Launching a Native Token under the CLARITY Act

Oct 19

A native token can enable pricing, access, and incentive designs that equity or subscriptions cannot. It also creates real regulatory and market risk. This post outlines pragmatic defaults for U.S. technology firms considering a token under a CLARITY-style framework, where a token can begin life as an investment contract asset and later operate as a CFTC-regulated digital commodity once sufficiently decentralized. Stablecoins are out of scope.

Refer to the full whitepaper here.

Should you issue a token at all?

Say yes only if the token does work your business cannot do with dollars or existing crypto. Clear reasons include metering usage, conferring access, aligning contributor incentives, or enabling governance over shared infrastructure. Pass if utility is weak, control is concentrated, product is pre-traction, or compliance resources are thin.

Seven decisions, with defaults

Sale mechanism. Dutch auction or Liquidity Bootstrapping Pool. These widen distribution and cut first-minute spikes. Defer major CEX listings until product utility is live. Deviate to a fixed-price round only if you can defend the valuation and cap.
Value linkage to real usage: One primary function that forces or strongly encourages on-platform use. Users should answer “what is this token for” in one sentence. Avoid early revenue-sharing claims that invite pure speculation and securities risk.
Allocation: Team plus early investors at or below one-third of total supply; reserve the plurality for users, ecosystem incentives, and treasury. Publish a table with categories, percentages, and purposes. The aim is broad ownership that supports later decentralization tests.
Unlocks and vesting: Team 4-year vest with 1-year cliff; investors 12-24 months; ecosystem emissions paced to adoption. Publish an unlock calendar with max daily unlock as a percent of float and avoid cliffs that exceed 5 percent of circulating supply on any single date.
Liquidity and market hygiene: Seed a DEX pool sized to limit slippage on typical order sizes; engage reputable market makers only for spread-tightening, not volume theatrics. Time larger listings to product milestones, not hype cycles. Monitor for manipulation and adjust LP incentives as needed.
Tax treatment for recipients: Use restricted tokens with clear vesting; educate U.S. employees on 83(b) timing; keep community rewards predictable and reportable. Design incentives so recipients need not sell immediately to cover taxes.
Governance handoff: Publish a decentralization roadmap on day one. Move from foundation or multisig control to binding on-chain votes as security and community capacity mature. Track and disclose ownership dispersion and key-control milestones. Aim to eliminate any single group’s effective control.

A quantitative spine that reduces volatility

Publish a two-year circulating-supply glidepath at launch. Include month-by-month circulating supply, float as a percent of fully diluted supply, and the maximum single-day unlock. Treat these limits as policy, not marketing. If you cannot publish this calendar, do not launch.

What CLARITY implies for execution

Plan for two regulatory phases. During fundraising, treat the token as an investment contract asset and follow the applicable registration or exemption with robust disclosures. Post-launch, design toward commodity status by decentralizing ownership and control, open-sourcing code, and meeting exchange disclosure requirements. Your tokenomics should make decentralization a measurable outcome, not a slogan.

Common failure modes to avoid

Token first, product later. Leads to speculation loops and loss of credibility.
Insider-heavy cap tables. Harder to pass decentralization and community trust tests.
Hidden or lumpy unlocks. Markets price in supply shocks.
“Price talk” in communications. Increases legal risk and attracts the wrong audience.

Bottom line

A token can be a precise tool for distribution, incentives, and governance. Treat it like launching both a product and a public market at once: decide with numbers, publish your rules, and sequence regulatory milestones into the design. If you cannot meet these standards today, wait until you can.