SPV Structuring: Traditional vs. Tokenized Comparison
Special Purpose Vehicles (SPVs) are the backbone of deal structuring. But the way we create and manage them is evolving.
What Is an SPV?
An SPV (also called SPE—Special Purpose Entity) is a separate legal entity created for a single, specific investment. It pools capital from multiple investors while appearing as a single line on a target company's cap table or property deed. Common structures include Delaware/Wyoming LLCs or Limited Partnerships.
Required documents for any SPV:
- Operating Agreement (LLC) or Limited Partnership Agreement (LPA)
- Private Placement Memorandum (PPM) — disclosure of risks, terms, strategy
- Subscription Agreement — investor commitment and representations
- Form D filing (if using Reg D exemption)
The distinction between "traditional" and "tokenized" SPVs is primarily about cap table management and investor experience infrastructure, not the underlying legal structure—which remains subject to the same securities laws.
Traditional SPV Challenges
If you've structured deals before, you know the pain:
Setup Phase
- Legal costs: $15,000–$50,000+ per SPV for full document package (OA/LPA + PPM + Subscription Agreement + counsel review)
- Timeline: 4–8 weeks for standard setup (longer if complex terms or multiple jurisdictions)
- Jurisdiction selection: Manual comparison of Delaware, Wyoming, Cayman, etc.
- Bank account: 2–12+ weeks depending on bank, jurisdiction, and investor profile—sometimes remote, sometimes in-person verification required
Ongoing Management
- Cap table: Excel spreadsheets with version control challenges
- Distributions: Manual calculations, wire instructions, delays, payment failures
- Reporting: PDF quarterly updates via email
- Secondary transfers: Paper assignments, counsel involvement—costs vary ($1,000–$10,000+) depending on consents, ROFR waivers, amendments, and sanctions/AML review requirements
Investor Experience
- Onboarding: DocuSign chains, email back-and-forth, manual accreditation checks
- Visibility: Limited transparency between reporting periods
- Documents: Buried in email threads
- Support: Direct calls to sponsor at all hours
The Tokenized Alternative
"Tokenized" SPVs use blockchain-based registries and investor portals to streamline administration. The legal structure remains the same—tokens represent the same membership interests or LP units, subject to the same securities laws.
Setup Phase
- Legal costs: $5,000–$20,000 with templated documents — templates reduce preparation time and cost, but final budget depends on jurisdictions, investor types, offering documents (PPM/SA/Subscription), tax structuring, and compliance requirements; ranges are indicative only
- Timeline: 2–4 weeks with pre-built infrastructure (assumes documents are template-based and no unusual terms)
- Jurisdiction: Common jurisdictions available (Wyoming, Delaware, Cayman, etc.)—suitability depends on investor base, tax considerations, banking access, and token transfer regime
- Banking: Fiat payment rail integration requires bank/PSP onboarding and KYC—timelines vary significantly (weeks to months); crypto rails may launch faster but still operate within AML/KYC frameworks
Ongoing Management
- Cap table: Audit trail / append-only ledger with controlled holder registry—corporate record-keeping requirements still apply (note: Delaware DGCL permits maintaining stock ledger on DLT if statutory requirements are met)
- Distributions: Automated calculation and pro-rata allocation possible; actual settlement speed depends on payment rails (wire/SEPA/stablecoins), cut-off times, and verification checks
- Reporting: Live dashboard, automated statements, investor self-service
- Secondary transfers: Resales of security-like interests require compliance with resale restrictions and often broker-dealer/ATS infrastructure—on-chain transfer capability does not eliminate these requirements; programmatic eligibility checks can streamline compliant transfers
- Custody considerations: If a platform or intermediary holds or controls "crypto asset securities," broker-dealer custody rules and related requirements apply—automation alone does not eliminate regulatory obligations
Investor Experience
- Onboarding: Self-service portal with integrated KYC/AML verification
- Visibility: 24/7 portfolio dashboard
- Documents: Organized library, always accessible
- Support: Platform handles routine questions; reduces sponsor burden
Side-by-Side Comparison
| Factor | Traditional | Tokenized |
|---|---|---|
| Setup cost | $15,000–$50,000+ | $5,000–$20,000 (with templates; indicative) |
| Setup time | 4–8 weeks | 2–4 weeks |
| Cap table management | Manual (error-prone) | Enhanced auditability + transfer controls; quality depends on KYC/reconciliation processes |
| Distribution processing | Days to weeks | Minutes to days (rail-dependent) |
| Secondary transfer friction | High ($2K–$10K+; varies with consents/amendments) | Streamlined/guard-railed; may require approvals, consents, and licensed trading infrastructure |
| Investor onboarding | Hours per investor | Minutes (self-service) |
| Reporting overhead | High (manual) | Low (automated) |
| Legal structure | LLC/LP (securities law applies) | LLC/LP (securities law applies) |
Important: Both structures are subject to identical securities regulations. Tokenization is an operational layer, not a legal shortcut.
