A host of crypto industry critics have weighed in on the potential drawbacks of so-dubbed initial exchange offerings (IEOs) — a crypto exchange-hosted alternative to the original model of an initial coin offering (ICO). Their views were reported by Bloomberg on April 10.

IEOs offer an alternative model of token offering wherein a crypto exchange acts as a form of underwriter, operating the sale and ostensibly vetting both the projects themselves and prospective investors.

The IEO phenomenon has apparently gained traction amid a declining ICO market that has absorbed the adverse impact of a regulatory crackdown and bearish crypto valuations.

Bloomberg cites crypto data tracker CoinSchedule.com, whose data reportedly indicates that around $180 million has been raised in 23 IEOs, with most taking place since February.

Yet IEOs’ regulatory status is no less clear — and prospectively even less promising — than their ICO predecessors, some critics argue. Zach Fallon — a securities lawyer who reportedly formerly worked on ICO matters at the United States Securities and Exchange Commission — told Bloomberg that the new model will "take everything from an ICO and make it worse."

Jeff Dorman, partner and portfolio manager at Los Angeles-based Arca Funds, meanwhile pointed to the paradox of introducing intermediaries to a space that prizes decentralization:

“The irony of course is that this is directly at odds with the decentralized ethos embedded in crypto, but this has been conveniently ignored as long as it’s working.”

Crypto exchanges, moreover, ostensibly use IEOs as an occasion to push sales and use of their own native tokens, either by making IEO issuers raise funds using their exchange token, or requiring IEO traders to have large balances of their native token to participate in sales.

Fallon told Bloomberg this practice could make the model even more problematic for regulators, and make them more likely to be deemed securities. He further noted the broker-dealer-like role exchanges play in the offerings.

As reported, the IEO model was spearheaded by Binance, whose token sale platform Launchpad hosted a high-profile token sale for the Tron-based BitTorrent token (BTT) this January, followed by another IEO for AI and smart contract project Fetch.AI in February.

In mid-March, United States crypto exchange Bittrex cancelled its first IEO token sale, which it had planned to host on its Malta-based counterpart, just two days after its announcement. It later conducted a different, inaugural IEO in early April.