017 and 2018, the honest answers were: nothing, no one, and nothing.

Frequently asked questions

What is an initial coin offering?
A fundraising method in which a project sells newly created tokens directly to buyers, usually in exchange for an established cryptocurrency. The issuer receives capital without giving up equity and without an underwriter, and buyers receive a token whose rights depend entirely on what the project chose to grant.

What does ICO mean in business?
It is the crypto analogue of raising capital, but the comparison to an IPO is misleading in the way that matters. An IPO sells ownership of a company under a disclosure regime; an ICO usually sells access to a future product with no audited accounts, no regulator reviewing the prospectus and no residual claim on assets.

How is an ICO different from an IPO?
Three differences decide the risk. An IPO conveys equity, an ICO usually does not. An IPO requires audited financials and regulatory review, an ICO historically required neither. And an IPO has intermediaries who carry liability for the disclosure, while an ICO’s buyer has no one to hold responsible if the description was false.

Are ICOs legal?
It depends on the jurisdiction and on whether the token is treated as a security there. Many regulators, including the SEC, have applied existing securities law to tokens after the fact, which is how a large body of enforcement action arose from offerings the issuers considered unregulated at the time.

What are the risks of investing in an ICO?
Total loss is the base case rather than the tail. Beyond outright fraud, the common outcomes are a product that never ships, a token with no mechanism to accrue value even if it does, and illiquidity that makes exit impossible at any quoted price. The absence of intermediaries removes the vetting as well as the fees.

Do ICOs still happen?
The format has largely been displaced by structures with more regulatory clarity — security token offerings, exchange-led sales and venture rounds — precisely because the enforcement history made the original model expensive. The mechanics remain instructive: it was a live demonstration of what disappears when disclosure is optional.

Sources

• US Securities and Exchange Commission (2019). SEC Orders Blockchain Company to Pay $24 Million Penalty for Unregistered ICO. The Block.one raise of approximately $4 billion over a year-long offering and the $24 million penalty are taken from the Commission’s own order.
• Enforcement outcomes for Telegram (settled June 2020, $1.2 billion returned against $1.7 billion raised), Kik (summary judgment September 2020, $5 million penalty on a sale of nearly $100 million) and LBRY (summary judgment, District of New Hampshire, November 2022, on sales exceeding $11 million) are drawn from the respective court records and SEC filings.
• SEC v. Ripple Labs: the July 2023 ruling distinguishing institutional from programmatic sales, the $125 million penalty ordered in 2024, and the $50 million figure in the 2025 settlement that concluded the litigation.
• European Securities and Markets Authority. Markets in Crypto-Assets Regulation (MiCA). Regulation (EU) 2023/1114, applicable from 30 December 2024; the white paper obligation for public offers and admissions to trading, and the transitional arrangements running into 2026.
• Aggregate ICO fundraising of roughly $5.6 billion in 2017 and $11.4 billion in 2018 reflects contemporaneous industry tracking, which was inconsistently defined across sources; the figures indicate scale rather than a precise total. The EOS price of $0.57 against a sale-period peak of $18.87 is as of 2025 and is not a current quote.

This article is general information, not personalised investment advice. It describes a historical fundraising format and the enforcement actions that followed it, and names specific projects as documented examples rather than as recommendations for or against anything. It does not take into account the financial situation, objectives or risk tolerance of any individual reader. Token offerings have produced total losses for participants on a large scale. Capital is at risk and past performance does not indicate future results.