Every Blockchain Solution Must Have A Fitting Legal Structure
I believe the structure I describe in this post is one plausible way to avoid the uncertain "damages valuation" issue currently playing out in the Tezos Dispute.
The structure I discuss in my prior post is one of many possible #ICO plans that may or may not be feasible; in any case, it imagines an appraisal taking place -- of both the blockchain solution (that is, the technology itself) AND the tokens separately -- prior to a donation and subsequent auction.
The appraisals are vital in the structure, primarily for the following reasons:
- In this structure, the non-profit and the for-profit actually have to do this for their tax filings
- It potentially preserves value for the issuer-individuals (e.g., founders, developers) by potentially reducing their taxes
- It mitigates future damages claimed by initial investors
- It is a liability checkpoint
The final two reasons speak to preempting future litigation ("exposure"). Exposure must be a paramount concern for companies (and their legal counsel) who can’t help but take advantage of the ravishing liquidity (and legal uncertainty) that ICOs offer. Thoughtful considerations about corporate structure and financial exposure are ESSENTIAL as litigation in this area is surely in the “example-making” stage. (See my Research Guide, which provides a digest [currently pending updates] of civil and criminal enforcement actions (and statutes, regulatory guidance, etc.)
Companies should consider exposure in terms of (1) the location, and (2) the type. The location has to do with where a company is subject to suit, and the type considers which laws the company will be subject to. These jurisdictional decisions need to be made after thoughtful consideration at the outset of a company’s formation (or, at least a company formed solely for the purpose of conducting an ICO or creating a blockchain solution) because these decisions will be essential to the company’s sustained success and unimpeded long-term pursuits.
I will tackle some of the jurisdictional issues at play in my next post.