Telegram and the Future of ICOs

As regulators worldwide begin to crack down on ICOs, start-ups are becoming more weary of the risks associated with public offerings. In many cases, companies are skirting these regulations with air drops, or the distribution of free tokens, at least for the time being.

One of the most notable ICOs that may be skipping its public offering is Telegram. Despite the cancelation rumors, the messaging app already enjoys the position of first ever billion-dollar ICO. EOS also had a big raise. So far, Telegram has already raised over $1.7 billion in private sales, as confirmed by recent SEC filings.

"The goal of fundraising is to gain access to capital to allow a team to build a product and company. It appears Telegram has already achieved their goal so there would be no reason to conduct a public sale," explained Anthony Pompliano of Morgan Creek Capital Blockchain.

Telegram has remained silent regarding the possible delay or outright cancelation of their public offering, but not going public could be the start of a new trend emerging in the ICO world, due in large part to a broader regulatory crack down in the industry.

Last year, the SEC labeled a number of tokens as securities. In fact, Jay Clayton, the head of the SEC, has noted "I believe every ICO I've seen is a security.” As securities, would-be investors must be ‘accredited’ in order to get in on the offering. This is because the SEC worries that ‘regular’ investors do not have the knowledge to adequately measure the potential risks involved.

Despite this, a number of tokens are moving forward with public offerings, looking to capitalize on the $8.7 billion funding trend that has taken the start-up world by storm.

This aversion to risk has paid off for some, but it has also landed many in hot water, including AriseBank, a Texas-based platform that allegedly raised some $600 million in funds without registering the offering with the state’s regulatory authority. And in early March, the SEC increased pressure on ICOs, sending subpoenas to an undisclosed number of start-ups in the space.

It remains unclear whether or not Telegram will move forward with their public offering, but the regulatory risks are becoming increasingly palpable. If there is not some sort of reversal on SEC decisions, start-ups might forego the process altogether, putting the industry’s investments back in the hands of big banks and VC funds.

"If teams can raise their capital goals in private sales, they'll continue to do so until there is less ambiguity in regulations,” Pompliano noted.