Prosper Marketplace Inc. has promoted itself as a lending service, but several recent legal filings show that regulators consider its main offering to be securities and, in most cases, unregistered securities.

This conclusion sheds light on the company's October decision to temporarily shut down its site and retool, a strategy that other players in the emerging peer-to-peer lending space have adopted, too.

Analysts said the increased scrutiny by regulators could reduce risk in the emerging peer lending market but, in the short term, could also prove a barrier to potential users.

The most recent development came Monday, when the North American Securities Administrators Association announced that Prosper had agreed to pay a fine of $1 million for offering unregistered securities.

"Prosper.com was selling notes and/or investment contracts that … weren't registered with the [Securities and Exchange Commission] at the federal level, or the states, and they weren't exempt from registration. So therefore, they were selling unregistered securities," Fred Joseph, NASAA's president and the Colorado securities commissioner, said in an interview Tuesday.

Federal regulators have come to the same conclusion. In a cease-and-desist order issued last week, the SEC said that, because Prosper's loans are often viewed by its users as investments, among other reasons, the loans are securities.

Prosper has also come under fire from some customers, who filed a class action against it in San Francisco County Superior Court last week, seeking damages related to loans made through Prosper that have gone bad. Their complaint stated: "Prosper is liable for offering and selling loan notes without an effective registration statement or valid exemption."

Under the NASAA deal, state regulators agreed to terminate an investigation into Prosper's activities begun several months ago.

Prosper also agreed to stop offering unregistered securities until it meets federal registration requirements, though this was largely a symbolic move since the company had stopped facilitating loans in October as part of a plan announced last year to create a secondary market for its loans.

Tiffany Fox, a Prosper spokeswoman, said, "We have agreed to settle the matter with NASAA members, and we are moving ahead with our registration" for a secondary market. This effort involves a quiet period, and Ms. Fox could not comment further.

Edward Woods, a senior analyst at the Celent unit of Marsh & McLennan Cos., said that such regulatory scrutiny may have been inevitable.

"It was too ideal to believe that people could lend and borrow among themselves, as in an eBay world, being 'regulated' by a community," he wrote in an e-mail. "To make the p-to-p market function easily for consumers, the p-to-p lenders had to use methods that made the products securities."

The attention from the SEC and state agencies "will be a significant blow to the market," he wrote, because it may make it harder for some to participate. "For example, I can lend $500 to my friend or colleague, but if I lend in an online p-to-p market, I have to be within suitability guidelines for trading in securities," he wrote.

Other p-to-p lenders are also moving to register their loans.

Lending Club Corp., a Prosper rival, emerged from a six-month quiet period in October after completing a similar registration process to create a secondary market.

Loanio Inc., a p-to-p site that went live in October, is in a quiet period, also while it registers the notes it issues to lenders, according to a notice on its Web site.

And Zopa Co. Ltd., a peer-to-peer lender in the United Kingdom, said in a blog post last week that it chose not to start a similar service in the United States because of the regulatory hurdles. "Individual promissory notes from borrowers could be seen as 'securities' needing registration," the company wrote. "That's the key reason why we didn't launch our U.K. model in the U.S. and watched with great interest when others did proceed with platforms that we felt carried regulatory risk."

(Zopa shuttered in October a U.S. operation that let credit unions issue loans and certificates of deposit under its brand.)

Bobbie Britting, a research director in the consumer lending practice at TowerGroup Inc., an independent research unit of MasterCard Inc., said that the SEC order shows that what Prosper was doing was "not direct loans … it's really an investment tool."

Peer-to-peer lending sites must become compliant so they can continue to offer loans, she said. "We still need some lending tools out there, so long as they're compliant and investors realize what they're signing up for; … having more tools available in a tight credit time is a good thing."