200 Investigations Underway as Part of 'Cryptosweep': NASAA

"State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities," Borg said.

The vast majority of the enforcement activity involves the offer or sale of unregistered securities, according to NASAA.

Noting that not every ICO or cryptocurrency-related investment is a fraud, "it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum; state and provincial laws or regulations may apply, especially securities laws," Borg said.

He urged sponsors of such products to "seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors."

Investors should also "be cautious when dealing with promoters who claim their ICO offering is exempt from securities registration but do not ask about your income, net worth or level of investing sophistication," Borg added. "Do your homework and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money — afterwards may be too late."

— Check out SEC Quashes More Bitcoin ETF Pitches in Another Blow to Crypto on ThinkAdvisor.