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Backpack has a new plan. The crypto exchange wants to turn tokens into equity. But it&#x27;s trying to dodge securities law first.
The exchange was co-founded by Can Sun. He&#x27;s the former FTX general counsel. Now he&#x27;s pitching a token-to-equity conversion program built around VIP status.
The company&#x27;s exploring a $50 million raise. Valuation: $1 billion. It&#x27;s also considering going public.
Here&#x27;s the trick. Just holding Backpack&#x27;s token won&#x27;t give you equity. Trading it won&#x27;t either.
You need to qualify as a VIP first. That means actively using the exchange. It means locking your tokens for about a year. Only then can you convert to equity.
Sun says this structure matters. Equity rights come from the VIP program. They don&#x27;t come from the token itself.
&quot;Equity rights are attributes of the off-chain VIP program, not of the token itself, so the token in open circulation doesn&#x27;t by itself represent a security,&quot; <a href="https://decrypt.co/359510/legal-strategy-behind-crypto-exchange-backpack-token-equity-program" target="_blank" rel="noopener">Sun explained.</a>
That distinction is crucial. U.S. securities law has been hammering tokens that function as investment contracts. Backpack&#x27;s trying to build separation.
The timing matters too. Backpack&#x27;s weighing a traditional IPO or SPAC merger. Token unlocks will align with that timeline.
Sun says the company&#x27;s gotten strong interest. Investment bankers want in. SPAC sponsors are circling. But Backpack&#x27;s coordinating everything carefully: corporate financing, token economics, regulatory positioning.
There&#x27;s a backup plan. Backpack&#x27;s ready to register the tokens as securities if needed. The plan connects to a future IPO.
They&#x27;d list an additional securities class at IPO. It would cover token-related rights. Sun says this would cure &quot;any worst-case regulatory finding that the initial token program was an unregistered securities sale.&quot;
U.S. securities law allows this. Companies can remedy earlier unregistered offerings through later registration.
The strategy sounds familiar. Coinbase proposed &quot;Class T&quot; tokenized stock back in 2020. The SEC scrutinized it. It never launched.
But Backpack&#x27;s approach is different. The VIP structure adds layers. It separates token holding from equity rights more than simple tokenized equity schemes did.
It might work. The model could become a template for other crypto companies. They want tokenized ownership without immediate securities regulations.
The emphasis is key. Active platform usage matters. Time-locked commitments matter. Passive token holding doesn&#x27;t get you equity.
It&#x27;s a potential path forward. Crypto firms are increasingly moving toward public markets. They&#x27;re pursuing formal regulatory compliance.
Regulators will decide. Their interpretation will determine everything. This becomes either a viable standard or another cautionary tale in crypto&#x27;s regulatory maze.

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Backpack's Token-to-Equity Model Seeks to Sidestep Securities Regulations

Backpack exchange proposes VIP-based token-to-equity conversion to avoid securities law. Co-founder Can Sun explains how the structure separates tokens from equity.