Tokenized Loyalty Rewards Program

Executive Summary

Purpose:
This summary explains why the eGolf Village digital loyalty rewards tokens (“eGolfTokens”) are not securities under U.S. law and how they may later become registered equity only after an SEC-qualified offering.

Overview

eGolfTokens are issued by eGolf Village, Inc. as digital loyalty rewards earned through platform usage—booking tee times, purchasing golf merchandise, participating in events, or engaging with partner services. Tokens provide immediate consumptive value and function similarly to loyalty points, gift cards, or membership credits.

**Why eGolfTokens Are Not Securities**

Under the Howey Test, a token is a security only if it involves (1) an investment of money (2) in a common enterprise (3) with an expectation of profit (4) derived from the efforts of others.
Because eGolfTokens lack these attributes, they do not qualify as securities.

1. No Investment of Money

Tokens are earned, not sold as investments. Even if purchased from another member, their purpose is consumptive use, not speculation.

2. No Common Enterprise for Profit

Token holders share no revenue, dividends, or profit rights. Tokens operate the same way as traditional loyalty programs.

3. No Reasonable Expectation of Profit

No appreciation or financial gains are promised.
Redemption value is fixed.
Tokens cannot trade on public exchanges.
No market-based price speculation is allowed.

4. Value Does Not Depend on Managerial Efforts

Utility exists at issuance—discounts, event access, and platform benefits—regardless of company performance.

Impact of Token Transferability

Members may transfer tokens to other members only within the eGolf Village ecosystem and at a fixed redemption value. Transfers are intended for convenience (gifting, sharing, redistributing rewards) and not for investment purposes.

The SEC has stated that transferability alone does not make a token a security when:

secondary-market speculation is prohibited
tokens retain stable consumptive value
transfers occur within a closed-loop environment

eGolfTokens meet all such criteria.

Future Equity Conversion (Optional and Regulated)

eGolfTokens may be converted into Class A Common Stock only after the Company secures:

Regulation A+ qualification,
S-1 registration, or
another SEC-approved offering.

Until such time:

tokens remain non-security utility rewards, and
no equity or profit rights attach to tokens.

The Token Conversion Equity Pool reserves shares solely for future conversions after registration.

Conclusion

eGolfTokens are non-security digital loyalty rewards under federal and state law. Transferability within the platform does not change this status. Conversion into equity can occur only after SEC qualification, ensuring full legal compliance.

FULL LEGAL BRIEF

Classification of Tokenized Loyalty Rewards as Non-Security Instruments & Conditional Equity Conversion Framework
eGolf Village, Inc.**

I. Introduction

This legal brief evaluates whether the digital loyalty rewards tokens (“eGolfTokens”) issued by eGolf Village, Inc. (“the Company”) constitute securities under U.S. federal or state law. The brief concludes that eGolfTokens, when structured as described, qualify as non-security utility tokens analogous to conventional loyalty points, gift cards, coupons, stored-value rewards, and membership credits.

This brief also analyzes the impact of allowing limited member-to-member transferability of tokens and outlines design features that preserve non-security classification.

Finally, the brief explains how, upon the Company’s satisfaction of certain milestones—including qualification of a Regulation A+ offering, filing of an S-1 registration, or another SEC-sanctioned public distribution—the tokens may be registered as securities and lawfully converted into Class A Common Stock of eGolf Village, Inc. in accordance with the Company’s whitepaper and governance documents.

II. Factual Background

The Company operates an ecosystem enabling golfers to book tee times, purchase merchandise, access private events, participate in community programs, and engage with golf courses and travel partners.

To reward participation, the Company issues eGolfTokens, which have immediate and ongoing consumptive utility, including:

Discounts on tee times, equipment, apparel, and services
Access to exclusive private events, tournaments, and member experiences
Priority access to partner offerings
Premium community features or digital membership upgrades

Tokens at issuance do not represent equity, voting rights, dividends, profit-sharing interests, or investment opportunities.

Transferability:
Members may “gift,” “share,” or “reallocate” tokens to other verified members within a closed-loop system. Tokens cannot be exchanged on external markets, listed on exchanges, sold to the general public, or traded for speculative gain. All transfers remain subject to:

fixed redemption value
platform-led transfer execution
no free-market bidding or price discovery
prohibitions on investment-driven transfers

Future Conversion:
Only after the Company completes a qualified SEC-registered offering may tokens be voluntarily converted into Class A Common Stock pursuant to the Token Conversion Equity Pool defined in the Company’s charter and whitepaper.

III. Legal Standard

A. Federal Securities Law – Howey Test

Under SEC v. W.J. Howey Co., 328 U.S. 293 (1946), a token is a security only if it satisfies all four elements:

Investment of money

In a common enterprise

With a reasonable expectation of profits

To be derived from the efforts of others

B. SEC Framework for Digital Assets (2019)

The SEC considers:

consumptive utility

marketing representations

transferability

price-stability controls

functionality at launch

avoidance of speculative secondary markets

C. No-Action Letters

Tokens were found to be non-securities in:

TurnKey Jet (2019)
Pocketful of Quarters (2019)

Both permitted transferability within defined parameters.

