My personal (IANAL, speculative) view on this is that the tokens which are going to be considered "utility tokens" are going to be done so retroactively, once the founders end up building something useful that is objectively utility-like.

I mean consider the alternative: for projects that never get launched, what does the SEC do? Right now the mental model seems to be "they read the ICOs landing page, look into the team, and audit the half-finished github repo to decide if it was on track to become a utility or a non-utility" -- this seems hilariously disconnected from reality. In that scenario does anyone think that clever choices of project framing on a HTML page and some half-finished code will keep them out of jail if they are sitting on millions of dollars of money collected from the public?

My guess is the SEC will basically let things brew for a while and then start bringing the hammer down on projects that don't go anywhere other than make the founders rich. If you find yourself in court defending yourself against the SEC, you better hope you have evidence to show you at least tried to ship the "utility" you promised.

If this is right, it should be quite frightening to those raising ICOs: you may be handcuffed tightly to the project since in order to prove that your tokens were not securities you'll need to have shown a good faith effort to realize the vision as outlined at the time of the ICO. And don't forget, even if you actually execute on things, this assumes you managed to design the project in such a way that you are truly building a "utility token", which is on its own still has yet to be defined by the SEC.

What this means in English is even if you decide somewhere along the way the project is a bad idea, not only can you not walk away without potentially increasing risk of prosecution of securities fraud, but you also may not even be able to significantly pivot! Considering that most startups pivot at least once, you are basically undermining your changes of success significantly (IMHO) by raising money this way vs traditional means.

Unless the concept you use to raise the ICO:

- sticks the landing perfectly with market fit (hard or maybe impossible, given what we know about lean startup development in 2017, especially for such early emerging technology as blockchain tech)

- ultimately manages to be considered a "utility token", something we don't yet even have a definition for

I think you may be in trouble.

IOW, once you start learning what the market actually wants, you may be forced to choose between a high risk of project failure (if you don't pivot) or a high risk of going to jail (if you do pivot.) And even if you don't pivot, and hell, even if your project takes over the world, maybe you screwed something up in your positioning and your token is considered a security, so you go to jail anyway. Ouch.

ICOs basically force you into a number of startup anti-patterns (IMHO)

- Publically promising a product before building or shipping anything, which is the opposite of customer development. (And unlike typical crowdfunding, given the current speculative market, I don't take a successful ICO as any indication of consumer interest in the project itself whatsoever.)

- Having an extremely large number of people financially invested in the project too early, which is a huge distraction and prevents flexibility

- Inability to pivot or wind down the venture due to reasons stated above

- Excessive capitalization, leading to overspending, lack of urgency to find product market fit, etc.

The money is nice, and the value in retaining control of the cap table shouldn't be understated. Smart, seasoned entrepreneurs will probably utilize ICOs in a disciplined way to great benefit, probably by paying an army of lawyers to protect them and run the ICO. But there's going to be a lot of negative outcomes for many others I think.