A token project is preparing for an exchange listing. A market maker offers to support liquidity in return for a token loan and an option to purchase part of the allocation. The proposal emphasizes tighter spreads, deeper order books, and a smooth launch.

Several months later, the project wants its tokens back. The market maker points to an option exercise provision, an extended repayment period, and authority to hold inventory on third-party exchanges. The founders discover that their understanding of “providing liquidity” never made it into the agreement.

Before transferring inventory, a project should understand what the market maker may do with the tokens, how performance will be measured, and precisely what must be returned. Those terms deserve as much attention as the headline fee.

Define the token loan and purchase rights

Start by identifying the legal entities providing the tokens, performing the services, and owing repayment. If a foundation holds the treasury but a development company signs the agreement, establish the foundation’s authorization and contractual rights.

Next, distinguish among a loan, an outright sale, and assets held for trading on the project’s behalf. The documents should explain whether ownership transfers, whether inventory may be commingled, and whether the recipient must return equivalent tokens or account for specifically held assets.

Where the market maker receives a purchase option, negotiate the quantity, exercise price, expiration, notice procedure, settlement currency, and interaction with repayment.

Consider a hypothetical loan of one million tokens accompanied by an option to buy them for $0.50 each. If the token later trades at $2, exercise could allow the market maker to pay $500,000 instead of returning tokens with a quoted value of $2 million. That may be an intentional commercial bargain, but the project should model it before signing.

Address partial exercise, token migrations, supply changes, and early termination. Determine whether an option survives a service breach and whether repayment obligations are reduced only after valid exercise and payment.

Translate the proposal into a measurable trading mandate

“Maintain liquidity” leaves substantial room for disagreement. Specify the approved exchanges, trading pairs, inventory allocation, and services expected on each venue.

Useful performance measures may include maximum quoted spreads, minimum order-book depth within defined price bands, and the percentage of time qualifying quotes remain available. Define the reference price, measurement intervals, data sources, and treatment of exchange outages.

These should be negotiated service obligations with realistic exceptions. Avoid language that treats a desired token price or artificial transaction volume as the service being purchased.

Trading authority also needs boundaries. Address whether the market maker may transfer inventory between venues, lend it onward, pledge it, use leverage, or hedge through derivatives. If hedging is permitted, identify its purpose, limits, and reporting requirements.

For accounts controlled by the project, consider whether trading-only permissions are sufficient and whether withdrawals should require separate authorization.

Require lawful activity and meaningful oversight

A promise of “volume support” warrants scrutiny of the actual trading strategy.

In its August 6, 2026 announcement concerning MyTrade’s founder, the Department of Justice described his sentencing following a guilty plea to conspiracy to commit market manipulation and wire fraud. MyTrade’s service used bots to conduct wash trades that created misleading trading activity. The practical lesson for a project is to examine how promised results will be achieved.

The agreement should prohibit manipulative trading, deceptive orders, and coordinated transactions intended to create false market activity. Require compliance with applicable law and venue rules, together with controls appropriate to the strategy.

Include rights to investigate suspicious activity, obtain relevant records, and suspend trading when necessary. A general compliance warranty provides little operational protection if the project cannot see what is happening.

Kelman PLLC’s earlier coverage of market-maker enforcement actions provides background on the allegations that prompted several proceedings. Contract negotiations should turn those concerns into concrete oversight rights.

Make reporting sufficient to reconcile the inventory

A dashboard showing aggregate volume does not explain where the project’s assets are or how they have been used.

Negotiate reporting that allows the project to reconcile:

• Opening and closing token and cash balances.
• Trades, transfers, fees, rebates, and other charges.
• Inventory held at each approved venue or wallet.
• Outstanding loans, collateral commitments, and permitted hedges.
• Performance against the agreed quoting obligations.

Specify reporting frequency, delivery format, record retention, and access after termination. Require prompt notice of withdrawal restrictions, security incidents, material trading errors, and regulatory inquiries affecting performance.

The agreement should also distinguish trading gains and losses from service fees. Who receives exchange rebates? Who funds losses? Can the market maker deduct disputed charges from repayment?

A project should be able to reconstruct its position without relying entirely on the market maker’s explanation of a proprietary dashboard.

Address conflicts, information use, and exclusivity

A market maker may have interests that differ from the project’s. Review its ability to trade for its own account, serve competing projects, transact with affiliates, and receive compensation from exchanges or other counterparties.

Require disclosure of material conflicts and agree on how they will be managed. Confidentiality provisions should address the use of nonpublic information about listings, token unlocks, treasury transactions, and commercial announcements.

Exclusivity deserves particular attention. A broad restriction could prevent the project from appointing another provider even when performance deteriorates. Consider limiting exclusivity by venue, trading pair, duration, and satisfaction of measurable service standards.

The project should also retain approval rights over public statements suggesting that the market maker guarantees a token’s price, listing, or commercial success.

Negotiate the exit before delivering the tokens

Termination and repayment are separate obligations. Ending the service relationship should trigger a defined process for stopping new trades, closing permitted positions, reconciling balances, and returning inventory.

Specify notice periods, cure rights, and circumstances permitting immediate suspension or termination. Consider material breach, unauthorized asset use, persistent performance failures, loss of necessary permissions, and security incidents.

For repayment, identify the token, network, destination-verification procedure, deadline, and responsibility for transaction fees. If cash substitution is permitted, define who may elect it and how valuation works.

Address exchange withdrawal freezes expressly. Decide whether the market maker remains responsible for timely repayment and what evidence or mitigation steps it must provide. An open-ended extension tied to a venue reopening can leave the project unable to recover its inventory when it needs it most.

Preserve reporting, audit, confidentiality, and dispute-resolution obligations after termination.

Review liability limits and recovery prospects together

A liability cap based on a few months of service fees may be commercially inadequate where the market maker controls a substantial token allocation.

Negotiate how the cap applies to repayment obligations, unauthorized transfers, fraud, willful misconduct, and confidentiality breaches. Review indemnities alongside exclusions of damages and defense-control provisions. These clauses should operate coherently under the chosen law.

Assess the counterparty’s financial capacity and whether collateral or a guarantee is appropriate. A contractual recall right does not ensure immediate recovery: in a U.S. bankruptcy, the automatic stay under 11 U.S.C. § 362 can restrict collection and enforcement, subject to statutory exceptions. Counsel should evaluate the arrangement’s specific insolvency treatment before relying on contractual remedies.

Finally, select governing law and a court or arbitration forum with enforcement in mind. Identify where the counterparty and its assets are located, and address access to urgent relief.

Kelman PLLC’s commercial transactions practice assists digital asset businesses with negotiating and documenting agreements. Before committing treasury inventory, contact the firm to review the proposed agreement, token allocation, trading mandate, and repayment structure.

Attorney Advertising. This article provides general information, not legal advice. Rights and obligations depend on the agreement, applicable law, and facts. Contacting the firm does not establish an attorney-client relationship.