**IV. Legal Analysis

Why eGolfTokens Are Not Securities**

A. No Investment of Money

Token holders do not purchase tokens for speculative or investment purposes. Tokens are:

earned through participation
redeemed for pre-defined platform benefits
not sold as investment products
issued with fixed, non-speculative redemption value

Even if a user purchases tokens from another member, such acquisition is purely consumptive—not an investment.

B. No Common Enterprise

Consumers do not share in Company profits, revenue, or growth.
Tokens:

do not entitle holders to financial returns
do not pool economic interests
serve the same purpose as gift cards or loyalty points

There is no joint enterprise aimed at generating profit.

C. No Reasonable Expectation of Profit

This is the most significant factor.

eGolfTokens avoid this element because:

The Company makes no promises of token appreciation
No marketing materials suggest an investment or resale value
Tokens have fixed redemption value for goods/services
Tokens cannot be traded on public exchanges
Transfers are limited to a closed-loop ecosystem at non-speculative value
Future equity conversion is contingent upon full SEC registration, preventing pre-offering speculation

Transferability does not introduce an expectation of profit because:

resale prices cannot exceed face-value redemption

speculative bidding is not allowed

transfers are governed by Terms of Service prohibiting investment use

platform architecture prevents secondary markets or price arbitrage

member-to-member transfers exist solely for consumer flexibility and redistribution of rewards

D. No Reliance on Managerial Efforts of Others

The utility of the token is fully functional at the time of issuance.

Its value depends not on Company profitability or managerial success but on stable redeemable benefits:

discounts
event access
platform features
partner services

Users neither expect nor receive financial gain from the Company’s managerial efforts.

E. Transferability Does Not Convert Tokens Into Securities

Under SEC guidance, transferability is not determinative.

Transferable tokens are still non-securities when:

redemption value is fixed
transfer is limited to the platform
price speculation is prohibited
tokens are fully functional at issuance
transfers support consumptive use or community sharing

eGolfTokens meet all of these conditions.

F. Tokens Are Analogous to Loyalty Points, Gift Cards, and Membership Credits

Because tokens:

function as loyalty rewards
have immediate consumptive utility
cannot appreciate in value
are never sold as investments

They fall squarely within traditional consumer reward programs exempt from federal and state securities regulation.

V. Conditional Pathway to Security Status Upon Regulatory Qualification

The Company adopts a two-phase legal structure:

Phase 1: Non-Security Utility Token (Current)

Tokens are:

non-transferable outside the ecosystem

not speculative

not tied to financial performance

redeemable solely for consumer use

not registered with the SEC

Phase 2: Registered Security (Future, Conditional)

Tokens become eligible for equity conversion only after:

Regulation A+ qualification, or
S-1 registration, or
Another SEC-approved offering

At that time:

tokens become “investment contracts” only with full registration
holders may elect to convert tokens into Class A Common Stock
conversions draw from the pre-authorized Token Conversion Equity Pool
prior token activity remains fully compliant

Until such an event occurs, eGolfTokens remain non-security consumer utility tokens.

VI. State Securities Law Considerations

States generally follow Howey or analogous “risk capital” tests. Because eGolfTokens:

do not involve an investment of capital
do not pose speculative risk
do not involve profit-sharing
operate solely as a reward system

—there is no requirement for state registration or qualification.

Transferability within a controlled ecosystem does not alter this conclusion.

VII. Conclusion

Based on federal law, the Howey test, SEC guidance, state law, and the Company’s token architecture:

1. eGolfTokens Are Not Securities.

They are functional, consumer-oriented loyalty rewards with fixed, non-speculative value.

2. Member-to-Member Transferability Does Not Alter Non-Security Status.

Transferability occurs only:

within a closed-loop system
at non-speculative, fixed value
for consumer use, not investment

Thus, the tokens still fail the essential elements of an “investment contract.”

3. The Program Provides a Compliant Pathway to Future Equity.

Only after SEC qualification may tokens convert into securities.

4. The Dual-Phase Structure Maximizes Legal Safety & Strategic Flexibility.

eGolfTokens operate legally as rewards today while enabling a fully compliant future equity conversion event.

VIII. Recommended Disclaimer

“eGolfTokens are digital loyalty rewards redeemable for discounts and access to services within the eGolf Village ecosystem. They are not investment products, do not represent equity or financial rights, and do not create an expectation of profit. Tokens may be transferred solely within a closed-loop environment for consumptive purposes and cannot be traded on external markets. Only upon qualification of a Regulation A+, S-1, or comparable SEC-registered offering may token holders elect to convert tokens into Class A Common Stock, pursuant to the terms disclosed in the Company’s whitepaper.”