Robinhood's initiative to make private equity more accessible through tokenized shares of startups like OpenAI has drawn attention for its potential legal implications. According to crypto lawyer John Montague, this approach could lead to unintended consequences, including lawsuits, regulatory issues, and potential losses for investors if the platform faces bankruptcy. The tokens, which represent fractional interests in a special purpose vehicle (SPV), have been met with skepticism by OpenAI, which views the offering as unauthorized and legally questionable. Montague acknowledges the ambition behind this product but warns of serious legal repercussions, including potential breaches of shareholder agreements and governance documents.

This concern is underscored by the recent actions of another AI startup, Figure AI, which sent cease-and-desist letters to brokers selling its shares without authorization. The trend of companies protecting themselves against unauthorized secondary market trading is expected to continue, with Montague noting that violations of a company's bylaws or shareholder agreements could lead to straightforward breaches of contract and entitlement to injunctive relief. Regulators have also begun to take notice, with SEC Commissioner Hester Peirce stating that tokenized equity offerings are indeed securities, subject to federal securities laws. Furthermore, the recent bankruptcy of Linqto, a similar service provider, raises questions about the fate of token holders in such scenarios.

Montague suggests that if Robinhood were to go bankrupt, the stock held in an SPV might not be specifically allocated to the token holders in bankruptcy court. Additionally, the structure of these tokens could potentially inflate a bubble in private markets, as they offer economic exposure without true ownership, detaching investors from voting rights and board oversight. Despite these challenges, Montague remains optimistic that Robinhood's bold steps could force clarity in regulatory pathways for tokenized equity offerings, ultimately benefiting the industry with increased liquidity in private stocks.