Decentralized AI Projects and AI Node Sale: Legal Structuring Considerations

Decentralized Artificial Intelligence began to gain momentum last year; however, in the last few months it seems to have exploded in popularity. In this article, we're going to discuss the decentralized AI market category and look at some of the most optimal approaches to legal structuring of these projects. We’ll also cover what founders should think about when creating a legal roadmap for their decentralized AI projects. Ultimately, this article aims to serve as a legal playbook for Web3 founders, builders, and operators, containing guidance on the compliance aspects at each stage of a project’s development along with the most suitable legal options available.

Decentralized AI: an emerging market category

Decentralized AI is a growing field that combines the power of artificial intelligence with the transformative potential of blockchain technology. These projects aim to create self-sustaining economies and ensure that users own their own data by developing infrastructure and innovative platforms at the intersection of AI and blockchain.

Currently, we can broadly sort decentralized AI projects into two categories: infrastructure and platforms/AI agents. It is highly likely that the categorisation will change as more project types continue to emerge. Therefore, to keep things simple for this article, we are going to address decentralized AI projects in these two broad categories.

Decentralized AI Infrastructure Projects

The first category is decentralized AI infrastructure projects, which play a crucial role in enabling both the scalability and decentralization of AI solutions. They often leverage physical infrastructure, such as graphics processing units (GPUs), to enhance the performance and efficiency of AI applications. A quick internet search brings up some interesting examples of infrastructure projects:

DePIN (decentralized physical infrastructure) projects

These projects, such as Filecoin, Near Protocol, and Akash Network, provide decentralized storage and computing resources for AI applications.

Newer infrastructure projects

Emerging projects like 0G, Aethir, io.net, and GAIB offer innovative solutions for decentralized AI infrastructure. 0G calls itself “The first decentralized AI operating system” and “The largest AI Layer 1 ecosystem.” GAIB says it is “The first economic layer for AI & compute future”.

Decentralized AI Agentic Platforms/AI Agents

The second category is agentic platforms or AI agents. These projects represent a more recent development in the decentralized AI landscape. They combine AI agents with blockchain technology, unlocking new use cases such as AI agents creating and trading tokens and operating semi- or fully autonomously. Leading examples of agentic platforms include Virtuals Protocol and ElizaOS.

Virtuals Protocol is a blockchain platform for launching and trading AI agents. Each agent is backed by a liquidity pool and uses ERC-6551 compliant wallets for dynamic pricing. The platform allows anyone to launch their own tokenized AI agents, where token holders can access specific features. ElizaOS is a multi-agent simulation framework built in TypeScript that enables the creation and management of autonomous AI agents. It's designed to maintain consistent agent personalities and knowledge across different platforms.

While infrastructure projects and agentic platforms differ in their launch and operation, they share the common goal of advancing the decentralized AI market category. Both types of projects often launch their own tokens, which can impact the legal roadmap and create similarities in their legal considerations.

Growth trends for decentralized AI

Overall segment growth

The decentralized AI market is experiencing explosive growth, fueled by a surge of interest from investors, users, and developers alike. The sector's rapid advancement, powered by Large Language Models (LLMs), has led to a market cap exceeding $16 billion in a period of just six months. As of January 22, 2025, the AI Agents market reached a total market cap of $14.8 billion, while the overall AI projects market, combining both infrastructure and AI agents, stands at $45 billion.

A key area to watch in the decentralized AI platform ecosystem that is experiencing remarkable growth is the AI agent space. Platforms, like Virtuals Protocol mentioned earlier, are leading this expansion with their innovative tokenomics and sophisticated AI agents. A prime example is AIXBT, which to date has achieved a $700 million market cap and built a community of over 390,000 followers on X.

