Incentivize early contributors, devs, and influencers
(for completing tasks, sharing content, playing games, contributing code, and more)
Help minimize pre-liquidity risk
(SEC,409A, & ERISA before a token has launched)
RTU based paper / PDF contracts for future tokens
(based on RSUs, a familiar framework for regulators worldwide)
What to consider before giving workers RTUs
Securities Law
The SEC generally considers tokens as securities subject to regulation. They have observed that some tokens are securities or may become a security at a future date and are therefore considered taxable events.
RTUs are largely patterned after RSUs which are designed with compliance to securities regulation in mind.
Federal & State taxes
Token compensation is subject to federal and state taxes. The timing of when the tokens are paid out to workers can result in adverse tax consequences.
Since RTUs are a promise to give tokens upon a future milestone, the taxable event can be deferred until a later date.
409a & ERISA
A properly-crafted RTU plan can avoid Section 409A and ERISA regulatory complications by ensuring that its income deferral provisions fall within its exceptions (e.g., short-term deferral exception to Section 409A).
Since RTUs represent tokens that will be granted in the future there is less need for token valuation estimates.
Compliance with Labor Laws
The legality of compensating employees purely with tokens is unclear. When tokens are used as a major component of a worker's compensation, the token volatility may result in a violation of a state's minimum wage laws.
An RTU plan should make it clear that the token compensation is a bonus and not a wage.
Dig deeper into some important things to consider when issuing a token in this blog post.
