---
type: claim
domain: internet-finance
description: The legal argument for why futarchic capital vehicles differ from traditional securities -- emergent ownership, market-driven decisions, and raise-then-propose structure create layers of separation between the fundraise and the investment target
confidence: experimental
source: LivingIP Master Plan
created: 2026-02-28
related: ["governance-first-capital-second-sequencing-prevents-token-capture-of-protocol-development-because-early-capital-injection-selects-for-financialized-governance-participants", "futarchy-based fundraising creates regulatory separation because there are no beneficial owners and investment decisions emerge from market forces not centralized control", "futarchy enables trustless joint ownership by forcing dissenters to be bought out through pass markets", "Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong"]
reweave_edges: ["governance-first-capital-second-sequencing-prevents-token-capture-of-protocol-development-because-early-capital-injection-selects-for-financialized-governance-participants|related|2026-04-18"]
---

# futarchy-based fundraising creates regulatory separation because there are no beneficial owners and investment decisions emerge from market forces not centralized control

The regulatory argument for Living Capital vehicles rests on three structural differences from traditional securities offerings.

**No beneficial owners.** Since [[futarchy solves trustless joint ownership not just better decision-making]], ownership is distributed across token holders without any individual or entity controlling the capital pool. Unlike a traditional fund with a GP/LP structure where the general partner has fiduciary control, a futarchic fund has no manager making investment decisions. This matters because securities regulation typically focuses on identifying beneficial owners and their fiduciary obligations. When ownership is genuinely distributed and governance is emergent, the regulatory framework that assumes centralized control may not apply.

**Decisions are emergent from market forces.** Investment decisions are not made by a board, a fund manager, or a voting majority. They emerge from the conditional token mechanism: traders evaluate whether a proposed investment increases or decreases the value of the fund, and the market outcome determines the decision. Since [[futarchy is manipulation-resistant because attack attempts create profitable opportunities for arbitrageurs]], the market mechanism is self-correcting. Since [[speculative markets aggregate information through incentive and selection effects not wisdom of crowds]], the decisions are not centralized judgment calls -- they are aggregated information processed through skin-in-the-game markets.

**Living Agents add a layer of emergent behavior.** The Living Agent that serves as the fund's spokesperson and analytical engine has its own Living Constitution -- a document that articulates the fund's purpose, investment philosophy, and governance model. The agent's behavior is shaped by its community of contributors, not by a single entity's directives. This creates an additional layer of separation between any individual's intent and the fund's investment actions.

**The raise-then-propose structure.** The most important structural feature: capital is raised first into a general-purpose thematic pool. Only after the fundraise closes does a futarchic proposal go live for a specific investment (e.g., investing in Devoted Health at pre-agreed terms). If traders believe the investment is positive expected value, it passes. If not, it fails and someone can propose to liquidate and return funds pro-rata. The key regulatory point: we haven't offered the security. Whether the investment happens depends entirely on futarchic markets -- the fundraise and the investment decision are structurally separated.

Since [[decision markets make majority theft unprofitable through conditional token arbitrage]], investors have protection against the fund being used against their interests. Since [[futarchy enables trustless joint ownership by forcing dissenters to be bought out through pass markets]], the exit mechanism is built into the structure.

**What this is NOT.** This is not a definitive legal opinion. Regulatory clarity will evolve. The position is hedged: "we believe" this structure is fundamentally different. The precedent of MetaDAO raising $150M+ in commitments through futarchic proposals without triggering securities enforcement provides early evidence, but the first Living Capital vehicle investing in a real company (especially a US healthcare company) will test the framework at a different scale.

**The timing dependency.** Since [[anti-payvidor legislation targets all insurer-provider integration without distinguishing acquisition-based arbitrage from purpose-built care delivery]], the regulatory environment for Devoted specifically adds complexity. Public perception of crypto at the time of the raise matters. Companies need to understand that having a publicly trading proxy for their value is a double-edged sword.

---

### Additional Evidence (confirm)
*Source: [[2026-03-25-tg-shared-shayonsengupta-2033923393095881205-s-20]] | Added: 2026-03-25*

Sengupta argues credible decentralization is essential for p2p.me's survival: 'For a business whose core product is helping users onramp/offramp across several jurisdictions, the protocol's survival depends on no single entity being captured. As part of the MetaDAO launch, all IP, assets, and mint authority gradually transfers from the existing entity structure to the on-chain treasury with all ownership and governance directly transferred to tokenholders.' This demonstrates a real-world use case where futarchy governance provides regulatory protection through decentralization.


Relevant Notes:
- [[futarchy solves trustless joint ownership not just better decision-making]] -- the deeper innovation that makes this structure possible
- [[Living Capital vehicles pair Living Agent domain expertise with futarchy-governed investment to direct capital toward crucial innovations]] -- the vehicle this regulatory argument applies to
- [[legacy ICOs failed because team treasury control created extraction incentives that scaled with success]] -- what the raise-then-propose structure specifically avoids
- [[decision markets make majority theft unprofitable through conditional token arbitrage]] -- the investor protection mechanism
- [[Devoted Health is the optimal first Living Capital target because mission alignment inflection timing and founder openness create a beachhead that validates the entire model]] -- where this regulatory argument first applies

Topics:
- [[maps/internet finance and decision markets]]
- [[maps/LivingIP architecture]]

## Supporting Evidence

**Source:** CFTC 5-state litigation campaign April 2-28, 2026

5-state CFTC campaign (April 2-28, 2026) confirms enforcement scope is precisely bounded to centralized commercial platforms with sports/election event contracts. No state enforcement action across 7+ state lawsuits has named decentralized governance protocols or on-chain futarchy markets, confirming MetaDAO's structural irrelevance to enforcement targets.
