A hybrid round produces two records of who owns what. The cap table lists shares, options and convertible instruments. The token table sets out how the network’s tokens will be split between the team, investors, a treasury and the wider ecosystem. Equity investors read the first closely and token buyers read the second. Specialist investors read both, and the first thing they check is whether the two describe the same company.
When they don’t, the round loses value in diligence. A common reason is timing: the two tables are often drafted at different moments, for different audiences, and nobody reconciles them before investors do.
1. Two tables, one company
The cap table answers who owns the company that builds the protocol and holds the intellectual property. The token table answers who holds the asset the network runs on. They overlap in three places: the founders, who usually appear on both; the early investors, who often hold equity plus a right to future tokens; and the treasury, which the company controls and uses to fund its operations. An investor who sees only one of the two can’t tell where the value of the business will actually end up.
2. Where value gets promised twice
Early-stage Web3 rounds commonly pair a convertible equity instrument, such as a SAFE, with a right to future tokens. A token side letter gives the investor the right to receive tokens if the company later decides to issue them. A token warrant gives the right to buy tokens later at a price fixed today. Both are standard market practice and both are reasonable on their own.
The problem appears when the token table is drafted later without accounting for them. If the investor allocation is sized as if the side letters didn’t exist, or if the same slice of supply is also offered to a strategic partner, the two tables now promise the same value twice. Someone ends up diluted in a way they didn’t agree to, and diligence is usually where they find out.
3. What the token actually does
The simplest way to keep the two tables consistent is to be precise about the token’s job. A token that gives access to a network, pays for a service on it or settles transactions between its members has a value that tracks the network’s use. That value belongs on the token table and investors can model it separately from the company’s revenue.
A token that promises a share of the company’s profits, or rights that resemble a vote over the company itself, does something else. It duplicates what the shares already do, and that duplication is what regulators look for.
4. Regulators read the substance
On both sides of the Atlantic, the label a founder puts on a token carries little weight. In the EU, MiCA covers crypto-assets that aren’t already financial instruments, and ESMA’s guidelines on qualification explain how to tell the difference. They state that the technology used doesn’t affect whether a crypto-asset is a financial instrument. A token presented as a utility token can still qualify as one if it confers profit participation or voting-type rights, and where a hybrid token mixes both kinds of feature, the financial instrument features take priority.
In the United States, the long-standing test from SEC v. W.J. Howey Co. asks whether buyers invest money in a common enterprise expecting profits from the efforts of others. In March 2026 the SEC and the CFTC issued a joint interpretation that sorts crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. Only the last is a security in itself. The interpretation treats the transaction and the promises the issuer makes as the unit of analysis, and it recognises that an investment contract around a non-security token can end once the issuer has delivered on those promises. It’s an interpretive release rather than a formal rule, so it can be revisited, but its logic matches the EU’s: what the issuer promises shapes how the token is treated. Tokenised versions of existing securities follow a different path, set out in an earlier analysis.
For a hybrid round, the documents behind both tables are therefore read together. A side letter that ties token holders’ returns to the company’s success can pull the token toward securities treatment, whatever the white paper calls it.
5. Control lives on both tables
Founder control is usually analysed on the cap table alone. In a hybrid structure that analysis is incomplete. If team tokens and team shares vest on different schedules, the founders’ incentives in the network and in the company can drift apart. If governance tokens give holders a say over decisions the company used to take alone, part of the control investors thought they were buying through shares may sit with token holders instead. Neither is a reason to avoid a token. Both are reasons to read the two tables side by side before the round closes.
6. What a coherent structure shows an investor
A coherent hybrid structure lets an investor answer four questions quickly: which value comes from the company and which from the network, why the token needs to exist, which rights each instrument carries and which regulatory regime applies to each. When the two tables answer those questions the same way, investors can diligence the token as part of the investment case. The FinTech and Web3 scenario on our Services page illustrates this situation.
When there’s no operating reason for a token at all, the coherent answer is a structure without one, the choice we set out in Equity, Tokenomics, or Hybrid.
Frequently asked
What is a token side letter?
An add-on to a convertible equity instrument such as a SAFE that gives the investor the right to receive tokens if the company later issues them. It differs from a token warrant, which gives the right to buy tokens later at a price fixed in advance.
Can a utility token be treated as a security?
Yes, depending on its substance. ESMA’s guidelines say a token presented as a utility token can qualify as a financial instrument if it confers profit participation or voting-type rights. In the United States, the SEC and CFTC interpretation of March 2026 looks at the promises the issuer makes when the token is sold.
Should every Web3 startup issue a token?
No. A token is justified when it has an operating function the business needs, such as network access or settlement. Without that function it adds a second instrument to diligence and to regulatory review without adding value.
Sources and references
- Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA).
- ESMA, Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments (ESMA75-453128700-1323), December 2024.
- US Securities and Exchange Commission and Commodity Futures Trading Commission, joint interpretive release on the application of the federal securities laws to certain types of crypto assets, 17 March 2026.
- SEC v. W.J. Howey Co., 328 U.S. 293 (1946).
- AYAKO Partners internal analysis.