Actor Jamie Foxx became the latest celebrity to join the ICO bandwagon on Thursday when he promoted the token sale of Cobinhood, a free cryptocurrency trading exchange.
Foxx is at least the fourth celebrity to promote an ICO on Twitter lately. Boxer Floyd Mayweather, rapper The Game, and Paris Hilton have all run similar promotions on Twitter previously.
But investors in the cryptocurrency space are not too thrilled about the growing celebrity endorsements. They believe it's a worrying sign of a bubble and will need regulators to eventually crack down on it.
"It does remind me of the Wild West. I'm pretty sure the regulators will step in and say it's not OK," said Affirm CEO Max Levchin, who's invested in a few bitcoin-related startups, including Xapo.
Levchin, who remains bullish on bitcoin and the underlying blockchain technology, said ICOs need to be more regulated with a more streamlined procedure, and pointed out there are plenty of "fraud" and "get rich quick" schemes in the space.
Andreas Antonopoulos, an early bitcoin investor, called Foxx's tweet a good indication of "peak ICO," and called it a modern-day "shoeshine boy moment," referring to the famous Joe Kennedy quote used to describe the stock tip he received from a shoeshine boy before the 1929 Wall Street crash.
"The worst reason to make an investment is a celebrity endorsement. Unfortunately, this tactic works, and that's why they're doing it," he said.
An ICO is similar to a stock IPO, but instead of buying shares in the company, investors are buying digital "coins" used on cryptocurrency platforms. Companies built on blockchain, a digital database for recording financial transactions and other types of deals, raise money by selling these tokens, which can typically be used to pay for goods and services on their platform, or just stashed away as an investment.
According to CoinDesk, ICOs have raised nearly $2 billion in 2017 alone, a record amount that outpaces the funding made by venture capitalists in blockchain companies this year.
The problem is ICOs are completely unregulated with no government oversight. In July, the for the first time that securities laws may apply to the sale of new digital coins, and last month it issued a .
Semil Shah, general partner at Haystack Fund and an early bitcoin investor, suspects celebrities are being paid to promote these ICOs. That doesn't mean it's illegal, as it's just another form of "influencer marketing," but it could eventually draw the SEC's attention, he said.
"We know the SEC is watching," he said. "I would guess long-term that U.S. regulators will not simply look the other way when folks or their agents promote these schemes to the public."