Licensing a TLD instead of selling it

Some holders do not want to sell. The TLD is part of a longer plan, or it carries a family or a company name, or the holder simply believes the namespace will matter more later than it does now. Then someone arrives with a serious project and asks for the TLD. A refusal ends the conversation. A sale ends the holding. A license is the third answer: the other party gets to use the namespace for an agreed purpose and period, and you remain the holder.

The idea is familiar from trademarks and software, where the owner keeps title and grants a right of use. On an onchain TLD it works differently in one decisive respect. The right of use cannot be handed over as a technical permission, because the registry recognizes one party only: the wallet that holds the token. Everything the licensee wants done under the TLD has to be done by you.

This article is written for a holder weighing that arrangement. It explains what a license of a TLD actually is, compares it with a sale, sets out how names get issued under it, goes through what the contract has to settle, and states the risks for each side without softening them. Contract law, and the way a license is characterized, vary by country: treat what follows as information and let your own counsel decide.

Why a license of a TLD is a promise to act, not a grant of access

On Freename, a TLD exists as a token recorded onchain and kept in a wallet. Whoever controls that wallet is the holder, and issuing names under the TLD is a power that belongs to the holder alone. The registry offers no way of appointing a manager, an administrator or a second account with limited rights. There is one seat.

That has a direct consequence for licensing. In a trademark license, the licensee prints the mark on its own goods. In a software license, the licensee runs the program on its own machines. Under a TLD license, the licensee cannot create name.yoursector by itself. It asks, and you issue. The license is therefore less a transfer of a capability than a set of promises: you promise to issue the names the licensee asks for, within agreed limits and within an agreed time, and to refrain from doing certain things with the TLD yourself.

The same logic applies to tooling. Freename publishes a Model Context Protocol server through which an AI assistant can manage names and records in a conversation, and it is tempting to see this as a way to let a licensee operate the namespace. It is not. An assistant connected that way acts as the holder, with the holder’s full powers, so connecting a licensee’s assistant to your account is the same as giving the licensee your seat. The page on managing a TLD from an AI assistant describes what the connection does; in a license it is a tool for you, to make your own work of issuing faster.

What the licensee receives when the token stays with the holder

Write down, before any negotiation, what the other party will actually have. There are usually four things.

A right to have names issued. The licensee may instruct you to issue names under the TLD, to wallets it designates, within a scope the contract defines. The scope can be the whole namespace or a part of it: a defined set of names, names for a category of users, names for one territory or one product.

A degree of exclusivity. An exclusive license means you will issue names under the TLD for nobody else, including yourself, during the term. A sole license lets you keep issuing for your own account but for no other licensee. A non-exclusive license leaves you free to license others. The contract should say in plain sentences who may ask for names and who may not.

Control of the commercial policy. The holder sets the price of names issued under a TLD and may price names differently from one another. Since those settings are yours to make, a license that lets the licensee run a namespace commercially must oblige you to set prices as the licensee instructs, and to change them when it asks.

A share of what registrations bring in. Freename operates a royalty program under which the holder of a TLD receives a share of each registration fee paid for names under it, subject to the registry’s terms and activation conditions. That money arrives with the holder, not the licensee. If the licensee is the one generating registrations, the contract decides how much of it you pass on, and how often.

What the licensee does not receive is just as important. It does not hold the token. It has no standing with the registry. Its position cannot be read on the public record, which shows your wallet as holder exactly as before. Its whole position is a contract with you, enforceable against you and, as a rule, against nobody else.

Sale and license compared from the holder’s seat

A sale asks what the TLD is worth to this buyer once and for all. A license asks what a period of use is worth, and leaves final value open.

Two rows deserve a comment. The first is your work afterward. Holders often picture a license as passive income on an asset they keep. With a TLD it is the opposite of passive, because each name passes through your hands. A license with an active licensee is an operating commitment, and the fee should be thought of partly as payment for that commitment.

The second is the counterparty’s security. A buyer who holds the token depends on nobody. A licensee depends on your solvency, your key management, your availability and your good faith for as long as the license runs. A well-advised licensee will price that dependence and ask for protections that reduce your freedom, until at some point the license has most of the constraints of a sale without the price of one.

When a holder should license, and when a sale is the honest answer

A license suits a project whose life is shorter than your plan for the TLD: a campaign, a pilot, a program that will run for a defined period and then stop. It suits a counterparty that wants a limited number of names rather than a namespace to operate, since the work on your side is then bounded. It suits a holder and a prospective buyer who disagree about value, where a period of real use would give both of them evidence that argument cannot. And it suits a TLD you would never sell for reasons that have nothing to do with price.

It suits other situations badly.

