The regulatory questions around onchain names

Several bodies of law already touch onchain top-level domains and the names issued under them, even where no legislature has written a dedicated statute for this kind of asset. The absence of a bespoke regime does not mean the field is unregulated. It means that existing rules (intellectual property law, consumer protection, financial regulation, tax, data protection) apply to onchain names in ways that are still being worked out, and that the answers differ by country, by structure and by how the name is used.

This article maps the legal terrain by area. It does not give advice, and it does not predict outcomes. What it gives you is a set of precise questions to take to counsel in your own jurisdiction before making decisions about acquiring, issuing, or enforcing rights in onchain names. A compliance officer reading this for the first time should finish with a clearer picture of which practice groups need to be in the room.

The order follows the way the subject usually presents itself: why no single regulatory home exists, then each area of law in turn, then the responsibility that attaches to those who issue names to others, and finally the questions that come first in practice.

Why no single regime governs onchain names

A traditional domain name registered under the Domain Name System (DNS) sits inside a carefully designed governance architecture. The Internet Corporation for Assigned Names and Numbers (ICANN) delegates authority to registries, registries contract with registrars, and that chain of contracts makes the Uniform Domain-Name Dispute-Resolution Policy (UDRP), the dispute mechanism that ICANN requires, binding on every registrant. Regulators, courts and brand owners know how to work within that system.

Onchain TLDs use distributed ledgers and smart contracts (programs that run on a ledger) to register and resolve names, independent of ICANN governance. Freename is one such registry, and there the TLD takes the form of a token that is recorded onchain and sits in a wallet. No registry agreement with ICANN exists, so the chain of contracts that carries the UDRP to a registrant is absent. The legal status of an onchain name is therefore not settled by the system that issues it. It is left to the general law of each country, and in many countries that law has not yet said much.

That structural gap has a consequence for every other area. Financial regulators look to their established definitions of instruments and intermediaries. Consumer protection agencies look to existing categories of goods and services. Data protection authorities apply rules written before public ledgers were in common use. Each body of law tries to fit a new object into its existing vocabulary, and the fit is imperfect in different ways in different places.

Three further complications compound the picture. First, onchain names serve several functions at once: a name under a TLD can be a payment address, a website identifier, an identity credential, and a transferable asset. Second, the relevant transaction can cross borders instantly, with a holder in one country, a buyer in another and a ledger maintained from several more, so more than one national regime may be relevant at once. Third, the record is public and permanent: everything written to the ledger is readable by anyone, indefinitely. That fact has its own legal consequences, addressed below.

The practical result is that counsel cannot point to one statute and say the question is answered. They must survey several bodies of law in the jurisdictions that matter to their client, hold the answers together, and advise on the combined exposure. The sections that follow set out what each of those bodies of law asks.

The areas of law and the question each raises

The table below is a reference point, not an exhaustive analysis. Each area has its own section further down.

Intellectual property: the trademark collision

Trademark law is the body of law most immediately affected by onchain naming, and the difficulty is structural rather than incidental.

A registered trademark gives its owner the right to prevent confusingly similar use of that mark in commerce, for the relevant goods and services, in the relevant territory. In the DNS, the UDRP gives a trademark owner an administrative procedure that every ICANN-accredited registrar must honor, without going to court. Because onchain names sit outside that chain of contracts, the procedural shortcut is not available, and no authority stands above an onchain registry in the way ICANN stands above DNS registries and registrars.

This raises two distinct questions for trademark owners.

The first concerns registration. Onchain registries generally issue a name to the first person who asks for it, without examining it against trademark registers. A name identical or confusingly similar to a mark can therefore be held by someone with no connection to the brand. Whether merely holding such a name, without using it, amounts to infringement is a matter of national law, and the answer is not the same everywhere. Many holders registered generic or descriptive words in good faith, and a word that is a trademark in one class or country is an ordinary word in another.

The second concerns enforcement. Where a name is used in a way that does infringe, national courts may offer a remedy, but the path is longer and more expensive than an administrative complaint, and the outcome is less certain. A court order also has to reach something: a person, an operator, or a service that can act on it. The pseudonymity of wallet addresses makes it hard to identify the holder of a name, and with it the proper defendant, the jurisdiction and the venue.

The questions for IP counsel follow from this. Does holding or using an onchain name that reproduces a registered trademark constitute infringement under the law of the relevant jurisdiction? If the TLD itself reproduces a mark, does issuing names under it add to the exposure, and whose exposure is it? What interim remedies are available where the holder cannot be identified? Do the brand’s existing trademark registrations cover the goods and services associated with the way onchain names are used?

