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How do I Buy Tokens in an Initial Coin Offering (ICO) or Token Sale?

Who is Eligible to Participate?

Companies will hold a pre-sale, public sale, or both for their ICO or Token Sale. At that time, eligible purchasers can send them Bitcoin or Ethereum for a (usually) unknown quantity of the coins/tokens for a (usually) unknown price. Prices/Quantity disbursements are (usually) determined depending on the total quantity of coins/tokens and the total amount raised during the sale.

First you need to determine if the ICO or Token Sale is a securities offering (see here for full explanation). If it is a Security Token and you are located in the United States, you must be an accredited investor and prove your accreditation status. You may also be able to participate if you are a non-US resident (some other countries may be blacklisted as well). Accredited US investors include anyone with a net worth of $1 million or more or who has earned an income of $200,000 or more for the two previous years. To participate in security token sales, you will have to prove your status.

If you are not an accredited investor, you will likely not be able to proceed in participating in the ICO, but you will be able to purchase the coins once they are listed on an exchange.

For utility tokens, eligible purchasers include all US and non-US participants. Token Sales last for a predetermined length of time (or for predetermined amount of funds) and information can be found on the website of the Token you wish to purchase.

How to Participate

Instructions may vary, but most will require the purchasers to follow some version of the following steps:

  • The token website:
    • Will provide an Ethereum (ETH) and/or Bitcoin (BTC) address
    • Give you a ETH/BTC to their token conversion rate so you know how many tokens you will receive or inform you that the token distribution will be based on the amount of ETH/BTC received compared to the number of tokens available for sale
    • Inform you not to send ETH/BTC from an Exchange or Broker (like Coinbase or Binance)

The reason they tell you not to send from an exchange is that they will disburse the tokens you are purchasing by sending them back to the account that they received the ETH/BTC payment from. Therefore, if you haven’t already, you will need to:

  • Set up a Hardware wallet or Software wallet that is compatible with ERC-20 tokens. If you have not done this already, you can see our tutorial at: How to set up a MyCrypto Wallet.
  • When you visit the website of the Token Sale, the company will have you register your email address and create a password to access. Once you confirm your email address via the email they send you, you will be able to log in to the Token Sale Portal (this is also the step where Security Tokens will ask for Know Your Customer (KYC) forms for you to confirm your accreditation). It should look something like:
  • Enter the amount of ETH you want to contribute (this amount must be held in a Hardware or Software wallet) and then enter your Public Address. Not only will this allow the Token Sale to receive the Ethereum you want to contribute, but it is also the address that they will send the tokens you buy to. Do not enter an address from an exchange. When the company sends your tokens back to the address, the exchange will not be equipped to receive them. Also, the Token Sale should NEVER ask for your Private Address.
How to Claim What You Purchased
  • Once the sale has ended and the company reconciles all contributions, they will email you and let you know that the Token disbursement has occurred. They will also give you a set of information that will allow you to add the Token to your wallet, if it does not have it currently listed. This will include:

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