Token vs. Equity: How Chain-Only Ownership Can Bypass SEC’s Regulatory Grasp

The Core Misconception

For years, we mistook token sales for equity fundraises. We assumed that if a token appreciated in value, it must be a security—because ‘profit’ implies ‘investment’. But that’s the wrong map. Tokens don’t represent claims on a company; they represent control over code.

On-Chain Ownership Is Real Property

Ethereum’s EIP-1559 doesn’t just burn gas—it redistributes sovereignty. When fees flow directly to validators, and holders can vote on upgrades without corporate mediation, you’re not selling stock—you’re granting property rights. Like owning land, not leasing it to a property manager.

The DAO Delusion

We thought DAOs would be decentralized governance engines. They’re not. Most are voting paralysis: 3% of holders participate; 97% passive. If your governance requires consensus on every parameter change, you don’t have autonomy—you have bureaucracy with blockchain aesthetics.

The Equity Trap

Equity isn’t evil—it’s appropriate for off-chain income: venture capital, SaaS contracts, ad revenue from centralized services. But when you try to feed those revenues into tokens? You create the very dependency SEC fears: investors relying on founders for access to value.

FTT Is Not a Token—It’s a Security in Disguise

FTT tokens? They’re not digital deeds—they’re IOUs wrapped in smart contracts. Their value dies when the issuer fails. That’s not decentralization—that’s fraud with an API.

The Path Forward

call it what it is: tokens as infrastructure rights; equity as business assets. Build DAOs as non-profits under DUNA-like legal personhood—not as corporations with wallets. Automate everything possible; delegate only what must be humanly decided—and never let the founder hold the keys.

We didn’t solve this by hoping regulators would catch up—we solved it by building systems so clear no judge could misunderstand them.