For brands and legal teams, the defensive side matters as much as the enforcement side. Knowing which names matching your marks exist, and who can issue names under the matching TLD, is the factual basis for any legal analysis. The Trademark Name Check on the site is a free first step for teams scoping their onchain exposure. Where the matching TLD is held by someone else, a negotiated acquisition is often a more predictable route than litigation, and it is a commercial question as much as a legal one.

Consumer protection and misleading use

Consumer protection law prohibits misleading commercial practices: statements, omissions, and presentations that cause a consumer to make a transactional decision they would not otherwise have made. Onchain names raise these concerns in at least three contexts.

The first is misleading presentation of a name itself. A name such as support.yourbrand held by someone with no connection to the brand suggests an official relationship that does not exist. Consumer protection law in many jurisdictions may treat that kind of presentation as a misleading practice, alongside whatever trademark law says about it. An onchain name is not exempt simply because the ledger is public and the record can be checked on a block explorer. Few consumers check.

The second context is the marketing of names as investments. Where a TLD holder issues names to the public and promotes anticipated appreciation, emphasizing price history, scarcity, or revenue-sharing arrangements, consumer protection regulators may ask whether the marketing amounts to misleading claims about returns. The questions for counsel are concrete. What representations were made at the point of sale? Were they accurate and substantiated? Were material risks disclosed, including the fact that resolution of onchain names in browsers and wallets is partial?

The third context is the conduct of operators who run a TLD as a public namespace. An operator who sells names under a TLD to businesses or consumers is offering a commercial service and may be bound by the consumer protection rules of the place where those consumers are located, regardless of where the operator itself is based. The standard questions apply. Are refund and cancellation terms clearly disclosed? Are the technical capabilities of the name accurately described? Is the marketing consistent with what the name can actually do?

The underlying difficulty is that consumer protection authorities are territorial while the sale of an onchain name is not. A name can be bought from anywhere. The applicable law will often depend on where the consumer is located, not where the seller is established, and a seller who cannot tell where its buyers are cannot easily tell which rules it has to meet. Counsel will want to know what the sales process records about the buyer, and whether it can exclude territories where the offer would not be compliant.

Rules that may touch a sale of a digital asset

Whether an onchain name, or the token that represents a TLD, is a regulated financial instrument is one of the most consequential open questions in this field. If the answer is yes in a given country, a sale without the proper authorization may breach the rules on offering investments to the public, the rules on financial intermediaries, or the rules against money laundering.

Many jurisdictions are still developing rules specific to digital assets. Others apply their existing law on securities, commodities or property to tokens case by case. In both situations, the classification of a particular token usually has to be argued from its features, because no list settles it in advance.

The analysis turns on how the name is structured and marketed. A name that functions purely as a utility, resolving a wallet address or pointing to a website, looks different from one that is sold with an expectation of profit, or one that entitles the holder to a share of future revenues. Regulators in this area commonly look past the technical form to the economic substance. A token sold as a collectible or a tool may be treated differently once it is promoted mainly as an investment, or once the seller promises work designed to increase its value.

The royalty arrangements of some onchain registries deserve particular attention in this context. Freename runs a royalty program in which the holder of a TLD receives a share of each registration fee for names registered under that TLD, subject to the registry’s current terms and activation conditions. A TLD that produces income for its holder is a different object, in the eyes of a financial regulator, from a TLD that produces none. Whether that difference matters depends on how the TLD is offered and to whom. A holder who earns a royalty from running a namespace resembles a business owner. A buyer who is sold a TLD on the strength of a projected royalty, and who expects someone else to generate it, may resemble an investor. The analysis is specific to each jurisdiction and each set of facts. It is a question for financial regulatory counsel, not a conclusion that can be drawn from the structure alone.

Anti-money-laundering rules raise a separate set of questions. Where onchain names are sold or transferred for value, the parties and the services involved may be subject to customer due diligence obligations, depending on whether the applicable regime treats them as regulated providers of digital asset services. Closing is the natural point at which to ask who identifies whom: when a TLD changes hands through onchain escrow and transfer, counsel on each side should know what identification the other party and the platform will require, and what their own client is obliged to collect.

1. Characterize the assetDetermine whether the onchain name or TLD token is a utility, a collectible, a financial instrument, or something that local law has not yet categorized. The answer depends on the structure and the marketing, not only the technical form.
2. Identify the applicable regimeAsk whether local securities law, commodities regulation, digital asset rules, or anti-money-laundering obligations apply to the proposed transaction. Repeat the analysis for every jurisdiction where the token is offered or where the parties are located.
3. Review the marketingExamine every representation made to prospective buyers: promotional materials, royalty projections, value claims. Representations that emphasize return or profit potential change the regulatory analysis materially.
4. Assess intermediary statusDetermine whether any party that facilitates the transaction, such as a marketplace, a broker or a wallet provider, is treated as a regulated financial intermediary in the relevant jurisdiction, and what obligations that status entails.

