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==What is ICO==
Initial Coin Offering - Also known as “token sales,” this new fundraising phenomenon is being fueled by a convergence of blockchain technology, new wealth, clever entrepreneurs, and crypto-investors who are backing blockchain-fueled ideas. ICOs present both benefits and disadvantages, as well as threats and opportunities, to the traditional venture capital business model.
[https://hbr.org/2017/03/what-initial-coin-offerings-are-and-why-vc-firms-care Why VC firms care]

==How an ICO works==
A new cryptocurrency is created on a protocol such as Counterparty, Ethereum, or Openledger, and a value is arbitrarily determined by the startup team behind the ICO based on what they think the network is worth at its current stage. Then, via price dynamics determined by market supply and demand, the value is settled on by the network of participants, rather than by a central authority or government.

==Why is an ICO interesting==
:1. One is profits — cryptocurrency investors made some massive returns in 2016
:2. Liquidity of cryptocurrencies

[https://hbr.org/2017/03/what-initial-coin-offerings-are-and-why-vc-firms-care more details on Why]

==Why an ICO scares off==
:1. [[#Regulatory Naivety|regulatory uncertainty]];
:2. the high valuations;
:3. over-capitalization; 
:4. the lack of control over financials, strategy, and operations;
:5. and the lack of business use-cases;
:6. And like any industry, the ICO arena has had its fair share of outright scams, pump and dumps, and blatant Ponzi schemes.

==Why ICOs are eels==
ICOs are the Wild West of financing — they sit in a grey zone where the U.S. Securities and Exchange Commission (SEC) and many other regulatory bodies are still investigating them. 
:1. The main problem is, though, that most ICO’s don’t actually offer equity in start-up ventures; instead, they only offer discounts on cryptocurrencies before they hit the exchanges. Therefore, they don’t fit into the current definition of a security, and are technically outside of traditional legal frameworks. 
:2. They are global instruments — not national ones — and they are funded using bitcoin, ether and other cryptocurrencies that are not controlled by any central authority or bank. Anyone can invest, and they can even do so pseudonymously.

==What is an ICO and what is a DAPP/Appcoin==
For the uninitiated, an ICO (short for “initial coin offering”) is a crowdsale of cryptographically secured blockchain-native tokens to fund the development and operation of one of three types of blockchain projects:
:1. a platform-layer blockchain (such as Ethereum, Lisk, or Tezos);
:2. an organization that operates on a blockchain (known as a Decentralized Autonomous Organization, aka a “DAO”, or a Centrally Organized Distributed Entity, aka a “CODE”); or
:3. a decentralized application (a “Dapp”) that runs on a platform-layer blockchain.
A token that fuels a Dapp is sometimes referred to as an Appcoin, while tokens that fuel DAOs and platform-layer blockchains are simply known as tokens or cryptocurrency. In a typical ICO, new tokens are issued in a crowdsale in exchange for Bitcoin or Ether, and then, if sufficient demand exists, digital currency exchanges such as Shapeshift, Kraken, and Poloneix will make a market so they can be traded.

===Regulatory Naivety===

===Howy test===
A company offering '''securities''' that are not exempt must register them, a process that also involves ''disclosure of certain information, including'':
:A. A description of the company's properties and business purpose
:B. A description of the security being offered
:C. Information about the company's management
:D. Financial statements about the company, certified by independent accountants

Under the Howey Test, a '''transaction is an investment contract if''':
:1. It is an investment of money
:2. There is an expectation of profits from the investment
:3. The investment of money is in a common enterprise
:4. Any profit comes from the efforts of a promoter or third party

If an investment opportunity is open to many people, and if investors have little to no control or management of investment money or assets, then that investment is probably a security.

[http://consumer.findlaw.com/securities-law/what-is-the-howey-test.html MORE INFO ON HOWY TEST]