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What is an IDO?

By Ben Tabas, Intrica Research · Updated · US

Answer

An IDO, or initial DEX offering, is a token sale run on a decentralized exchange, where buyers send crypto to a smart contract and receive the new token. Techopedia's guide, updated April 17, 2024, says part of the money raised goes into a liquidity pool with new tokens, so the token can trade on the DEX right after the sale. In the US, a token sale can still be a securities offering.

How an IDO works

  1. The project picks a launchpad or a DEX and sets the token price, the amount for sale and who can take part.
  2. Buyers commit funds through a smart contract, often in ETH, according to Techopedia's April 17, 2024 guide.
  3. At the token generation event, buyers receive their tokens, according to Bitbond's guide, updated Sept. 4, 2025.
  4. Part of the raise and some new tokens go into a liquidity pool, which Techopedia says is often locked for a set period, and trading opens on the DEX.

IDO, ICO and IEO compared

  • ICO. The project sells tokens from its own website and negotiates exchange listings afterward (Techopedia, April 17, 2024).
  • IEO. A centralized exchange runs the sale and usually vets the project first.
  • IDO. The sale runs on a DEX with no central operator, and the token can trade as soon as the offering ends.

Rules and risks

The SEC said on July 25, 2017, that tokens can be securities whether they are issued on paper or on a blockchain.

On March 17, 2026, the SEC issued an interpretation that sorts crypto assets into five groups: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. It also explains how a non-security token can become part of an investment contract and how that contract can end.

On Aug. 18, 2026, the SEC proposed Regulation Crypto Assets, with one exemption for raises up to $5 million over four years and another for up to $75 million in each 12-month period. As of Oct. 28, 2026, it was a proposal and had not been adopted.

For buyers, Techopedia lists lighter vetting of projects, limited recourse after fraud and sharp price swings as the main risks.

Check whether ChatGPT and Google AI name your project when buyers research upcoming token launches.

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Sources

  1. What Is an Initial DEX Offering? IDO Definition and How it Works · Techopedia, April 17, 2024Supports: The IDO definition, the liquidity pool step and the comparison with ICOs and IEOs.
  2. Master Initial DEX Offerings: Your IDO Success Guide · Bitbond, Sept. 4, 2025Supports: Buyers receive tokens at the token generation event and can trade them.
  3. SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities · U.S. Securities and Exchange Commission, July 25, 2017Supports: Federal securities law can apply to tokens regardless of the technology used to issue them.
  4. SEC Clarifies the Application of Federal Securities Laws to Crypto Assets · U.S. Securities and Exchange Commission, March 17, 2026Supports: The five-group token taxonomy and how investment contracts can begin and end.
  5. SEC Proposes New Regulation Crypto Assets · U.S. Securities and Exchange Commission, Aug. 18, 2026Supports: The proposed $5 million and $75 million offering exemptions and their proposed status.

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General information, not legal advice.

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