Secondary Transfers: Reality Check
One of the most misunderstood aspects of tokenized SPVs is secondary liquidity. Some clarifications:
What tokenization enables:
- Programmatic transfer restrictions (holding periods, jurisdiction checks, accreditation verification)
- Automated cap table updates when transfers occur
- Reduced administrative friction for compliant transfers
What tokenization does NOT change:
- Securities law restrictions on resale (Rule 144, Reg S distribution compliance periods, etc.)
- Need for buyer/seller to meet eligibility requirements
- Requirement for proper documentation of transfers
- Limited actual liquidity—most SPV interests trade infrequently regardless of technology
Secondary market infrastructure: Trading tokenized securities requires either (1) an SEC-registered ATS (Alternative Trading System), (2) broker-dealer involvement, or (3) direct peer-to-peer transfers that comply with applicable exemptions. Platforms like tZERO, Securitize Markets, and INX operate registered ATSs.
When Traditional Still Makes Sense
Tokenization isn't always the answer:
- One-off deals with few investors (under 10–15)—setup costs may not justify the infrastructure
- Institutional-only deals where LPs have existing processes and prefer traditional documentation
- Very short timelines where existing docs can be reused verbatim
- Regulatory uncertainty in certain jurisdictions where blockchain-based registries aren't clearly recognized
- Complex custom terms that require extensive legal customization regardless of platform
When to Choose Tokenized
Tokenization shines when:
- Multiple deals over time (amortize platform setup costs across deals)
- Diverse investor base including international investors with different payment preferences
- Crypto-native investors who want stablecoin payment options
- Scale ambitions beyond current deal flow—infrastructure investment pays off over time
- Operational efficiency is a priority—reducing manual cap table and distribution work
- Investor experience differentiation matters for your brand
Hybrid Approaches
Many sponsors start hybrid:
- Traditional formation with familiar jurisdiction and standard documents
- Tokenized cap table for management efficiency—record ownership on-chain while maintaining traditional legal documentation
- Optional crypto rails for investors who want them (alongside traditional wire)
- Gradual migration as comfort and investor demand increase
This approach lets you test the operational benefits without committing to a fully new workflow.
Cost Breakdown: What's Actually Involved
Traditional SPV (Full Custom)
| Component | Cost Range |
|---|---|
| Operating Agreement / LPA | $5,000–$15,000 |
| PPM drafting | $7,500–$20,000 |
| Subscription Agreement | $2,500–$7,500 |
| State formation + registered agent | $500–$2,000/year |
| Bank account setup | $0–$500 |
| Form D + blue sky filings | $1,000–$5,000 |
| Ongoing admin (per year) | $3,000–$10,000 |
Total first year: $20,000–$60,000+
Tokenized SPV (Platform-Based)
| Component | Cost Range |
|---|---|
| Platform setup + templated docs | $5,000–$15,000 |
| Legal review (recommended) | $2,000–$5,000 |
| State formation + registered agent | $500–$2,000/year |
| Platform fees (ongoing) | 0.5%–1.5% AUM or $200–$500/investor/year |
| Form D + blue sky filings | $1,000–$5,000 |
Total first year: $10,000–$30,000+
Note: Complex deals, non-standard terms, or multi-jurisdiction structures will increase costs in either model.
Making the Transition
If you're considering the switch:
Phase 1: Single Deal Pilot
- Run one straightforward deal through tokenized infrastructure
- Compare actual costs, timeline, and operational burden
- Gather investor feedback on portal experience
- Identify integration points with your existing workflows
Phase 2: Parallel Operations
- New deals on tokenized rails where appropriate
- Existing deals remain on traditional infrastructure
- Build internal familiarity with platform capabilities
- Develop best practices for your deal types
Phase 3: Selective Expansion
- Migrate existing SPVs if beneficial and operationally feasible
- Standardize on tokenized approach for deal types where it adds value
- Scale deal volume with confidence in infrastructure
Key Takeaways
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Same legal structure, different operational layer — Tokenization doesn't change securities law compliance; it streamlines administration.
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Cost savings are real but conditional — Templates reduce legal costs for standard deals; complex structures still require custom work.
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Secondary liquidity is oversold — Technology enables compliant transfers, but actual trading volume depends on market demand and regulatory infrastructure (ATS, broker-dealer involvement).
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Investor experience is the underrated benefit — Self-service portals, real-time dashboards, and automated distributions reduce sponsor burden and improve investor satisfaction.
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Start hybrid — Test the operational benefits on a single deal before committing to full migration.
Evaluating tokenization for your SPV structures? Get a custom assessment.