The ICO bounty program era has officially come and gone.

As the initial coin offer market heated in 2016 and ’17, so did the prevalence of the bounty program. Bounty programs offered ICO hobbyists a sweet deal: free token in exchange for project promotion on social media, in blogs, and generally for spreading awareness.

Participants were happy to receive free token, ICO project managers loved the _free_ (organic-ish) marketing, and everybody was happy. Except for the United States Securities and Exchange Commission (SEC).

Now, citing the all-mighty [Howey Test](http://consumer.findlaw.com/securities-law/what-is-the-howey-test.html), the SEC is pursuing American ICO operators who offer a bounty program.

![](https://hackernoon.com/hn-images/1*kalbR6YfdHAnaH_cOB3Hcw.jpeg)

Curating a group of individuals to promote a project is grassroots marketing, perhaps the most effective and efficient marketing tool there is. This is especially true when it comes to niche subjects with small and motivated audiences, making cryptocurrency a natural fit for such efforts the same way it’s a fit for politics and fashion.

There’s just one key difference: cryptocurrencies and ICO projects involve financial risk. This means, of course, lots of laws and regulatory bodies. There are regulatory landmines everywhere, and I’m honestly not sure how anyone thought bounty programs would be deemed kosher.

The SEC’s Howey Test labels a transaction an investment contract (and, most likely, a security) if “profit comes from the efforts of a promoter or third party,” which almost _always_ occurs when a project is promoted as part of a bounty program, and free token means there’s an implied expectation of profit. These guidelines indicate most bounty-promoted tokens are securities, but very few of these tokens have registered as such.

And the problem doesn’t stop with the SEC and Howey Test. The Federal Trade Commission also cares, along with its counterpart in the United Kingdom, the Office of Fair Trading. Each of those bodies requires promotional blogs and social media posts where compensation is received be labeled as such. I’ve never seen an ICO promotional tweet with “#ad,” let alone a proper disclosure. That’s problematic.

There are other examples of how bounty programs violate laws and regulations in many countries but I’ll stop there. The fact is many international bodies have not yet acted, but the SEC has begun taking action and that means the bounty era is officially over.

It may not only be bounty programs that are in trouble — while I’m personally only aware of action against bounties, I believe other promotional activities where free token is granted (like airdrops) may tread in similar water.

Whether you’re a participant in such a program or a buyer of token projects that partake in such activities, **be careful**.

While it may not be popular with decentralization purists, **the SEC’s concern and involvement is a good thing for the space**. The stakes in [cryptocurrency](https://hackernoon.com/tagged/cryptocurrency) are higher than ever, with skyrocketing market caps and fresh market entrants joining each day by the thousands. It seems obvious the SEC feels an inexperienced crypto buyer could be easily duped by the claims of third parties.

They’re correct. Whether experienced in the space or not, **it can be impossible to distill the difference between genuine excitement from the community and a promotional post with no disclosure**. The SEC is acting in the best interests of the people.

Still, **the underlying point of a bounty program is valid**: a healthy token project, especially those on track for success, should have an active community of stakeholders. This is true when we’re talking about bitcoin, benjaCoin, and everything in-between.

You just want that community to be **authentic**. Not folks in it for some free token.

The unfortunate truth is most ICO projects are early-stage projects that don’t have the community or a live product to develop one around. **It’s time to start passing on such projects.**

Instead, focus on ICOs with existing customers and partners who are **amped** about the move to [blockchain](https://hackernoon.com/tagged/blockchain) (and token). They’re hard to find but well worth it.

One such project is [**RetailCoins**](https://retailcoins.eu/), a new project out of the Netherlands. Among other things, their token backs rewards and loyalty programs, enabling the exchange of rewards across multiple businesses.

While this project may have attracted a group of buyers on its own, I am encouraged that they’ve already processed more than 1.2 million transactions, have a few thousand users, and that their (dozens of) existing partners are excited by the move to a token system.

RetailCoins has a strong community before speaking to a single member of the crypto space, and they didn’t have to give away token to incentivize them. Quite the opposite: their existing partners have already purchased nearly $300,000 worth of token as part of a private sale. _Sweet_.

There are other projects like these — **get out there and find ’em**. They’re the ones making noise within their respective industry, not in the bounty sub-forum on Bitcointalk.

[_Andrew J. Chapin_](http://andrewjchapin.com) _is an entrepreneur and writer based in San Francisco, California. His book,_ [_Art of the Initial Coin Offering_](https://www.amazon.com/Art-Initial-Coin-Offering-Crypto-Token-ebook/dp/B075RRWGT1)_, is available on Amazon today. He is a co-founder at_ [_benjaCoin_](http://benjacoin.com) _and advisor to several ICO projects, including_ [_RetailCoins_](http://www.retailcoins.eu)_. #disclosure_

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