If the counterparty intends to build a public namespace, with many registrants and its own name on the door, it is building its business on an asset it does not control. Good counsel on its side will say so. If the TLD matches the counterparty’s own trademark, the organization will usually expect to hold its name, not rent it, and a holder who proposes a rental of a name that corresponds to someone else’s mark invites a conversation about rights that a sale would never have opened. If you are a private individual with no succession arrangement for your wallet, you are asking a company to depend on one person’s continued access to a key.

Where those conditions hold, the straightforward course is a sale or a clear refusal. To see what a sale would involve before ruling it out, read how a sell-side mandate is run.

A license with an option to buy sits between the two. The licensee uses the TLD for a period and may then acquire it at a price or by a method fixed at the outset. For the holder this is a deferred sale with a rental period in front, and it should be negotiated as one: the option terms matter more than the license fee.

How a name gets issued when the licensee cannot issue it

The center of the relationship is the path an instruction takes from the licensee to the registry. The procedure below is a model to adapt.

1. Instruction through the agreed channelThe licensee sends the request in the form and through the channel the contract names, from a person authorized to give instructions. It states the exact string, the wallet that is to receive the name, and the price setting if one applies.
2. Check against the scopeYou verify that the name falls inside the licensed scope and outside the reserved and excluded names. This is a check of the contract, not a judgment on the licensee's business.
3. Confirmation of the receiving walletYou confirm the destination address back to the licensee through a second channel before acting. A name issued to a wrong address may not be recoverable.
4. Issue within the service timeYou issue the name, or set the price that lets the designated party register it, within the time the contract allows.
5. Record and reportYou log the instruction, the action and the transaction reference, and send the reference to the licensee, who can read the result on the public record.
6. Refusal with reasonsIf the instruction is outside the scope or falls under a ground for refusal named in the contract, you decline in writing within the same service time and say which clause applies.

Three design choices sit behind this sequence.

The first is whether you issue each name yourself or set a price and let registrants register through the registry’s own interface. For a licensee that hands out a handful of names to known parties, direct issue on instruction is simple. For a licensee that wants the public to register names, you will more likely configure prices as instructed and let registrations happen, in which case the license is mostly about pricing, reserved names and the split of registration income.

The second is the service time. Be honest about what you can sustain over the full term, and provide for batches: a list of names agreed and issued together before a launch is far easier to deliver than a stream of single requests.

The third is the ground for refusal. You remain the holder, and what is issued under the TLD remains attached to your wallet in the public record. Most holders keep a right to refuse names that are unlawful, that imitate a third party, or that would expose the holder to a claim. The licensee will want that right narrow and its use explained.

What the license contract has to settle, clause by clause

The table gives the clauses that carry the weight. Your counsel will add the ordinary ones.

Scope and reserved names

Define the scope by what the licensee may ask for, and then state what is held back: names you keep for yourself, names already issued to others, and categories nobody will receive. If names exist under the TLD before the license starts, attach the list taken from the public record, so that the licensee knows what it is licensing around.

Fees, registration income and the cost of the program

Rent can be fixed, tied to registrations, or both. If it is tied to registrations, the royalty program is the source, and the contract has to face three facts about it. The share the holder receives depends on the registry’s terms in force and on activation conditions. Taking part carries an annual cost set by the registry, unless the TLD was registered under earlier terms that include the program for life. And the share is earned on registrations. Decide who pays the annual cost, what happens to the split if the registry changes its terms, and state plainly that neither party guarantees any level of registrations.

The promise not to transfer

This is the clause a licensee’s counsel will read first. Nothing in the registry prevents you from moving the token to another wallet or selling the TLD during the term. The contract can forbid it, or allow it only if the acquirer takes over the license in writing. Either way the protection is contractual. A buyer who acquires the token without notice of the license holds the TLD, and the licensee is left with a claim against you.

Custody and confidentiality

A licensee is entitled to ask how the key is kept and what happens if you cannot act. Never disclose the key or a recovery phrase to anyone: a contractual description of the arrangement, with a duty to keep it in place, is the usual middle ground. Settle also what may be said about the project and whether the holder is named. A mutual NDA covers the talks; the license needs its own clause.

The risks a holder takes on as licensor

You become an operator. Every instruction is a task with a deadline. Miss enough of them and you are in breach of a contract with a party that has built on your promise.

You carry what is issued. Names issued on the licensee’s instructions sit under a TLD that the public record ties to your wallet. If a name under it infringes a right or is used to mislead, the complaint may reach you first. An indemnity from the licensee helps only as far as the licensee can pay and can be reached. Your right to refuse an instruction is the real protection, and it has to be in the contract before the first name is issued.

Names outlast the license. A name issued to a third party belongs to that party. Whether a holder can later withdraw or change a name already issued is a case-by-case matter and should never be assumed. When the license ends, the names issued during it do not disappear. You take back a TLD that is no longer blank: it carries the licensee’s naming choices and its registrants.

The TLD is harder to sell during the term. A buyer wants the namespace free. An exclusive license with years to run narrows the field to buyers willing to take it over, and a promise not to transfer closes the door entirely.

