Terms&Conditions in ICOs: what should we pay attention to

Terms & conditions have always been an essential part of an initial coin offering (ICO), as well as of any other type of deal. A regular active user may hit «I agree» button multiple times a day without bothering to considering what surprises can possibly pop up. What, sometimes, can be a bit of an issue. We are conditioned to overlook the less-than-enthralling legal sections of websites. Even lawyers can feel unmotivated to read these provisions. We analyze the product or service on its alleged merits, prior experience and reviews of other users. We are also sometimes shielded by consumer protection laws.

But, since ICO tokens exist in the virtual realm and are nothing more than a set of rights, there is often no product to demonstrate, there can be no usage reviews, and, what’s more, there is little clarity on legislative protections. These points make it imperative to have a look at the corresponding terms and conditions.

In case if an ICO’s website doesn’t even have an attached T&Cs document, it’s a signal to hold your money tighter. Obviously, it’s not that fun reading T&Cs, but don’t be tempted by a one-page document: it must be lengthy.  

What else should you pay attention to?

 Counterparty

Like in any offline contract, an ICO's T&Cs should be clear about who the counterparties are. Who is the potential defendant in a litigation against the seller? Any legal counsel will be keen to know who they're dealing with if the project fails and litigation is justified. Essentially, the name of the contracting party should normally be in the first paragraph. If it's not, that's a red flag.

— Token definition

As most tokens promise something to happen in the future, investors are better off seeing that promise described in a legal document. Terms and conditions might simply refer you to the white paper for token description, which is fine, but terms and conditions should incorporate the white paper by reference, just so token buyers have an understanding of what they are buying.

— Terms of token sale

Terms and conditions should include provisions on pricing and timing of the token sale. This information is likely available on the ICO landing page, but again, it's prudent to go beyond the headline and check what is stated in a legally binding document.

Use of proceeds

The ICO is successful, now what? Terms and conditions should include an issuer's plan regarding how ICO proceeds will be used. If the application of proceeds is critical to the success of the investment, make sure the terms provide a binding description.

Other oddities

Something might look simply bizarre. For example, a provision saying that you obtain no rights by contributing to the project. Odd, eh? If there is something confusing, or that looks fishy, contact the issuer.

Yet, keep in mind that a perfect set of terms can be published on a scam ICO website. Finally, use your common sense and listen to what others are saying about the potential investment.

 

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