On May 21, the North American Securities Administrators Association (“NASAA”) announced a massive and coordinated series of enforcement actions by U.S. state and Canadian provincial regulators to combat fraudulent practices involving cryptocurrency-related investment products.

As cryptocurrencies have gained in popularity, companies have increasingly turned to a method known as an initial coin offering (“ICO”) to raise capital. ICOs, however, are ripe for potential fraud. As the Washington Post has explained, “consumers face higher risks of being misled at a time when the intense demand for bitcoin has prompted many retail investors to take extreme steps to gain exposure to the currency…”

Given ICOs’ high risk of fraud, state regulators are increasingly scrutinizing such offerings as well as other practices involving cryptocurrency-related investments. In fact, according to NASAA, state regulators have opened nearly 70 inquiries and investigations into cryptocurrency-related companies. Moreover, there are 35 pending or completed enforcement actions related to ICOs or cryptocurrencies since the beginning of May. In short, state agencies are using state securities laws to crack down on fraud and deception in the cryptocurrency market.

These coordinated state actions have caught the attention of federal regulators as well. U.S. Securities and Exchange Commission (“SEC”) Chairman Jay Clayton issued a statement praising the NASAA for taking action. Chairman Clayton warned “fraudsters in this space that many sets of eyes are watching, and that regulators are coordinating on an international level to take strong actions to deter and stop fraud.” Chairman Clayton further reminded investors that “regulators are committed to protecting investors in these markets.”

As the recent NASAA announcement and SEC Chairman Clayton’s comments demonstrate, regulators in the United States and abroad are increasingly turning their attention to the cryptocurrency market. The intensifying spotlight on ICO’s and cryptocurrency should encourage companies pursuing an ICO or other activities involving cryptocurrency-related investments to seek legal counsel and to comply with all state laws, federal laws, and SEC regulations.