"Trillion" Liquidity: Pre-IPO Equity Tokenization Opens New Exit Channels for PE/VC ( under )

04 Reflection and Outlook

4.1 Proceed with Caution: Core Bottlenecks of Equity Tokenization for Non-Public Companies

Although the tokenization of equity in unlisted companies demonstrates the potential to reshape the trillion-dollar market, its current development is still in the very early stages and faces four major core bottlenecks that need to be addressed.

1. Compliance Challenges: Dual Pressure from Government Regulation and Corporate Legal Affairs

Compliance issues are the primary and most complex bottleneck currently faced by the tokenization of equity in non-public companies. Unlike the tokenization of publicly listed stocks, the tokenization of non-public company shares must not only contend with securities law regulations from agencies like the SEC (Securities and Exchange Commission) but also faces legal risks from the companies themselves.

In particular, the SPV indirect holding model essentially attempts to circumvent the transfer restriction clauses in the underlying company's shareholder agreement for regulatory arbitrage. Recently, companies such as OpenAI and Stripe have issued public warnings (as shown in Figures 8 and 9), clearly stating that the equity held by the SPV behind such tokens violates the transfer agreement, and that the token holders will not be recognized as company shareholders. Furthermore, SPVs under this type of holding may face the risk of sanctions from the company.

Figure 12: OpenAI Warning Announcement on Tokenized Equity

Source: OpenAI Official Website

Figure 13: Stripe Warning Tokenized Equity Announcement

Source: Stripe official website

This risk has quickly evolved into reality. For example, Robinhood (which established a presence in Lithuania) launched the OpenAI token in June 2025 and subsequently received a public warning from OpenAI in July (as shown in Figure 10), followed by an investigation from Lithuanian regulators within the next week. This dual pressure from government regulation and corporate legal affairs constitutes the largest compliance uncertainty at present.

Figure 14: The X post that led to Robinhood's investigation

Source: OpenAI's official X account

However, it should be noted that there is a certain mitigating mechanism for the risks of such dual pressures.

• On one hand, the complex SPV legal structure built by the project party objectively takes advantage of the legal gray areas of the “equity transfer restrictions” clause. Although the target company publicly opposes it, there is still uncertainty as to whether it can successfully prevent such indirect transfers at the legal level—moreover, the time and economic costs of such legal actions are extremely high, and whether the target company has a strong motivation to enter the legal process remains an unknown.

On the other hand, the number of target companies that publicly express strong opposition is still small (such as OpenAI and Stripe), while more leading companies in the market (such as Musk's SpaceX) maintain a “no comment” strategy, which is interpreted by the market as tacit approval to some extent.

•More importantly, as crypto assets are increasingly accepted by mainstream finance, companies' attitudes towards tokenization are also dynamically evolving (for example, some companies have begun to adopt the DAT treasury strategy). Therefore, whether companies that currently oppose will seek cooperation in the future – this dramatic scene is indeed likely to occur. We judge that the core evolution direction in this field will depend on whether it can promote the integration of the “SPV indirect holding” model into the “native collaborative” model, with the key distinction being the penetration of crypto assets into traditional finance and technology companies.

2. Unclear price discovery mechanism: Lack of anchor for fair value

The pricing mechanism of tokenized equity also has significant flaws. Private company equity itself lacks continuous quotes from a public market, and its valuation anchoring (such as the most recent round of financing valuation) is low-frequency, lagging, and opaque. When this non-standard asset is tokenized and placed in a 7x24 hour market, the effectiveness of its price discovery mechanism is severely tested.

For investors, it is difficult to discern the rationality of the token price—whether it is anchored to lagging financing valuations or the speculative premium of market sentiment. This leads to the token price in the secondary market being more susceptible to fluctuations influenced by market sentiment, potentially resulting in significant deviations from the actual valuations in the primary market. When the underlying company (or its industry) faces extreme market volatility, this pricing mechanism, which lacks a solid value anchor, may be at risk of failure, and its potential risk transmission mechanisms remain unclear.

3. Liquidity Dilemma: Constraints of Market Depth and Scale

Although one of the core objectives of tokenization is to unlock liquidity, this goal is far from being achieved based on the current market performance. As shown earlier (Table 3), the market value of equity tokens that can currently circulate freely (excluding Securitize and Archax) is extremely low, mostly at the million-dollar level, and trading is mainly dispersed across DEXs (decentralized exchanges).

The current situation of small market capitalization combined with dispersed trading has led to a severe lack of liquidity depth. The market exhibits typical characteristics of a thin market: the bid-ask spreads are significantly widened, and any relatively large order can easily trigger severe price slippage. This fragile market structure makes token prices highly susceptible to shocks, resulting in significant volatility, which not only fails to effectively accommodate the large exit demands of traditional holders, but also greatly increases the transaction costs and risks for ordinary investors.

