Jay Clayton, the chairman of the U.S. Securities and Exchange Commission, has issued new remarks about the regulatory risks of launching an initial coin offering (ICO).

Speaking to Fox Business on Tuesday, Clayton commented that he “loves this technology” – but that said, he believes companies shouldn’t ignore existing securities law, regardless of whether a token sale is conducted privately or publicly.

Notably, he highlighted how some companies are turning to the blockchain funding model after having issues trying to raise money through more common means, calling the trend “troubling.”

Clayton said in the interview:

“We have seen instances where companies seem to have had trouble raising money in a traditional private placement and then have switched to an ICO in order to raise the money. The business hasn’t changed substantively, but it’s a form-over-substance way to raise money. That is troubling.”

The SEC chair also repeated his argument that many of the tokens his agency has reviewed fall under the definition of a security.

“Many ICOs and many of the ones I’ve looked at specifically are securities,” he told the network. “They are offerings of interest in an enterprise where the buyer of the ICO of the token, you can call it a token you can call it a security, is basically saying I’m investing with you with the promise of a future return.”

Ultimately, Clayton demurred when asked how the SEC would enforce its regulations, saying that there are both public and private solutions for violations of federal securities laws.

On the other hand, he had a message for firms looking to launch their own token sales: “We are watching.”

Image Credit: Brookings Institute/Flickr