Initial exchange offering (IEO)

What the venue actually takes on

Banxa's account of how the format arrived is the short version: after the ICO market collapsed, exchanges repackaged public sales as IEOs, where the exchange did the listing and some of the vetting.¹ Three functions move across at once. The venue runs the sale page, receives and holds the money, and screens the project before agreeing to any of it.

Allocation is the piece founders underestimate. Because subscribers are existing account holders, the exchange can ration by lottery, by tier, or by requiring a holding of its own asset. Binance positions Launchpad as the structured fundraising venue, similar in concept to an initial exchange offering, and runs Launchpool as a separate mechanic entirely, where users lock BNB and other tokens to receive new tokens at no extra cost.²³ Those are different products and the terms differ accordingly, so read which one you are actually being offered.

For the buyer it is the mirror image of a self custody sale. Funds sit with the exchange, identity checks were done at account opening, and a failed transaction is a support ticket rather than a lost private key.

Who is carrying what

Split the risks by who holds them, because the marketing rarely does. The project carries fee and allocation cost, a buyer set defined by one venue's user base, and a listing whose future depends on that venue's commercial priorities. Ask for the fee schedule, the token allocation to the exchange, and any delisting terms in writing.

The exchange carries reputational exposure and the vetting work, which is exactly why it charges. That vetting is commercial diligence on a business it is about to put in front of its users. It is not a regulatory review, it is not disclosed to buyers in the way a prospectus would be, and it does not transfer to the project any finding it makes.

The buyer carries token risk and platform risk together. Custody sits with the venue during the sale and often afterwards, so an exchange failure and a project failure are two separate ways to lose the same position. Our initial DEX offering entry covers the opposite trade, where self custody removes the platform risk and makes every buyer error final.

Against an ICO and against an IDO

One variable separates all three: who stands between the project and the buyer. In an ICO nobody does. The project published a whitepaper and an address, buyers sent funds directly, and no broker or prospectus sat in between.¹ Every obligation that an intermediary would normally absorb stayed with the issuer, usually unnoticed.

In an IDO the intermediary is a smart contract and a pool. Settlement is onchain from self custody wallets, price discovery starts in the same block the pool is funded, and no party can pause anything. In an IEO the intermediary is a company with a compliance department, an order book, market makers under quoting obligations, and the operational ability to delay a listing.

So the choice is about which failure modes you want. An IEO trades launch control and margin for a market that opens with professional depth behind it. An IDO trades that depth for reach that depends on no listing committee. Neither creates demand that was not there.

A listing is not a classification

This is the most expensive misreading in the category. Whether a particular sale is an offer of securities turns on the facts of that offering and the law of each jurisdiction it reaches. A venue agreeing to host it changes neither, and no exchange offers an opinion that it does.

In our view the risk runs the other way. An exchange sale concentrates a documented, timestamped, fully identified record of every buyer, every payment and every piece of marketing in one place, which is helpful if the analysis holds and unhelpful if it does not. That analysis belongs to your counsel. This page is design reference, not legal advice, and nothing here recommends buying, selling or holding any token.

What to settle before the term sheet

Five things, in writing. The total cost, counting fees and any token allocation to the venue. The size and price of the sale tranche. Whether that tranche vests or lands unlocked, since an unlocked sale tranche goes straight into effective sellable float. The market making arrangement and who pays for it. And what happens to the listing if the exchange changes its mind.

Then the question the launchpad conversation will not raise. A venue can put your token in front of its users once. Whether they stay depends on whether the product underneath produces something worth paying for, and no listing has ever fixed that.