Why the Legal Structure Comes First
Token offerings representing asset ownership interests are securities under US federal law. The consequences of issuing an unregistered security are not civil regulatory violations — they are criminal prosecution of the issuers, mandatory rescission to investors, and disgorgement of all proceeds. Getting the legal structure wrong is not a recoverable mistake.
The SPV Architecture
A Special Purpose Vehicle (SPV) is a legally distinct entity created specifically to hold the asset being tokenized. For real estate: a Delaware LLC or Series LLC. Delaware LLC SPV structure: Operating Company (asset manager) → Delaware LLC (SPV) → holds property or asset → issues token-represented membership interests to investors. Series LLC (for multi-asset platforms): A Master LLC with a series for each property — each series has separate liability from the others.
SEC Exemption Selection
Regulation D (Rule 506(b) and 506(c))
506(b): No general solicitation, up to 35 non-accredited investors, unlimited accredited. 506(c): General solicitation permitted, accredited investors only, must verify accreditation. File Form D within 15 days.
Regulation A+ (Mini-IPO)
Allows public offerings to all US investors up to $75M per 12-month period. Requires SEC review and qualification. Ongoing reporting requirements.
Regulation CF (Crowdfunding)
Up to $5M from all investors per 12 months through a registered crowdfunding portal. Lower individual investment limits for non-accredited investors.
Transfer Restriction Implementation
Smart contract whitelist: Token transfers only permitted between addresses verified by the issuer. ERC-1400 standard: A security token standard that encodes transfer restrictions, forced transfers, and issuance controls.
Offering Documentation Requirements
- Private Placement Memorandum (PPM): Contains issuer description, offering terms, use of proceeds, risk factors, financial statements, management biographies, subscription agreement terms, and transfer restriction description. Cost: $15,000–$40,000.
- Subscription Agreement: The contract between the issuer and each investor. Contains representation of accredited investor status, investment amount, payment terms, risk acknowledgment.
- Token Purchase Agreement: Governs the terms of the token issuance specifically — technical description of the token, wallet delivery terms, and acknowledgment of the token's regulatory classification.