Government initiatives

Government strategies have also accelerated market growth. US President Trump's announcement of a $500 billion AI infrastructure plan, the “Stargate” project, sparked a surge in AI-related tokens, with AI16Z experiencing a notable 35% price increase. This market growth tallies with the some of the significant funding rounds decentralized AI projects have enjoyed recently: PIN AI raised $10 million, Nexus Labs has raised $25 million, and Nillion has raised $50 million.

AI Node sales

The use of node sales to fund and decentralize AI infrastructure also appears to be on the increase, with 0G Foundation’s AI Alignment Node Sale as just one example. These sales drive community engagement and early stage funding by offering early supporters a chance to purchase nodes that contribute to network security and earn them rewards.

This confluence of factors — increased funding, rising user adoption, and innovative funding mechanisms — points to the massive interest and potential surrounding the decentralized AI market. The stage is set for significant disruption and innovation in the months and years to come as decentralized AIcontinues to evolve and mature.

Now that we’ve set some context for this market category, let's dive deeper into the typical milestones the projects go through and what the legal roadmap looks like for each milestone.

Key milestones for new decentralized AI projects

Launching a successful decentralized AI project involves navigating various stages, each with its own set of challenges and opportunities. Let's breakdown the key milestones.

1. Initial fundraising (testnet stage)

Before a project goes live, it's crucial to secure initial funding to support development and testing. Depending on the project and its goals this can involve:

• Ecosystem grants: many blockchain ecosystems offer grants to support up-and-coming projects building on their platforms.
• Venture capital: raising funds from venture capital firms can provide significant capital and valuable expertise. This often involves offering DevLab's equity or future token rights in exchange for investment.
• Onboarding testnet users: early adoption and feedback are essential. Onboarding users to a testnet environment allows for testing and refinement before the mainnet launch.

2. Token/node sale (mainnet/launch stage)

Once the project is ready for mainnet launch, token or node sales can be a powerful way to generate funding and distribute tokens or access rights. This stage marks a critical step towards decentralization and community engagement for decentralized AI projects.

Node sales (infrastructure)

For projects building the underlying infrastructure for decentralized AI, node sales serve as a powerful tool to achieve two key goals: decentralization and incentivized participation. By selling nodes to early supporters, these projects can ensure the network remains decentralized and secure, while also rewarding node operators for their contributions, which encourages active involvement and drives network growth.

Token sales (agentic platforms and infrastructure)

Both decentralized AI infrastructure projects and agentic platforms can utilize token sales as a powerful tool to achieve multiple objectives. These sales not only generate essential funding for development and operations, but also help establish a thriving ecosystem by distributing tokens to early users and supporters. Additionally, tokens serve as a key mechanism for granting access to platform features and governance rights, which creates strong incentives for ongoing participation in the platform.

📚 Learn more: Utility Token Launch Legal Guide

3. Platform launch (operating stage)

The platform launch marks a critical milestone, where the platform becomes available to a wide audience. The launch therefore requires careful planning and execution:

• Promotional activities: this can involve both borderless online campaigns and targeted efforts in specific countries, considering local regulations.
• Onboarding users: setting up an onboarding process that allows users to connect to the platform/protocol and start using its features.
• Monetization: implementing monetization strategies to generate revenue and sustain the platform's growth. This could involve charging fees for platform usage, transactions, or premium features.
• Moderation and compliance: if the platform involves AI agents, ensuring appropriate moderation mechanisms are in place is important to prevent misuse and ensure compliance with relevant regulations. Front-end operators of decentralized AI platforms should be especially mindful of this as they bear significant responsibility for ensuring the compliance and ethical use of AI agents.
• Custody and licensing:  if there is any type of custody of user funds, it is highly likely that licensing requirements will apply. Prioritize user security through robust self-custody solutions where possible. If the platform offers a launchpad for AI agents and custodies funds, it might be recommeded to explore the need for monetary licenses.

What legal works are required for decentralized AI projects?

Legal works for these projects will vary from project to project, however, founders, builders, and operators can use the following sections as a guide as to what they may encounter along the way.

