Rumors have begun to surface that indicate Telegram might back away from its ongoing initial coin offering (ICO). It’s still early in the game, with plenty of time remaining before the final buzzer, but a couple of flags have already been thrown. If it were to come to pass, it would prove to be a huge setback for the social media platform that has become the go-to application for the cryptocurrency community.

One big reason that it might be contemplating turning around is, unsurprisingly, potential pushback from the U.S. Securities and Exchange Commission (SEC). According to Telegram’s SEC filings, it is selling securities, and has already raised $1.7 billion. However, under SEC guidelines, it is prohibited for a company to sell securities to non-accredited investors, with limited exceptions.

Telegram would also have to go through its own verification process. It would have to show that it conforms to anti-money laundering regulations, as well as clear a know-your-customer (KYC) application. A known, established investor wouldn’t have any issue being confirmed, or accredited. However, for the multitude of individuals that have never stepped into the investment ring, each one would have to be verified.  This amounts to a massive amount of paperwork for Telegram.

Another reason is the lack of a tangible product or service. The Telegram blockchain, the Telegram Open Network (TON), currently only exists on paper. By the letter of the law, then, Telegram is offering nothing more than the “dream” of a future network. This is highly frowned upon the SEC, and other companies have already found themselves in hot water with the agency for similar acts.

Sid Kalla of the Turing Advisory Group indicates that it would be prudent for Telegram to back up, build the product and then move forward with the ICO. In an interview with CoinDesk, he said, “The private sales were raised at around the top of the market euphoria. For a public valuation to reach back to those levels, the crypto community would need to see something concrete.”

Telegram is now 5 years old. While it has certainly gathered a lot of business intelligence over this time, that intelligence does not necessarily translate into investment intelligence. It more than likely doesn’t have the resources or maturity to handle investor relations issues that could arise following a public ICO.

Telegram has been relatively quiet on the subject, and there are some that don’t believe a recall is imminent, or even forthcoming. Kalla indicated that there could be major drawbacks to reversing course at this point, adding that any future attempts at offering a public-backed product would more than likely result in investors demanding lower prices for Telegram’s digital currency. “The only reason I see a public token sale making sense if there is investor demand or pressure or any contractual obligation for liquidity,” he said.

Note: Tokens in the SegWit chain are referred to as SegWit-Coin BTC (inaccurately called Bitcoin Legacy or Core by many) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper.  Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.