Crypto Exchange Backpack Plans to Offer Company Equity to Token Stakers

Backpack signaled on Monday that its yet-to-be-released token will allow people to earn equity in the exchange, potentially turning users into owners amid its U.S. expansion.

Those that stake the company’s token for at least a year will have the opportunity to exchange their holdings for Backpack equity at a fixed ratio, CEO Armani Ferrante said on X. The company has currently set aside 20% of its equity for the initiative, he added.

Ferrante said the move is aimed at improving on existing models, considering that many projects fall short of promises to support tokens that derive their value purely from their utility. There’s also nothing forcing most projects to decentralize over time, he added.

The company hasn’t said when the token will debut. However, it asked people to verify their personal information last week to determine their eligibility for claiming it.

Decrypt has reached out to Backpack for comment.

The announcement underscores how players like Backpack are experimenting amid a more favorable regulatory environment. Under the SEC’s previous leadership, companies in the cryptosphere often tiptoed around tokens associated with their businesses.

In several instances, the SEC argued that digital assets were offered as securities to investors partly because they derive their value from the efforts of others. A common retort was that those efforts were collective or programmatic, rather than managerial.

Backpack hasn’t conducted any sales in relation to the token, according to a blog post. The company plans to make 25% of the token’s total supply available upon debut, which will go toward those that participated in a points campaign,  or hold NFTs from Backpack’s Mad Lads. The exchange’s users earned points through trading activity and seasonal programs.

The company has tied later distributions to a potential public offering, which could eventually unlock 37.5% of the token’s supply within a corporate treasury. The remaining share is set to be doled out to users in relation to growth milestones like regulatory approvals.

The company’s services are accessible under regulatory frameworks in the Middle East and Europe. The exchange is currently available in more than a dozen U.S. states, with plans to expand that presence throughout the country, according to its website.

Ferrante recognized that the status quo has historically produced lackluster results, with token prices often falling after they are unlocked for investors and team members. If a team associated with a token is acquired, then that can raise uncomfortable questions, he added.

The exchange is in discussions to raise $50 million at a pre-money valuation of $1 billion, Axios reported earlier this month, citing sources familiar with the deal. That would make the company built by former employees at FTX and Alameda Research a “unicorn,” more than three years after the industry-shaking collapse of Sam Bankman-Fried’s crypto empire.

Ferrante appeared to reference his former employer on Monday while floating a hypothetical scenario under which a project could claim that it is truly decentralized. In 2022, bankruptcy filings showed that FTX and its sister trading firm owed around $600,000 to the Margaritaville Beach Resort in Nassau, Bahamas, where they were headquartered.

“Unless something is completely decentralized to the point where an immutable protocol can function with the team having retired in the Bahamas sipping pina coladas all day, then utility is just a promise,” he said, noting only a handful of tokens passed that test.