Tax and accounting: pointers, not answers

Tax and accounting are areas where this article can only point to the questions, because the answers depend on the jurisdiction, the holding structure, and the facts of each transaction. Advisers in each relevant country will need to give the analysis.

The acquisition of an onchain TLD raises several questions immediately. Is the TLD a capital asset, an intangible asset, or inventory? How is the purchase price recognized on the balance sheet? What amortization treatment, if any, applies to an asset that, on a registry such as Freename, carries no annual renewal fee? An asset with no renewal date has no obvious useful life, and the accounting treatment of intangibles often turns on whether a useful life can be determined.

On disposal, the question is whether a gain is a capital gain or ordinary income, and whether the asset is treated as property, a financial instrument, or something else. Those classifications carry different rates and different reporting obligations in most tax systems. A holder who buys and sells TLDs regularly may also be asked whether the activity is a trade, which can change the treatment of every sale.

Royalty income, meaning the share of registration fees a TLD holder receives when names are registered under the TLD, raises its own questions. Is it income from a business, a royalty in the technical sense that tax law gives the word, or something else? Does any withholding obligation arise, given that the payers may be located anywhere and are rarely identified? If the income arrives as a digital asset, at what value and on what date is it recorded? Indirect taxes on the sale of names to consumers in other countries are a further question that operators tend to meet later than they should.

For organizations that hold a TLD on their balance sheet, accounting standards for intangible assets may require periodic impairment testing. The absence of a quoted market price for onchain TLDs makes that exercise difficult in practice. A holder who needs a supportable reference point can request a private valuation, and the auditor decides what weight it carries.

Transfer pricing rules may apply where a TLD is held in one entity within a group and generates income that flows to another. How those rules interact with the tax treatment of digital assets is a question to put to the group’s tax advisers before the holding entity is chosen, since moving the TLD later is itself a disposal.

Data and privacy on a public record

Public ledgers are, by design, permanent and readable by anyone. Every name registration, every transfer, every resolution record written to the chain is visible without restriction. That permanence creates a specific tension with data protection law in jurisdictions that give individuals rights to erasure, rectification, or restriction over their personal data.

The first question is whether any data on the ledger constitutes personal data under the applicable law. A wallet address, taken alone, is a pseudonym. But data protection laws commonly define personal data as any information relating to an identified or identifiable natural person, and a wallet address can become linkable to an individual through analysis of onchain activity combined with other information. Once an individual has publicly associated themselves with a wallet, the names it holds and the transfers it has made are visible to anyone. A name is, in addition, often chosen precisely to identify its holder: a name built on a person’s own name is harder to describe as pseudonymous than a string of characters.

The second question is erasure. Data written to a public ledger cannot, in general, be deleted afterward. In jurisdictions whose privacy laws include a right to have personal data erased, counsel will need to consider whether that right can be satisfied at all for data on the ledger, and whether the answer changes what should be written there in the first place.

The third question is who is responsible. Data protection law usually assigns obligations to the party that decides why and how personal data is processed. On a public ledger, the registry that designed the contracts, the operator who issues names, the registrant who chose the name, and the many parties who maintain the ledger each play a part. Which of them carries the obligations of a controller is among the least settled questions in the field, and the registry, the operator and the registrant may each carry distinct ones.

For organizations issuing names to third parties, one part of the analysis is not uncertain. A registration process that collects personal data offchain, even a contact address used only for notifications, is ordinary processing of personal data. It is not pseudonymous, and the full body of data protection law applies to it regardless of how the name itself is recorded.

Responsibility of someone who issues names to others

Running a TLD as a public namespace, selling names under it to businesses or consumers, is a different activity from holding a TLD for your own use. On Freename, only the holder of a TLD can issue names under it, so the holder is the one party every registrant depends on for accurate representations and continuity. Several bodies of law may impose obligations in respect of that relationship.

Contractual liability. Every name issued under a TLD rests on an agreement, express or implied, between the issuer and the registrant. The terms of that agreement determine what the registrant can expect: whether the name can be revoked, what happens if the TLD is transferred, what technical services are promised, and how disputes are resolved. Courts will generally look to those terms and, where they are silent, may imply what a reasonable registrant would have expected. Operators who issue names without a clear published policy face uncertainty about what they have agreed to.

Consumer law obligations. Where the registrant is a consumer rather than a business, the terms of issuance may be subject to consumer contract law, which in many jurisdictions allows unfair terms to be set aside and gives consumers a right to withdraw from contracts concluded at a distance. How a withdrawal right applies to a name that is recorded onchain the moment it is issued is a question to settle with counsel before the first sale.

