Updated 4:55 PM PST

SAN FRANCISCO — The Securities and Exchange Commission gave new hints Monday about how it views the application of securities laws to initial coin offerings (ICO), in an announcement that it had intervened to halt a $15 million ICO by a food review app startup called Munchee.

A 10-page cease-and-desist order against the San Francisco-based company underscored that the SEC believes that so-called “utility tokens” may still be securities, and that how a token sale is marketed can also affect whether the ICO is subject to regulation.

It's the latest move by the SEC's new “Cyber Unit,” which took its first enforcement action last week against an alleged scam ICO launched by a repeat fraudster in Canada, and an indication of just how closely regulators are monitoring this space.

Later Monday afternoon, SEC Chairman Jay Clayton also issued a statement on cryptocurrencies and ICOs that pulled together much of the guidance the commission has released about those issues to date, recognizing the potential benefits of these innovations while warning investors to be cautious. The statement comes amid a sharp runup in the price of Bitcoin.

Munchee launched its ICO at the end of October but pulled the plug early the next month and refunded purchasers of its “MUN” token. In the order, the SEC said that the company voluntarily stopped the offering after it was contacted by commission staff. (Publicly, Munchee had said on social media it halted the ICO to “ensure it is in compliance with applicable laws/regulations.” )

According to the SEC order, the company had advertised that purchasers of “MUN” tokens would eventually have the ability to participate in its new blockchain “ecosystem”—making in-app purchases, buying food from participating restaurants, and earning more tokens by adding reviews to its platform.

But the company also led prospective purchasers to believe that MUN tokens would rise in value and were a good investment, according to the order. That tilted in favor of the SEC's conclusion that the tokens were “securities” under what is known as the “Howey test,” after the landmark 1946 U.S. Supreme Court decision SEC v. W.J. Howey, the agency said.

“Munchee and its agents targeted the marketing of the MUN tokens offering to people with an interest in tokens or other digital assets that have in recent years created profits for early investors in ICOs,” the SEC wrote.

“This marketing did not use the Munchee app or otherwise specifically target current users of the Munchee app to promote how purchasing MUN tokens might let them qualify for higher tiers and bigger payments on future reviews. … Instead, Munchee and its agents promoted the MUN token offering in forums aimed at people interested in investing in Bitcoin and other digital assets,” it added.

Munchee, in its “white paper” explaining the concept behind the MUN tokens, claimed that it had done an analysis of its offering under the Howey test and concluded that its ICO did not implicate securities laws, according to the order. But the SEC said Munchee did not publish that analysis.

The company did not immediately respond to a request for comment Monday. A public link to its web page about its token offering was down.

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The MUN tokens, which were sold over the Ethereum blockchain, could not be used to buy anything at the time of sale, according to the cease-and-desist order. But it notes that even if MUN tokens “had a practical use at the time of the offering, it would not preclude the token from being a security.”

That appears to stand in contrast to legal analysis by the lawyers behind the “SAFT Project,” who rolled out a proposed framework for compliant digital token offerings in early October that argued once tokens become functional, they are generally not securities under the law. (SAFT is an acronym for Simple Agreement for Future Tokens, a riff on the name of a preceding legal instrument for investors called the “Simple Agreement for Future Equity.”)

At the same time, the SAFT white paper acknowledged that some sales of functional tokens may qualify as securities under the Howey test—for example, if a seller over-emphasizes the prospective profits to be reaped by early buyers.

Marco Santori, a Cooley partner and one of the lead authors of the SAFT paper, wrote on Twitter in reaction to the SEC's order that even if a token is functional when it is sold, “if you pitch it as a security, you're risking security status.”

“The SEC has made clear that just because you state that the token is a utility token—and that you reference that you may have done an analysis [under the Howey test]—that that isn't conclusive,” said Joshua Ashley Klayman, chair of the Wall Street Blockchain Alliance Legal Working Group and an attorney at Morrison & Foerster.

That message was underscored by Clayton's statement, which said that following the SEC's issuance of its first report on ICOs back in July, “certain market professionals have attempted to highlight utility characteristics of their proposed initial coin offerings in an effort to claim that their proposed tokens or coins are not securities.”

“Many of these assertions appear to elevate form over substance,” Clayton added. “Merely calling a token a 'utility' token or structuring it to provide some utility does not prevent the token from being a security.”

David Miller, a securities plaintiffs lawyer in Florida at Silver Miller, said that the SEC's view is “consistent with the practical reality of an ICO. People are investing in them as a security regardless of whether or not there is a utility component to the coin as well.”

Klayman also said the Munchee order illustrates that token sellers need to be careful about how they market their offering. “One really illuminating aspect of this order is it shows that the SEC is watching these ICOs in real time,” she added.