There’s no party like a tokenized party because the cryptocurrency’s value might drop. Scratch the “might.” Most of the tokens used to raise money for tech industry projects these days are probably doomed to become worthless down the line, since the vast majority of startups and networks eventually fail. Regardless, new digital currencies are sprouting up every day. What’s going on?

Initial coin offerings, aka fundraising with cryptocurrency instead of relying only on venture capitalists and traditional sources, quickly went from a niche business model to a widespread tech industry trend over the past few months as bitcoin’s price skyrocketed. Forbes reported ICOs raised more than $2 billion so far this year. And that tally was before the messaging app Kik raised nearly $100 million this week through its new Ethereum-based token Kin.

ICOs aren’t just for cryptocurrency veterans any more. Token sales are faster than traditional VC fundraising. Plus, they get broader audiences to engage with a project before the official launch, building a new type of customer loyalty. All the money pouring into these digital currencies caught regulators’ attention. China banned ICOs outright while the U.S. Securities and Exchange Commission started issuing warnings about projects that use experimental tokens to skirt legal requirements. Now legally approved business models are popping up around the world. This may soon lead to the end of ICOs as we know them. It could also be the beginning of something entirely new.

On Wednesday, a subsidiary of the e-commerce giant Overstock announced it is launching a new type of legally compliant trading platform for the exchange of cryptocurrency securities. It will be regulated by both the Financial Industry Regulatory Authority and SEC. "I think it's a historic event. We're opening a new type of capital market,” Overstock CEO Patrick Byrne told CoinDesk.

Shoppers can already buy products on with cryptocurrencies like bitcoin, ether and litecoin. Now this new platform suggests experiential blockchain models can be tailored to fit old school legal categories and processes. Many cryptography experts see this as a sign of the blockchain industry’s newfound maturity.

Meanwhile, others question if increased regulation will kill the ICO trend by rendering it irrelevant. The biggest benefit of an ICO was originally its lack of bureaucracy and gatekeeping. Theoretically, anyone could participate, not just wealthy businessmen and investors.

The buzz around Kin offers a great example of what is going on in the broader cryptocurrency industry. Kin is the first mainstream cryptocurrency tailored to teens and average social media users, not tech industry insiders or bitcoin users. Most people aren’t buying kin because they think holding on to it will make them rich, the way some cryptocurrency users hold on to bitcoin. Most users bought kin because they want to use it on Kik’s platform.

Kin can be used to buy products and services inside the app, such as advertising and video games. That may seem like a pretty straightforward utility token, almost as simple as an arcade coin. However, cryptocurrencies currently fall into multiple legal categories at once.

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Anyone buying or selling these tokens needs to carefully catalogue their activity for tax purposes and business compliance. The authorities in charge of curtailing cyber crimes consider blockchain tokens currency, at least in the U.S., while the IRS considers bitcoin a type of property. Forget about the startups themselves, which now practically require a team of specialized lawyers to do business with tokens. How will average token buyers keep up?

"Hopefully, whether it's the federal government or the government at the state level, they will take time to coordinate the activities of the regulators and to synthesize the regulatory approach to cryptocurrency and tokens,” attorney Alan Cohn, co-chair of Steptoe & Johnson LLP ’s Blockchain and Digital Currency practice, told International Business Times. “To basically harmonize the situation we have now, where a cryptocurrency or token can be simultaneously considered a currency, a commodity, and property, plus possibly a security, all at the same time."

Da Hongfei, cofounder of the blockchain platform NEO, told IBT his company will launch an ICO resource toolkit later this year. “We are working with lawyers to craft a legal framework to [fundraise], to do token raising on our platform,” he said. “In China, ICOs are illegal. But token raising with private investors, that is still legal. And ICOs themselves are still legal in many countries.” Projects that base their campaigns in Hong Kong, for example, can find creative ways to fundraise with cryptocurrency without violating Chinese law.

Chinese flag waves over a river in northern China, where regulators are taking a tough stance on cryptocurrency regulation. Greg Baker/AFP/Getty

NEO’s resources will be especially important for international campaigns that need to balance private and public buyers while also paying sales tax. “If you want to write a smart contract in NEO and do fundraising, you can follow the guidance to make sure everything is lawful,” Hongfei explained. “I think it [token sales] is a good way to raise money, especially for an open source business or blockchain project.”

Even so, there’s still one fundamental issue with turning the Wild West of token sales into standardized, white collar models: Many token sales allow anonymous cryptocurrency users to buy in.

Most cryptocurrency wallets are identified by a random string of numbers and letters, not names or social security numbers. Even the startup founders themselves can’t say who participated in their fundraising campaigns, aside from wealthy investors who participated in private token pre-sales. Cohn believes this will change as lawmakers explore the new blockchain industry and eventually define different categories of tokens.

"Even if you are not a money transmitter, and even if you are not considered a financial institution of some type, you still have basic requirements to know who you are interacting with,” Cohn told IBT. “Do you have them complete some kind of initial entry where they provide a name and a date of birth, a copy of a government ID card? Do you have them establish a blockchain-based digital identity, with a blockchain-based digital identity provider, and use that to conduct a basic 'know your customer' check? These are things companies that are conducting ICOs or issuing tokens need to consider."

Identifying buyers could limit the democratic aspect of ICOs. Previously, you didn’t need a bank account or driver’s license to participate in an ICO. Teenagers and low-income, rural bitcoin users could still join.

Vitalik Buterin and Israeli teen Ben Kaufman
Ethereum creator Vitalik Buterin and Israeli teen Ben Kaufman in Tel Aiv. Ben Kaufman

With the goal of inclusiveness in mind, Ethereum creator Vitalik Buterin and Truebit Foundation founder Jason Teutsch published a paper this week proposing different ICO models, which could guarantee fair access.

Even if a token doesn’t behave like equity or other types of traditional investments, it can still be a lucrative way for diverse populations to engage in the otherwise cliquish tech industry. Many tokens even allow holders to vote on the future of the technology itself, as well as the priorities of the project or company behind it.

"When you look at a utility token, a utility token may also appreciate dramatically in value,” Cohen added. “The question is, what are the rights that go along with that specific token?" Buterin has also been outspoken about his hope that more ICOs will lend themselves to nonprofit models, funding ideas with rotating contributors instead of companies. It’s impossible to say what ICOs will look like by this time next year.

There will probably be multiple types of ICO models, tailored to regional and industry-specific regulations. That way, both buyers and sellers will be clear on what these tokens actually are. Right now, a project could promise buyers the token represents a part of the company then fail to deliver. It’s still unclear if any of these future models will allow for both compliance and public accessibility.

Come what may, Cohn remains optimistic about the future of legally compliant token sales. "I think in each cycle of regulation that we've seen in the life of cryptocurrency, there's been an initial shock and an initial sorting out,” Cohn said. “But that greater amount of certainty has led to greater amounts of innovation afterwards."