Exploring Web3 Tokenomics Legalities: Insights from Fenwick’s Experts
Navigating Web3 Legalities: Takeaway Thoughts from Fenwick’s Experts
As the Web3 space continues in growth, knowing how to work through its legal intricacies has become integral to founders and developers alike. The Fenwick team recently joined Denarii’s Tokenomics Accelerator founders to go over some of the most important legal considerations when it comes to launching decentralized projects and tokens. What follows is a high-level overview of the key points found in the conversation on governance, securities, and decentralization in this fast-changing Web3 landscape.
From Web2 to Web3: Governance and Control
For an overview of how governance works in Web3, legal experts Andy Albertson and Ben Helfman at Fenwick presented a comparison of what would be considered a “centralized” company, say Apple, versus a decentralized ecosystem — the core differentiator that Web3 offers up. In Web3, control is increasingly distributed to communities through Decentralized Autonomous Organizations (DAOs) where users make decisions on an equal footing.
Governance in Web3 is not a one-size-fits-all approach. There are those ecosystems that have been fully decentralized from the first day, while others follow the path of gradual decentralization, and there are various forms with foundations and community voting.
Navigating Uncertainty: Web3 Legal Complexities
The biggest takeaways from the session were to lean into the discomfort and the uncertainty in Web3. One thing that Andy tried to make crystal clear was that the legal clarity around this space is still very much in flux, and a project needs to learn how to play nicely within that gray zone. In fact, that very complexity presents tremendous opportunity for those who would pioneer within.
Web3 founders need to put the balance of innovation and compliance into perspective, with full understanding that regulation generally lags behind technology.
Progressive Decentralization and Token Design
Ben added to that with progressive decentralization — some projects try to start off more centralized and then give control back to the community as the ecosystem matures. This isn’t just an absolute necessity from a governance perspective, but also for mitigation of legal risk related to securities laws.
Although projects should decentralize as quickly as is possible, so as not to be recognized as securities, at the same time, their ecosystems should be secure and up until that happens.
Open vs. Closed Networks: What Does the Future Hold for the Internet?
The most impassioned part of the discussion had Andy describe the philosophical shift that Web3 creates. He weighed the open, decentralized counterpoint that Web3 takes on against the curated, controlled ecosystems that Web2 giants such as Disney and Apple have to offer. Indeed, he described Web3 as the New York City of the world — vibrant, diverse, full of possibilities — while Web2 is like Disneyland, some walled garden with experiences set by design.
Web3’s open architecture furthers innovation, competition, and consumer choice, placing users and creators at the forefront in determining how the future of the internet is defined.
Legal Challenges and Opportunities
The session concluded with the legal discussion of token launches. He emphasized to them the need to work within the securities laws, and good structuring of the tokenomics, so it doesn’t fall into the wrong hands. He said, “Compliance with securities laws is burdensome, yet it gives projects protection in the long run. It makes them more resilient to regulatory scrutiny.”
Legal compliance is a way to avoid penalties, but it’s also about creating a sustainable, long-term ecosystem that can withstand changes in regulations.
Conclusion: Web3 is More Than Just Tech; It’s a Movement
The discussion with the Fenwick team made it crystal clear that Web3 is far from being just a technological shift, but more so a philosophical one — dealing with decentralization, openness, and community empowerment. While founders build in Web3, they have to override so much of the legal and governance turmoil that needs them to adapt, accept uncertainty, and be committed enough to the ethos of decentralization.
Consequently, handling the legal landscape of Web3 is a continuously changing and complex process, while decentralization, innovation, and community-driven ecosystems are rewards that make the effort all worth it.