1. Initial fundraising (testnet stage)

This stage lays the groundwork for your decentralized AI project's success. Before launching your testnet and raising initial capital, ensure you have the following legal elements in place:

Corporate structure and jurisdiction options

Get guidance on how to set up a corporate structure in a friendly jurisdiction. Consider the type of project you're launching and in which layer the future tokens will be launched. Infrastructure-type projects may opt-in for a double-entity structure (DevLab and Foundation) while application-type projects should consider a triple-entity setup (DevLab, Token(Node)Co, and Foundation). Sometimes, a holding company and a separate company for the protocol interface may be recommended. It is crucial to get proper guidance in this early stage to avoid costly mistakes of choosing the wrong structure or jurisdiction.

Look at where best to register your DevCo and consider startup registration options in Delaware, or perhaps the UK, UAE or Singapore.

DevCo registration and bank account setup

Once you’ve selected where to register your DevCo, you’ll need to complete the company registration process and open a bank account for your company to receive investments and to cover operational costs. This includes the payment of salaries to contractors and team members, owning IP, and covering other expenses (such as tools, subscriptions, etc.).

Legal documentation

Prepare necessary documents like token warrants and SAFTs (Simple Agreements for Future Tokens) to secure investment from investors and implement a token incentive plan and/or an ESOP (Employee Stock Ownership Plan) to attract and retain talent in your team. Make sure you have the basic legal documents like founder agreements, IP assignments, NDAs covered.

Legal Nodes solution

At Legal Nodes, we provide comprehensive legal support for Web3 founders building decentralized AI projects. Our team offers swift legal guidance to help you to make informed decisions about jurisdiction selection, scope of work, and budgeting. Contact us today to discuss details and receive a quote for your decentralized AI project legal structuring.

2. Token / node sale (mainnet / launch stage)

This stage is a critical step where your decentralized AI project transitions from development to a live, functioning ecosystem. It involves offering tokens or nodes to early supporters and the wider community, which requires careful legal preparation. Here's what you need to do:

Guidance on corporate structures

Determine which legal entities need to be registered based on your project's structure and the type of token/node sale you're conducting.

This may involve:

• Foundation: for decentralized management of on-chain aspects like the protocol, smart contracts, infrastructure, and token treasury.
• Token/node issuance subsidiary: specifically for handling the token/node sale and related legal and regulatory compliance. Usually, if a project is doing a centralized token launch (either private, public, or both) it is highly recommended to have a Token issuance entity.

Jurisdiction selection

Choose jurisdictions that are most favorable for your entities. Your short-list will depend on the corporate structure you've chosen, the type of project and token you're launching and—obviously— your budget.

Your options may include but won't be strictly limited to:

• Foundation: Consider both offshore options (Cayman Islands, Panama) and onshore options (ADGM UAE, Switzerland).
• Token/node issuance subsidiary (TokenCo): BVI and Panama are common choices for offshore registration. Onshore options include Switzerland and Liechtenstein (both require obtaining a local authorization).

Document preparation

You can use this checklist to cover the essentials, but always consult with local lawyers both in the jurisdiction of your TokenCo and in the jurisdictions where you plan to target and acquire users.

• Terms and Conditions (T&C) for TGE: in the case of a public token sale, draft comprehensive terms and conditions governing the token or node sale.
• Disclaimers: include clear disclaimers to inform participants about the risks involved and the legal status of the token/node.
• User verification: implement robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to comply with regulations and prevent fraud.
• Geofencing and sanction compliance: prevent participation from restricted or risky jurisdictions and ensure compliance with international laws.
• Token marketing compliance: review marketing materials to ensure compliance with advertising regulations and avoid making misleading statements.

Checklist for Web3 founders

• Understand the dynamic nature of token/node legality.
• Choose the appropriate legal structure (double or triple entity).
• Register necessary entities in suitable jurisdictions.
• Draft comprehensive T&C, disclaimers, and other legal documents.
• Implement KYC/AML procedures and ensure compliance.
• Review marketing materials for compliance.
• Consult with legal experts to navigate the complexities of token/node sales.

