The SEC recently weighed in on Initial Coin Offerings (“ICOs”), which have enjoyed explosive growth in 2017 with little to no regulation or government oversight. An ICO is a mechanism for issuing and offering for sale a digital currency, typically in exchange for a more established digital currency such as Bitcoin. The SEC guidance on ICOs suggests that many are subject to U.S. federal securities laws. Under the Securities Act of 1933, tokens or coins sold in ICOs constitute securities, according to the SEC’s guidance, because they are an investment contract with a “reasonable expectation of profits” to be derived from the efforts of others. The SEC guidance will significantly impact digital currency entities, as well as any exchanges hosting transactions involving ICO tokens. It will be crucially important for affected entities to consult with attorneys to ensure compliance with federal securities laws in light of the SEC’s new guidance.