TradFi Labs™ | RESEARCH DIVISION
September 4, 2025
Updated September 6, 2025 — This report has been revised to include additional discussion of NASDAQ Rule 5635(d), the Minimum Price Condition Rule, in the context of digital asset treasuries.
DISCLOSURES
Open World provides strategic advisory, strategy design, and execution expertise in connection with the implementation of varioustoken treasury strategies and public markets strategies. Open World does not provide advisory services in connection with any securities the Company may issue or in connection with fundraising to support such implementation of a token treasury strategy, or otherwise acts as a broker-dealer, investment advisor, placement agent, underwriter, or in any other capacity requiring registration or licensing with the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the Commodity Futures Trading Commission (“CFTC”), or any other governmental or self-regulatory body. Open World does not and shall not provide any legal, tax, investment, or accounting advice.
UNDERSTANDING NASDAQ RULE 5635 IN THE CONTEXT OF DIGITAL ASSET TREASURIES
Digital Asset Treasuries (DATs) are one of the most talked-about innovations in the convergence of blockchain and capital markets. They create a pathway for token foundations to contribute native tokens into a NASDAQ- or NYSE-listed company in exchange for equity, often alongside PIPE investors contributing cash or USDC. In doing so, they give public investors an avenue to gain regulated equity exposure to digital assets, while providing foundations and projects with a mechanism for capital formation that scales.
The model is powerful because it combines two worlds: the network effects of a token ecosystem and the capital-raising flexibility of the public equities markets. But with that innovation comes scrutiny, particularly from exchanges like NASDAQ. And recently, one rule has emerged as central to the discussion: NASDAQ Listing Rule 5635.
Open World was the first advisor to directly confront how Rule 5635 applies to DATs, engaging with NASDAQ to clarify the treatment of digital assets under the rule, and has been at the forefront of shaping these strategies. Our leadership was recently featured on Bloomberg to discuss the rise of Digital Asset Treasuries, underscoring how these structures are no longer theoretical. Instead, they are moving into the mainstream conversation.
WHAT RULE 5635 SAYS
Rule 5635 sets out the circumstances where a NASDAQ-listed company must obtain shareholder approval before issuing stock. It covers four key areas:
1. Acquisition Rule (5635(a)): Issuing stock in connection with the acquisition of the stock or assets of another company, if the issuance equals 20% or more of the company’s pre-transaction outstanding common stock or voting power.
2. Change of Control Rule (5635(b)): Issuing stock that would result in a change of control of the listed company.
3. Equity Compensation Rule (5635(c)): Issuing stock to officers, directors, employees, or service providers as part of an equity compensation arrangement.
4. Private Placement Rule (5635(d)): Issuing stock in a private placement at less than the “Minimum Price,” if the issuance equals 20% or more of the pre-transaction outstanding common stock or voting power.
For DATs, the two most relevant rules to consider, and the ones that many companies are grappling with, are: the Acquisition Rule and the Minimum Price Rule.
The Acquisition Rule requires shareholder approval before issuing stock in connection with acquiring assets if the new issuance would be 20% or more of the company’s outstanding equity or voting power. At the heart of the debate is a straightforward but important question: when a public company acquires digital assets such as Bitcoin, Ethereum, or an alt token, are those digital assets treated as “cash” or as “assets”?
• If they are treated as cash, the transaction falls outside the rule and no shareholder approval is needed.
• If they are treated as assets, then shareholder approval is required once the 20% threshold is triggered.
The Minimum Price Rule requires shareholder approval for private placements of over 20% of the company’s outstanding equity that is less than the “Minimum Price” of the common stock. The “Minimum Price” under NASDAQ Rule 5635(d)(1)(A) means a price that is the lesser of (i) the closing price of the stock immediately preceding the signing of the binding agreement for the transaction, or (ii) the five day average of the price of the common stock, of the same. Compliance with this Minimum Price Condition is especially important where a DAT contemplates an in-kind contribution of digital assets, whose value may fluctuate across exchanges and trading venues.
This gets to the crux of the issue that the NASDAQ and NASDAQ-listed digital asset treasury companies are actively confronting: how to appropriately value tokens — that are often USD- denominated on exchanges but are otherwise not treated as cash equivalents by NASDAQ — for an in-kind exchange of common stock when doing so may risk violating the Minimum Price Condition.
NASDAQ’S INTERPRETATION OF DIGITAL ASSETS
Through direct engagement with NASDAQ during one of the first large-scale DAT transactions, Open World was in contact with NASDAQ to ensure that the transaction complied with NASDAQ’s evolving framework for how digital assets are treated:
1. Under Rule 5635(a): digital assets, like cryptocurrencies, are treated as “assets.
2.Under Rule 5635(d): token prices can be derived from recognized digital asset market data providers (such as established crypto pricing services).
For now, this means that when token contributions are significant enough to represent more than 20% dilution, shareholder approval is mandatory. While this point was recently highlighted in The Information’s article NASDAQ Steps Up Scrutiny of Companies Loading Up on Crypto, Open World was the first advisor to confront the issue directly with NASDAQ which enabled active discussions with NASDAQ about these two rules.
When The Information published its article, the stock prices of several major public companies holding large amounts of digital assets fell, reflecting short-term investor concern that the NASDAQ had created new rules limiting the creation of digital asset treasuries. But this should not be read as a fundamental threat to DATs. Rather, it highlights the importance of understanding two aspects of Rule 5635 in a new but rapidly evolving branch of public capital markets that NASDAQ (and others) are working their way through.
Since the article by The Information was published, some market participants have speculated that NASDAQ may be considering amendments or new rules to govern how digital assets are treated, with some concerned that these new rules could effectively slow down or even limit the development of digital asset treasuries. But there is limited objective evidence to support these concerns. Instead, NASDAQ is likely to continue to take a facts-and-circumstances approach when assessing the applicability of its rules to digital assets, and maintain a continued focus towards protecting shareholders while maximizing commercial visibility for the exchange.
WHY THIS MATTERS FOR DAT STRUCTURING
At first glance, treating digital assets as “assets” or complying with the Minimum Price Condition might seem like it complicates Digital Asset Treasuries. In reality, it doesn’t change the fundamentals.
• PIPE transactions remain fully viable, allowing both tokens and cash to be contributed in exchange for equity.
• Tokens can still sit on the balance sheet of a listed company as a core part of its treasury strategy.
• Capital formation flywheels are still enabled, particularly when paired with S-3 shelf registrations and ATM programs.
The key difference is that shareholder approval requirements need to be factored into deal design. That means careful attention to dilution thresholds, transaction sequencing, minimum prices, and how equity is issued relative to the token and cash contributions. In some cases, other parts of Rule 5635, such as the Change of Control provision, may also need to be considered, depending on the size, pricing, and structure of the transaction.
OPEN WORLD’S ROLE
Our early engagement with NASDAQ and the structuring of a major DAT means we have firsthand knowledge of how the exchange is applying 5635 (among other rules), and how to structure transactions that are compliant while still achieving strategic objectives.
For projects and foundations considering a Digital Asset Treasury, the takeaway is clear: Rule 5635 is not a roadblock, it’s a design consideration. With the right structuring, DATs remain a powerful strategy for bridging digital assets with the public markets. Open World regularly publishes market research and TradFi Labs™ Research on its website (www.openworld.dev) and via Twitter (@_openworld).