Brad Feld

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ICO Advertising On Google

Mar 14, 2018
Category Technology

Google just banned ICO and cryptocurrency-related advertising. For the official policy, see Financial Services: New restricted financial products policy (June 2018).

Oh – and happy Pi Day. And MIT Admission Notification Day. And Einstein’s birthday. And Amy’s half birthday. And the day that Stephen Hawking transitioned to the next quantum energy level.

I never understood why ICO advertising has been allowed. I’ve heard the phrase “wild west” applied to ICOs for the past few years and it’s clear the regulatory regimes are finally hustling to catch up with the phenomenon. Up to this point, the phrase “consumer protection” hasn’t really been in my head around ICOs, but it is today.

When I was in college and my early 20s, I read Forbes Magazine religiously. Dave Jilk turned me on to it when I was a freshman (he was a senior) and from 1983 to 1995 I read almost every issue cover to cover. The pink sheet and penny stock phenomenon crested in the 1980s with intricate pump and dump schemes, boiler rooms, and an entire layer of the investment banking industry that promoted worthless public companies. Forbes covered this extensively and by the time firms collapsed and people went to jail I had a healthy skepticism about broad-based advertising and promotion scheme around any financial instrument.

When I first heard the phrase “ICO” three or four years ago, my immediate thought was something like “that’s just an invitation to the SEC to regulate that. Why do a play off the acronym IPO – call them something innocuous like “Papayas” instead. Knowing the SEC would move very slowly, I didn’t pay much attention. Last year, the SEC finally started putting out some vague statements that are now starting to get crisper and more precise.

From where I sit, it seems like similar rules to selling private equity should apply to ICOs. In addition, there are some rules associated with selling public equity that should apply. In both cases, the idea of advertising an ICO is ludicrous to me.

When a company we are investors in is raising a new round of financing, I’m not allowed to even write a blog post about the financing, let alone run an advertisement about it. Tweeting isn’t allowed. Neither is giving a speech in a public forum. Promoting it on Youtube would bring down the wrath of Jason Mendelson on my head.

Now that we are a “registered investment advisor” (since we also invest in other venture funds), we have an entire compliance infrastructure that I have to go through to even get blog posts approved (like the one about Glowforge yesterday) when I simply mention a company of ours on the web. While I can argue that the regulations around what I can write and/or promote are over-reaching, they are the rules that I, and our companies, have to live with.

The idea that a company can do an ICO, raise money, and ignore this set of rules makes no sense to me. I can imagine a category (currently being called “utility tokens”) that look more like frequent flyer miles or tokens at a video arcade than equity, but the boundaries around this are very blurry to me right now.

Anyone that is paying attention to cryptocurrencies and ICOs knows that there is a huge amount of fraud going on. A Google search on ICO Pump and Dump turns up a bunch of current stuff that is fascinating to read. Telegram, which is home to a huge ICO that is ongoing, is a popular platform for organizing ICO pump and dump schemes. If you think this kind of action is healthy long term, just go watch The Big Short.

I learned the phrase “buyer beware” in my early 20s while reading all those Forbes Magazines. Today, we have John Oliver to help us out.