4. Poor listing connection: The terminal risk of SPV model

When a tokenized private company (such as OpenAI) eventually seeks an IPO, the existing SPV model will face significant connectivity challenges. As warned by companies like OpenAI, indirect ownership through SPVs may face legal obstacles during the IPO registration and conversion (to public stock) due to violations of “transfer restriction” clauses, which could hinder the shares held by the SPV controlled by the token issuer. If the identity of the SPV shareholders is not recognized, the tokens they hold will not be convertible into publicly tradable stocks, thus preventing them from selling on the open market to realize value exit, and they may also be excluded from future shareholder rights (such as dividends and bonus shares).

Currently, the only successful case of transitioning from a token of a non-public company to the stock of a public company is the Exodus case in collaboration with Securitize. However, even this compliant path is not without friction. During the nearly one-year transition period as Exodus delisted from the ATS platform and prepared for listing on the NYSE American, its tokenized equity trading almost completely stopped (only a compliant OTC path remained), and market liquidity once stagnated.

In addition, once the nature of the asset shifts from Pre-IPO equity to publicly traded stock, the complexity of compliance regulation, clearing and settlement, and transfer agency will significantly increase. Currently, the project parties that dominate SPV issuances (mostly Web3 teams) generally lack the professional licenses (such as Broker-Dealer, Transfer Agent, etc.) and operational experience required for post-listing compliant securities. This lack of operational capability adds new uncertainty to whether the assets can smoothly transition to the public market, and it also makes the value realization path of the SPV model in this critical exit stage still unclear.

Of course, in the face of this “endgame” dilemma, some project parties using the SPV model are actively building compliant qualifications for the tokenization of listed company stocks (such as considering acquiring securities brokers with compliant licenses). In addition, other project parties have proposed another exit path: that is, after the target company's IPO, the SPV (as the original shareholder) will immediately liquidate all the stocks it holds after the lock-up period expires, and then distribute the obtained fiat currency earnings to all token holders in the form of “dividends.” This path theoretically bypasses the compliance dilemma of “token to stock,” but its effectiveness, liquidation timing, and the credibility risk of the project parties have yet to be validated by the market and time.

4.2 Outlook: Three Major Trends of Equity Tokenization for Non-Public Companies

Despite facing numerous bottlenecks mentioned above, the tokenization of equity in private companies, as one of the most imaginative areas in the RWA track, has undeniable potential to reshape the traditional financial structure. We anticipate that after experiencing the current phase of “barbaric growth,” the market will evolve towards three key trends:

1. Evolution of Driving Forces: From “One-Way Arbitrage” to “Two-Way Integration”

The legal friction generated between the SPV model and the target companies (such as OpenAI) clearly reveals the friction and limitations faced when bypassing the issuer. Such operations directly touch on the core clauses regarding transfer restrictions in the target company's shareholder agreement, which not only triggers legal risks but also leads to public resistance from the target companies (such as Stripe and OpenAI).

However, the real breakthrough point driving the market is not solely from external regulatory pressure, but rather stems from the change in attitude of the target companies (non-listed companies) — shifting from a passive defensive stance to an active participatory role. As Web3 and crypto assets gradually enter the sights of Wall Street and traditional finance, technology companies' understanding of tokenization is rapidly maturing. They are beginning to reassess tokenization (such as STO) as an efficient, global capital strategy tool, which may have advantages over traditional IPOs, including:

(1) Lower issuance costs;

(2) Access a broader global pool of compliant capital;

(3) Achieve continuous price discovery and market capitalization management capabilities before the IPO.

Therefore, the future mainstream market path may not simply be a replacement of “native collaborative” with “SPV arbitrage,” but rather a fusion and transformation. The divergence in attitudes of the targeted companies (OpenAI's resistance and SpaceX's silence) and dynamic evolution (such as some companies beginning to adopt DAT treasury strategies) suggest that some companies currently opposing may dramatically seek proactive cooperation in the future—similar to the attitudes of countless business stars and political figures towards BTC.

We assess that the core evolution direction in this field in the future lies in whether it can promote the integration of the “SPV indirect holding type” model and the “native collaborative type” model - that is, whether the SPV model can gradually gain recognition from issuers through its flexibility and market intuition, and ultimately transform “regulatory arbitrage” into “issuer-led” compliance collaboration.

2. Infrastructure Evolution: From DEX Speculation to Native RWA Liquidity Deepening

The current liquidity dilemma of thin markets on DEX cannot be solved by retreating to traditional non-native trading systems like ATS. As a crypto trading asset, its future lies in building and deepening true “on-chain native liquidity.”

It is foreseeable that the focus of the next stage will be on building infrastructure, which specifically includes:

(1) The widespread deployment of multi-chain and L2 will bring assets to new frontiers like Solana and Base, which have massive users and capital.

(2) The emergence of dedicated RWA protocols, along with the construction of certain DEXs specifically providing order book, market making, and clearing services for security tokens (rather than memecoins);

(3) The project party establishes its own exchange or dedicated liquidity layer to manage the secondary market of its tokens in a more centralized and efficient manner (under compliance conditions), ensuring stable depth.

