Legal
Securities Law
As per the US SEC’s Howey Test, an investment is considered a security when the following three criteria are met:
The investment of money
Common enterprise
Reasonable expectation of profits derived from efforts of others
Under the operating agreement structure, should the “title holder” retain 51%+ of the IRETs, therefore maintaining a controlling interest, all three criteria would be met as the buyers of the IRETs would expect profits derived from the effort of that individual/entity. If this is the case, those IRETs will only be available via Regulation S and Regulation D sales which would be limited to accredited and foreign investors.
Under the DAO LLC structure, as long as there is a limit to the maximum percentage of the property held which would prevent any one person from controlling the property, the IRETs will not be considered securities and will be freely available to any investor. Additional requirements will be set by REX Protocol to ensure this remains true, such as a mandatory vote for property management choice and DAO structures upon IPO through the marketplace.
Exchange Compliance
Users create an account on the REX tokenization platform and marketplace. Through the marketplace, all necessary KYC/AML procedures for token buyers will be conducted to ensure proper compliance with existing regulations. IRETs are listed on the marketplace where whitelisted users will be able to buy the tokens in a peer-to-peer fashion directly to their wallets.
At this point, the REX Protocol has completed its responsibilities in submitting all appropriate documentation, verifying the initial buyers and sellers of the IRETs, and disclosing all relevant information in regards to any risks and restrictions.
It is then the responsibility of the IRET buyers to abide by the regulations under which the IRETs were issued. The REX Protocol’s DEX will give a platform for IRET holders to maintain liquidity of their IRETs. The fact that the exchange is decentralized, means that it will not be based in any jurisdiction and will not hold custody of the user’s funds or assets. Additionally, control of the exchange will eventually be completely under the DAO, therefore minimizing legal liability from REX Protocol.
However, to be prepared for any future regulations, the DEX will also have several features to ensure that it is always legally compliant:
KYC/AML procedures and tools will be in place throughout the protocol
The DAO will be the decentralized governing body of the exchange
Sanctioned nations will be automatically geoblocked
There will be the option to geoblock any nation at any point
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