Terms and conditions, the shy cousin of the white paper, are an integral part of the composition of an initial coin offering.
With the help of the ICO hype, “white paper” has become an economy term, courageously presented at the top of the ICO landing page. However, the terms and conditions are characteristically a reference at the bottom of the ICO’s website, and investors often confirm their existence by clicking “I agree,” without pausing to consider what insights they bring to the project.
Substantially, the terms and conditions are the formal agreement between an investor and the ICO publisher. Correct terms and conditions should connect an ICO’s tokens with the deal presented. Unfortunately, this is not always the case.
Terms and conditions can include anxious stores. For instance, in the Tezos project’s Terms and Explanatory Notes (the analogue of T&Cs for token purchase goals) referred to token purchases as a “non-refundable donation.”
The way we commonly experience the internet and use services has conditioned many of us to ignore the less-than-enthralling legal divisions of websites. Even attorneys can feel unmotivated to read these provisions.
More often, this method is not a problem. We analyze the good or service on its supposed dignities, former experience and comments of other users. We are also sometimes protected by consumer protection laws.
Nevertheless, ICO tokens exist in the virtual sphere and are typically nothing more than a complex of rights. There are often no goods to show, there can be no usage reviews, and, still, there is little clarity on legislative protections. In this context, if investing in an ICO, it is imperative to review the appropriate terms and conditions.
If an ICO’s website doesn’t have terms and conditions, that is a red flag by itself. If it is a one-page document or the document doesn’t describe the factual token sale, there should be yet another pause for anxiety. Terms and conditions are typically extended documents, and can be significantly less fun to read than a white paper.
If those grounds are covered, here’s what ICO investors should be on the vigilance for:
The name of the contracting party should actually be in the first paragraph. If it’s not, that’s a red flag.
Similar with any offline contract, an ICO’s T&Cs should be clear about who the counterparties are. The buying party is clear, but who is the potential respondent in a litigation against the seller? Any legal lawyer will be keen to know who they’re dealing with if the project fails and litigation is justified.
More often a customer should expect to see a legal entity on the side of the ICO issuer, which at the very least shows that the issuer is following definite regulations, has likely considered structures for running the ICO, and may have involved attorneys.
Terms and conditions might refer you to the white paper for token description. This step is fine. In these cases, terms and conditions should incorporate the white paper by reference, so that token buyers have an insight of what they are buying.
Alternatively, the rights and commitment connected with the tokens can be spelled out in the terms and conditions. As most tokens are subatantially promises of something to occur in the future, investors are better off seeing that promise described in a legal document.
Terms of token sale
Terms and conditions should include regulations on pricing and timing of the token sale. This data is likely available on the ICO landing page, but again, it’s wisely to go beyond the headline and check what is stated in a legally binding document.
Use of incomes
The ICO is successful, now what? Terms and conditions should include an issuer’s plan regarding how ICO earnings will be used. If the use of profit is decisive to the success of the investment, make sure the terms supply a obligatory description.
In the end, look for anything that just looks weird.
For instance, a provision saying that you receive no rights by contributing to the project is something one should avoid. If there is something confusing, or that looks suspicious, contact the issuer.
Another important thing is that terms and conditions will not unilaterally shield your investment. Keep in mind that a perfect complex of terms can be published on a fraud ICO website.
Trust your intuition, and always check what others are saying about the potential investment.