The characterization is uncertain. How the law treats a token that represents a TLD, and whether a contract of this kind counts as a license of an intangible, a service agreement or something else, varies by country and is not settled everywhere. That affects tax, accounting, what happens in an insolvency and which remedies exist. It is a question for your counsel before the term sheet, not after.

The risks a licensee takes, and why the holder should care

A licensee who understands its exposure will ask for protections, and it is better to arrive with answers.

The licensee’s first risk is the holder’s access. If the key is lost, nobody can issue names under the TLD, and no court order restores a key. The second is the holder’s person: illness, death or insolvency. The third is a transfer of the token in breach of the contract. The fourth is plain non-performance, a holder who stops answering.

There are ways to reduce these, and each has a cost for you.

A multisignature wallet, which needs several keys to approve a transaction, can hold the token with a key in the licensee’s hands or in those of a neutral third party. The wallet is still the single holder in the registry’s eyes, so the rule of one seat is respected, but you can no longer move the token alone, and depending on the setup you may not be able to issue alone either. That is shared control, and it should be described as such in the contract.

A step-in clause can provide that on defined events, such as prolonged failure to issue, the token moves to the licensee or to a neutral party. It only works if the mechanism exists before the event.

An option to buy gives the licensee a way out of dependence that does not rely on your default. For many licensees this is the protection that makes the license acceptable at all.

There is also a limit on the licensee’s side that no clause removes. Onchain names resolve outside the DNS, in the wallets and browser tools that support the registry, and that coverage is partial and changes over time. A licensee paying rent for a namespace should be told this before it plans a public launch around names that an ordinary browser will not open. For a public website or for email, a DNS domain remains the better instrument.

Ending the license: expiry, breach, and the names left behind

Negotiate the end of the license at the start. Four situations need their own rules.

Expiry. At the end of the term you stop taking instructions. The contract should say whether there is a renewal, on what notice, and whether the licensee has a first right to a new term or to a purchase. It should also say what you may do with the namespace afterward. A licensee that has built on names under .yoursector may ask that you not license the same scope to a competitor for a period.

Breach. Give each side a notice and cure period before termination, and name the breaches that justify immediate termination: on the licensee’s side, typically non-payment and instructions that would make you issue unlawful or imitative names; on yours, failure to issue and transfer of the token in breach. Decide where disputes are heard and under which law.

Names already issued. Sort them into three groups. Names you hold yourself are yours to keep or reassign. Names the licensee holds in its own wallets remain with the licensee unless it agrees to move them. Names held by third parties remain theirs. For a namespace with public registrants, the contract should say who answers their questions after the end.

A sale during or after the term. If the licensee exercises an option, or you later sell to someone else, the transaction is an ordinary transfer and should be run as one, through onchain escrow at closing. Names you hold under the TLD can pass with it by agreement. And if the TLD benefits from earlier royalty program terms, whether they carry over to the acquirer is something to confirm with the registry before closing, not to promise in the license.

Putting a license proposal on paper before you answer

If someone has asked for your TLD and you are inclined to answer with a license, do the following before you reply, in this order.

Write one page stating what you would grant: scope, exclusivity, term, and what you keep. Write the service time you can honestly sustain for the whole term, and name who acts if you cannot. Take the current state of the TLD from the public record: names issued, to how many wallets, and which of them are yours. Check which royalty program terms apply to your TLD. Describe your custody arrangement in two sentences you would be willing to put in a contract. Then give the page to counsel in your country and ask how the arrangement would be characterized there.

It is also worth knowing what you are declining. A license fee is easier to judge against a view of what the TLD would fetch in a sale, and a holder can request a private valuation. The TLD Readiness Score is built for a sale, but it is a useful prompt here too, since custody, records and the state of issued names matter to a licensee as much as to a buyer.

Hush Partners acts in sales and acquisitions of onchain TLDs under mandate. Where a request to license ends with the parties concluding that a sale is what they need, the desk can act for the one who mandates it, with a single named partner on the file through to closing. The page for holders sets out how that works, and the contact form is the way to reach us.

Questions people ask

Can the licensee sublicense names to its own customers?

Only if the contract says so, and only in the sense that the licensee may ask you to issue names to wallets its customers control. The licensee cannot issue anything itself. If sublicensing is allowed, require that the licensee’s terms with its customers do not promise more than your license gives.

Does a license need to be registered anywhere?

A license is a private contract. The public record shows who holds the token and nothing of the agreements the holder has made around it. Some countries have registers for licenses of certain intellectual property rights, and whether a TLD license could or should be recorded in one is a question of local law for your counsel.

What if the registry changes its terms during the license?

Both parties depend on the registry and neither controls it. The contract should treat a change of registry terms as a shared risk: provide for renegotiation of the affected clause in good faith, and for an exit if the change removes the purpose of the license.