Businesses looking to launch token offerings or Initial Coin Offerings (ICOs) must take several steps to mitigate legal risks. 

First, they need to understand and comply with regulations in their target jurisdictions. This includes determining whether their token qualifies as a security under laws like the Howey Test in the U.S. or MiCA regulations in the EU. If the token is classified as a security, they must follow strict securities laws and consider exemptions such as Regulation D, Regulation S, or Regulation A+ in the U.S. 

To avoid compliance issues, they should carefully structure their tokens, distinguishing between utility tokens, security tokens, and governance tokens while avoiding misleading marketing that suggests investment returns. A key part of compliance is drafting clear and legally sound documents, including whitepapers, terms of service, and privacy policies. These should clearly state the token’s functionality, risks, and use cases, along with appropriate disclaimers. 

Additionally, businesses should implement strong Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures to prevent illicit activities. This includes verifying investor identities, complying with financial authority requirements, and using blockchain analytics tools to track transactions. 

It is also advisable to conduct due diligence by assessing securities law risks, tax implications, and cross-border legal issues with the help of legal and financial advisors. Independent audits of smart contracts and token mechanics can further help ensure compliance.

Companies should also consider alternative fundraising models such as Security Token Offerings (STOs), Initial Exchange Offerings (IEOs), or decentralized methods like Initial DEX Offerings (IDOs) and Decentralized Autonomous Organizations (DAOs), which may offer more regulatory clarity. 

Since cryptocurrency regulations are constantly evolving, businesses must stay updated on regulatory changes from agencies like the SEC (U.S.), ESMA (EU), and local regulators to adapt their approach accordingly. Having legal reserves set aside for potential disputes or regulatory actions is also a prudent strategy. 

By following these steps, businesses can reduce legal risks, build investor trust, and ensure a more compliant and sustainable token offering.