Legal Risk Advisory on Token Reward Program

Cha & Kwon Law Offices recently advised a global blockchain company preparing an innovative token reward program. The project aimed to attract worldwide users with differentiated incentives, but it also faced the challenge of complying with diverse financial regulations across multiple jurisdictions.

The program’s core feature was a reward structure that increased incentives when the token price declined. While attractive, this structure raised potential legal risks—such as being classified as unregistered securities issuance or a promise of principal protection under certain national laws.

Partner Ohoon Kwon conducted a precise legal review of the business model, identifying these core risks and proposing two clear alternatives:

Fixed-reward model – ensuring higher legal certainty.
Conditional-reward model – offering flexibility while maintaining defensible legal arguments.

Tailored legal documents, including terms of service and disclaimers, were prepared to meet disclosure obligations. With Mr. Kwon’s guidance, the client adopted a legally stable model, reduced regulatory risks, and strengthened the project’s credibility. Cha & Kwon Law Offices is providing a solid foundation to support the client’s sustainable growth.