3. Platform launch (operating stage): legal roadmap

Launching your decentralized AI platform involves opening it up to users, which brings a new set of legal and compliance considerations. Here's a roadmap to ensure a smooth and legally sound launch.

Front-end operator subsidiary

• Guidance and establishment: get guidance on whether such entity is needed and how it will work with other entities in your corporate structure (DevLab, TokenCo, Foundation). Set up a dedicated legal entity to operate the front-end of your platform and handle user-facing activities. This helps separate liabilities and streamline operations.
• Jurisdictions: consider registering this entity in a jurisdiction that offers favorable regulations for online platforms, such as BVI, Panama, or Costa Rica.

Legal compliance

• Terms and Conditions: draft clear and comprehensive terms and conditions that govern user interactions with your platform, ensuring users understand how AI agents work, their limitations, and any potential risks.
• Geofencing/VPN checks: implement robust measures to restrict access from prohibited jurisdictions and ensure compliance with local regulations. This includes utilizing IP geofencing and potentially on-chain Know Your Transaction (KYT) modules to prevent users from sanctioned countries from accessing your platform.
• User verification: if necessary, implement KYC/AML procedures to verify user identities and comply with anti-money laundering regulations.
• Financial promotions compliance: ensure that any marketing or promotional activities comply with financial promotion regulations in all relevant jurisdictions. This includes carefully reviewing how AI agents are marketed and the claims made about their capabilities.
• GDPR and data privacy: this is especially important if you're planning to onboard users from the EU as you must implement robust data protection measures to comply with the General Data Protection Regulation (GDPR) and follow other applicable data privacy laws.
• AI agent moderation: agents could generate harmful or misleading content, engage in discriminatory behavior, or violate user privacy. To mitigate these risks, front-end operators must implement robust compliance measures, such as content filtering and moderation, regular audits, user-reporting mechanisms and transparency over how AI agents are trained and how they operate.

Custody and licensing

• Self-custody: prioritize self-custody solutions for user funds to enhance security and minimize regulatory burdens.
• Custodial solutions: if offering custodial services, explore the necessary licensing requirements for handling user funds.
• Launchpad licensing: if your platform includes a launchpad for AI agents and involves custody of funds, investigate the potential need for monetary licenses.

By addressing these legal aspects proactively, you can ensure a compliant and successful platform launch, fostering trust among users and mitigating potential legal risks.

Why structure a decentralized AI project with Legal Nodes?

Launching a decentralized AI project requires careful consideration of the legal implications involved at each stage of your project. By understanding that legal compliance is a dynamic process that evolves with your project, you can confidently navigate the complexities and ensure a smooth launch.

At Legal Nodes, we provide comprehensive legal support for Web3 founders building decentralized AI projects. Our team offers swift legal guidance to help you to make informed decisions about jurisdiction selection, scope of work, and budgeting. We connect you with a global network of legal professionals, ensuring high-quality service without the costly markups of traditional firms. From entity registration to compliance with token regulations, we help you explore your options, identify risks, and meet legal obligations.

Benefits of working with Legal Nodes on the legal structuring of your decentralized AI project include:

• Accelerated guidance. We provide you with visualized corporate structure overviews, jurisdiction comparisons tailored for founders needs. This helps you to make a decision in days, not in months.
• Predictable budgeting. Legal works are estimated in credits and estimated costs are provided upfront. You can purchase credits in packages or just pay-as-you-go for new tasks. Your legal works are prioritized in the roadmap based on your business stages and goals.
• Cost-efficient execution. Our network of ex-BigLaw professionals provide competitive prices without the overhead costs of big law firms.

With Legal Nodes, you can focus on innovation and building your decentralized AI project while we handle the intricacies of legal compliance. Contact us today to launch your project with confidence.