Continuity obligations. A registrant who builds a business identity or a payment flow around name.yoursector has a reasonable expectation that the name will continue to function. If the TLD is transferred and the new holder does not honor existing registrations, the operator who originally sold the name may face claims. The legal basis for those claims (breach of contract, misrepresentation, negligence) depends on what was said at the point of sale and on the applicable law. The exposure is manageable: it is largely determined by whether the namespace has clear, published policies on transfer and continuity.

Trademark screening. There is no formal mechanism through which a trademark owner can oppose a name and have it removed from an onchain naming system. An operator who issues names that infringe third-party trademarks may nonetheless, depending on the jurisdiction, face secondary liability for that infringement, particularly where the matter was brought to the operator’s attention and nothing was done. Counsel should be asked what screening at issuance, and what response to a complaint, the local law would regard as reasonable.

These questions belong on every operator diligence checklist, alongside the technical questions about what a name can actually do. The glossary gives working definitions for the technical terms that arise in that analysis.

Which questions to take to counsel first

The map above is wide. In practice, the order in which you seek advice matters, because some questions gate others.

Start with characterization. Before asking whether a TLD sale is taxed as a capital gain, you need to know whether the TLD is property, a financial instrument, or a contractual right under local law. Before asking whether a royalty arrangement complies with financial regulation, you need to know how the token is characterized. Characterization comes before almost every other analysis, and it is the question most likely to have a different answer in different jurisdictions.

Identify the relevant jurisdictions. The holder’s country, the registrants’ countries and the place where a marketplace or service provider is established may each have a claim to apply their law. List them before commissioning the advice, and decide with counsel which ones justify a full analysis and which a short confirmation.

Prioritize IP and consumer protection for operators. If you are running a namespace and issuing names to the public, trademark screening policies and consumer-facing terms are operational matters that arise with every registration. Financial regulatory questions may take longer to become concrete, but IP and consumer protection questions are live from the first name issued.

For acquirers, review the existing registrant base. If you are acquiring a TLD that already has names issued under it, you may be acquiring whatever obligations the previous operator created toward those registrants. Due diligence should include a review of the published terms, the marketing materials, and any known disputes.

Separate the TLD from the names issued under it. The TLD itself is the asset that changes hands in an acquisition. The names issued under it are third-party interests connected to that asset. The legal questions that apply to holding a TLD are not identical to those that apply to holding a name under it. Counsel should be asked to address both layers.

A practical way to begin is to write the facts down before the first meeting: which TLD or names are involved, who holds them, whether names are issued to third parties, what has been said in marketing, and which countries the parties are in. Counsel can scope the work from that page. Where a transaction is part of the picture, Hush Partners acts under mandate for a holder who wants a buyer or for an organization that wants a holder found and approached, every exchange is covered by a standard mutual NDA, and closing runs through onchain escrow on an aftermarket. The legal analysis stays with your own counsel, and lawyers and advisers who refer a file remain in the lead on it. The desk is reached through the contact form.

Questions people ask

Can an onchain TLD be treated as intellectual property in its own right?

The answer depends on the jurisdiction and the structure. In many legal systems, a name can attract protection as a trademark (if it functions as a badge of origin), as a trade name, or potentially under unfair competition law. Holding the token does not by itself create any of those rights. Whether the onchain record amounts to a property interest that a court will enforce against third parties is a separate question, and an open one in many jurisdictions. Your IP counsel will need to assess both against the domestic property and IP framework.

When a TLD changes hands, where do its registrants’ names stand in law?

Names that the seller itself holds under the TLD can be transferred with it, if the parties agree to that, and names sold to third parties remain theirs. What those registrants can then expect depends on the terms under which those names were issued, on the registry’s own rules, and on the law governing the relationship between the operator and the registrant. Do not assume that the transfer settles the position of existing registrants either way. This is one reason why the terms of issuance, and the review of those terms at acquisition, matter so much. Escrow addresses the mechanics of the transfer. The protection of registrant interests is a contractual question for counsel.

How should royalty income from a TLD be estimated before taking tax advice?

Tax advisers will ask for figures before they give a view, and gross revenue is the place to start. The subname revenue calculator on the site models revenue from names issued under a TLD on assumptions you set. It produces an estimate, not a forecast, and it says nothing about the net position. Taking part in the royalty program carries an annual cost set by the registry, which has to be deducted, and some TLDs were registered under earlier terms that include the program for life, a point to confirm with the registry before closing because those terms may or may not pass to a buyer. Beyond that, the rate, any withholding, and the character of the income depend on the holder’s residence and on local advice.