3. Evolution of the Subject: From Super Unicorns to Long-Tail Private Enterprises

Currently, the market is highly concentrated on star unicorn companies such as OpenAI and SpaceX. In the early stages, this was more for marketing purposes by the project parties to attract market attention. However, these leading companies often have ample funding and strict legal mechanisms, and their shareholder agreements pose the most severe legal challenges and resistance to the tokenization path of the SPV model. In contrast, a large number of mid to late-stage, non-leading unicorns—even some mature private enterprises—are more motivated for proactive cooperation.

Based on this, tokenizing another vast blue ocean may lie in providing services to thousands of mature private companies seeking exit paths beyond IPOs. As the Curzio Research case demonstrates, these long-tail value companies may not have immediate plans for an IPO, but their employees and early investors have an urgent demand for liquidity. When these companies actively seek to collaborate with native liquidity platforms, the market for tokenizing private company equity can truly shift from marketing-driven to pragmatic, ushering in a phase of scaled explosion and releasing its true market potential.

05 Conclusion

The tokenization of equity in unlisted companies aims to provide solutions for the “enclosed city” of the world's largest but most liquidity-constrained assets worth tens of trillions of dollars. This report concludes that through analyzing its market size, core pain points, mechanism advantages, mainstream models, and future challenges, the following conclusions can be drawn:

First, the market shows a huge contrast between “trillion potential” and “ten million reality”, still in its very early stages. On one hand, equity in non-listed companies, represented by unicorn enterprises, is a massive “walled city” worth tens of trillions of dollars—long-standing pain points include “difficult participation” (high thresholds prevent investors from entering) and “difficult exit” (long lock-up periods make it hard for PE/VC stakeholders to exit). On the other hand, in sharp contrast to its immense potential, the current market capitalization of freely circulating tokens (after excluding sandbox and ATS projects) is only at the tens of millions of dollars level. This indicates that the market is still in a very early nascent stage, with core functions such as price discovery and liquidity release far from being realized.

Secondly, the current model presents a path divergence of diversified exploration. The market has differentiated into three models: the native collaborative model (such as Securitize) represents the ideal compliance path, but has a long implementation cycle and few cases; the synthetic mirror model (such as Ventuals) is purely a Web3 derivative; while the SPV indirect holding model (such as PreStocks, Jarsy) is currently the main practical path. This model has pioneered exploration of the market through a flexible architecture, but there are also urgent issues that need to be improved in terms of communication with target companies and the final connection to IPO.

Thirdly, the core of future market evolution is “integration and transformation,” rather than simple “replacement.” The SPV model, as a pioneering force that validates market demand with its flexibility, is currently facing challenges in regulatory compliance, IPO terminal connections, and insufficient liquidity, which are driving its evolution towards a more mature model. The future core driving force will be the change in attitude of non-listed companies (issuers) — as Web3 becomes increasingly mainstream, real enterprises begin to actively view tokenization (STO) as a new and efficient tool for financing and market value management. This maturity in perception will drive the SPV model from one-way market exploration to compliant collaboration with “participation of the target company.”

Fourth, the blue ocean of long-tail private enterprises and the landing of native infrastructure are the keys to scaled explosion. The real blue ocean of tokenization is not limited to super unicorns, but rather to a broader range of long-tail mature private enterprises seeking exit paths (as demonstrated by the Curzio Research case). When these utility-driven issuers combine with tailored “native RWA liquidity infrastructure” (such as dedicated RWA protocols and L2 deployments), the equity tokenization market for non-listed companies will truly transition from the “marketing-driven” prologue to the “utility-driven” stage of scaled explosion.

In summary, the tokenization of equity in non-public companies is currently at a critical stage, transitioning from spontaneous market exploration to “ecological compliance and collaboration.” This track is undoubtedly one of the most worthy directions for long-term attention and exploration in the RWA and the entire crypto financial sector. What its final form will be requires time and the market to provide answers, but once this door is opened, it may herald the beginning of a whole new financial model.

Reference Source

[1] Kumar, S., Suresh, R., Kronfellner, B., Kaul, A., & Liu, D. (2022, September 12). Relevance of on-chain asset tokenization in “crypto winter”. Boston Consulting Group & ADDX.

[2] Citi Global Perspectives & Solutions. (2023, March 30). Money, Tokens, and Games: Blockchain’s Next Billion Users and Trillions in Value. Citigroup.

[3] Hurun Research Institute. (2025 July ). “Global Unicorn Index 2025” press release.

[4] CB Insights. (2025 July ). The Complete List of Unicorn Companies. CB Insights official database.

Core Contribution

Author: Lacie Zhang (X:@Laaaaacieee), Owen Chen (X:@xizhe_chan)

Reviewers: Colin Su, Grace Gui, NingNing

Design: Alita Li