On October 10, the North American Securities Administrators Association (“NASAA”)—an association of state, provincial, and territorial securities regulators in the United States, Mexico, and Canada—released its annual Enforcement Report (the “Report”). The Report demonstrates that, while stepped-up enforcement activity has been observed at the federal level with respect to cryptoasset markets, state regulators are increasingly getting in on the action.

Of particular note in the Report is the marked increase in the number of enforcement actions against unregistered individuals and firms—a 24% increase over the prior year. In the press release accompanying the Report, NASAA’s President, Michael S. Pieciak, attributed this increase in part to regulators’ focus on fraudulent initial coin offerings (“ICOs”) and other cryptoassets. The increase was also driven by various jurisdictions’ adoption of the NASAA’s model statute intended to protect vulnerable senior investors from exploitation.

The surge in enforcement activities related to cryptoassets in 2017 has prompted many of NASAA’s U.S. and Canadian members to launch a coordinated sweep of promoters and issuers of illegal and fraudulent offerings. The sweep, titled Operation Cryptosweep, began in early 2018 and has resulted in 50 enforcement actions as of the date of the Report. According to previous statements, the sweep has focused primarily on fraud, as well as state law violations including failure to register a product before an offering.

Given the success of the recent enforcement programs, cryptoasset market participants can expect a continued level of scrutiny from members of the NASAA, and should remain diligent regarding the evolving landscape of both state and federal regulation of cryptoassets.