The Securities and Exchange Commission said Wednesday that platforms offering trading of digital assets that are securities and that are operating as an “exchange” under federal securities laws must register with the SEC as a national securities exchange or be exempt from registration.

The agency’s divisions of Enforcement and Trading and Markets, in their Wednesday Statement of Potentially Unlawful Online Platforms for Digital Trading, said that the SEC is concerned “that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.”

Many platforms refer to themselves as “exchanges,” which can give the [false] impression to investors that they are regulated or meet the regulatory standards of a national securities exchange, the agency groups said.

Such platforms, the agency said, are a popular way investors can buy and sell digital assets like coins and tokens offered and sold in so-called Initial Coin Offerings.

The platforms “often claim to give investors the ability to quickly buy and sell digital assets,” the SEC stated. “Many of these platforms bring buyers and sellers together in one place and offer investors access to automated systems that display priced orders, execute trades, and provide transaction data.”

The securities regulator has found that a number of the platforms provide a mechanism for trading assets that meet the definition of a “security” under the federal securities laws.

Investors, the SEC divisions warned, should use a platform or entity registered with the SEC, such as a national securities exchange, alternative trading system (ATS), or broker-dealer.

SEC Chairman Jay Clayton and the SEC “have been signaling for some time now that token trading platforms would be scrutinized to determine whether they were in violation of exchange or broker registration provisions,” Nicolas Morgan, a partner in the Investigations and White Collar Defense practice at Paul Hastings’ Los Angeles office, told ThinkAdvisor Wednesday.

The pronouncement “continues with that theme, and some platforms have already requested and/or received approval to be registered as an ATS,” Morgan said. Teplum is one such platform.

The statement also notes that while some of these platforms “claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges.”

The SEC also “does not review the trading protocols used by these platforms, which determine how orders interact and execute, and access to a platform’s trading services may not be the same for all users.”

The statement also urges investors to answer a bunch of questions before they trade digital assets on an online trading platform.