[EGreg]

Can you please elaborate on this exception:

"can be returned for what you paid for it"

This seems like a safe harbor if it's true! This is huge. So, an ICO with this clause would require the company to keep all the money raised on reserve, but then if the token goes up in price and never goes back down to the original level they can start using that surplus money. Kind of like a bank does with fractional reserve lending.

Do you have any more info on this?

[kd5bjo]

What surplus money? The issuer no longer has the coins, but USD instead. If they make a second offering at a higher price later, they'll need to keep that money in reserve as well or else the new coins will be unregistered securities.

[EGreg]

Well, the issuer has USD / BTC whatever but has to keep full reserves to be willing to cash everyone out in a case of a "run on the issuer".

This is a worst case scenario and realistically they can probably spend half of the USD / BTC / whatever raised on actually running the business.

As the token goes up in price, less and less people will want to buy at the current price. At some point issuer insure themselves against the remote possibility of the price crashing and people making a run on the issuer, by buying out-of-the-money call options if they can find some underwriter.

Then the underwriter's issuing the securities, and the issuer can spend some or all of the money protected by the call options / insurance.