The cryptocurrency exchange Backpack plans to offer users equity in the company through a VIP program linked to staking its upcoming token. Co-founder Can Sun stated the arrangement is structured to avoid securities classification by attaching equity rights to the VIP program, not the token itself. The exchange is also preparing to register the tokens as securities as a contingency plan.
The cryptocurrency exchange Backpack will offer users equity through its upcoming token, but only as part of a future VIP program. Co-founder and Chief Compliance Officer Can Sun explained that the conversion right is not a property of the token, but of a VIP program requiring users to trade on the exchange and stake tokens long-term. “The token could be floating out there to anyone, but if you don’t use Backpack, if you don’t stake it for a year, then it has none of those rights,” he said.
This legal strategy unfolds as Backpack reportedly discusses raising $50 million at a $1 billion pre-money valuation, as stated in an Axios report. Sun confirmed interest from SPACs and bankers regarding a potential public offering, noting the token’s supply unlock would align with that timeline. The company has a backup plan to register the tokens as securities during an initial public offering if necessary. “The remedy for an unlicensed securities offering is registration,” Sun stated. “We’re just going to register an additional class of securities on our IPO. That cures it in the worst-case scenario.”
Sun, former general counsel at FTX, pointed to a precedent from Coinbase’s attempt to register a tokenized stock class in 2020. SEC documents show the SEC asked for legal analysis on whether such tokenized shares differed from traditional stock. Coinbase later dropped the plan after “further consideration.”
