Introduction

As digital assets and blockchain technologies continue their transformation from emerging innovation to mainstream financial infrastructure, the intersection of cryptocurrency and traditional capital markets has become increasingly complex and strategically critical. Companies operating in the digital asset space face a unique constellation of regulatory, disclosure, and structural challenges when seeking to access public markets or institutional capital.

In this installment of our Crypto Law series, we sit down with Michael J. Blankenship, Managing Partner and Houston Co-Chair of the Capital Markets Practice at Winston & Strawn LLP, to explore the evolving landscape of capital markets transactions for cryptocurrency and blockchain companies. With extensive experience guiding both emerging and established companies through IPOs, SPAC transactions, and private capital raises, Blankenship provides invaluable insights into the strategic considerations that define success in this rapidly evolving sector.

From the complexities of token economics disclosure in public offerings to the nuanced structuring requirements of venture capital investments in blockchain startups, this conversation illuminates the practical realities facing companies at the nexus of digital innovation and traditional finance. As regulatory frameworks continue to develop and institutional adoption accelerates, understanding these capital markets dynamics has become essential for any organization operating in or investing in the digital asset ecosystem.

The following discussion addresses three critical areas where traditional capital markets practices intersect with digital asset considerations: public market strategies for crypto companies, SPAC transactions in the blockchain space, and the evolving landscape of venture capital and private equity investment in emerging digital asset ventures.

Q: As co-chair of Winston's Capital Markets Practice, what unique considerations should cryptocurrency and blockchain companies evaluate when planning IPOs or direct listings? How do you advise crypto companies on addressing regulatory uncertainty and disclosure requirements in their public offerings?

As co-chair of Winston's Capital Markets Practice, I work closely with cryptocurrency and blockchain companies that are navigating the path to the public markets. These companies must address several unique considerations in an IPO or direct listing. We advise clients to engage early with experienced securities counsel and, when appropriate, former regulators or technical experts to assess classification risk and develop a thoughtful, defensible position.

Disclosure is another critical area. Public market investors and regulators will expect a clear explanation of the company's token economics, network governance, and cybersecurity protocols. Companies must also consider how to present metrics that are not traditional GAAP indicators but are essential to understanding user growth, platform engagement, and token utility. We help clients craft a narrative that is both compelling and compliant, aligning business objectives with evolving SEC expectations.

Q: Given your extensive SPAC experience, how do special purpose acquisition companies provide an alternative path to public markets for crypto and blockchain companies? What specific due diligence and disclosure challenges arise when SPACs target digital asset businesses?

SPACs can offer an efficient and flexible route to the public markets for crypto and blockchain companies, particularly those with complex capitalization structures or early-stage business models that may not align with traditional IPO criteria. A SPAC transaction allows for more tailored deal terms, including the negotiation of earnouts and lockups, and provides more certainty on valuation and capital raised.

However, the diligence and disclosure process for digital asset targets presents heightened challenges. SPAC sponsors and their advisors must closely examine the legal status of any tokens, past or pending regulatory inquiries, and the robustness of financial and cybersecurity controls. Disclosures must be precise and transparent, particularly in areas such as revenue recognition, wallet security, token issuance history, and potential enforcement exposure. We guide clients through a rigorous diligence process and help structure the deal to mitigate regulatory and litigation risk post-closing.

Q: With your background in private equity and venture capital transactions, what legal and structural considerations should investors prioritize when funding blockchain startups? How are traditional VC and PE investment frameworks adapting to accommodate digital assets and token-based business models?

When advising on VC and PE investments in blockchain startups, we emphasize the importance of bespoke structuring to reflect the nuances of digital assets. Traditional investment documents often require modification to address token issuance, vesting mechanics, and rights associated with on-chain governance. Investors must understand not only the cap table but also the token cap table, including allocations, circulating supply, and smart contract controls.

Convertible instruments, SAFEs, and token warrants are being retooled to account for regulatory concerns and to align with investor economics. We also counsel investors on IP ownership, regulatory posture, and cross-border structuring, which are particularly relevant in blockchain. As institutional capital flows into the space, we are seeing a convergence between traditional fund terms and new token-based incentives, requiring clear contractual frameworks and robust compliance protocols to support long-term value creation.