Read the Fine Print: Token Compensation

Disclaimers located at the end of the report. For employees, consultants, and advisors at crypto startups, understanding token compensation is just as critical as understanding equity. Tokens may look deceptively simple—digital units recorded on a blockchain—but in practice, they come with their own thicket of legal, tax, and liquidity issues. Unlike equity, which has decades of case law and established market norms behind it, token compensation sits in a fast-evolving, often ambiguous regulatory environment. This article is designed to demystify how token packages are structured, when and how tokens are actually delivered, and the restrictions and risks that may come with them. Whether you’re reviewing a consulting agreement, joining as an early employee, or advising a project in exchange for tokens, it pays (literally) to know what you’re signing up for. The article is written with a focus on U.S. audiences, so for non-U.S. service providers, make sure you consult local tax and legal professionals for jurisdiction specific matters. Either way, we are lawyers but not YOUR lawyer, and this isn’t legal advice. Note, be sure to read the glossary on the bottom of the document for important definitions and concepts described here. I. What Are Tokens? A. Software Is Not Equity Tokens are units recorded on a blockchain that can enable access to or voting power of a protocol. Critically, tokens are (usually) not equity and usually do not resemble traditional securities. Beca