Regulatory Positioning
You own an asset.
Not a position
in a managed pool.
RealX was created within the ambit of existing base laws and is designed to be compliant with regulations. Every aspect of its construct rests on well-established legal precedents — and the construct, together with its technological manifestation, is the global intellectual property that drives the platform.
This page explains how that architecture reads under Indian CIS Regulations — and why the distinction between co-ownership of an asset and participation in a managed scheme is fundamental.
The chain of ownership
1
Identified Property
A specific, named asset
Commercial property, registered title, independent commercial value. The asset exists and has worth entirely independently of any platform, operator, or arrangement.
2
Legal Trust Structure
Holds title on behalf of investors
A registered Trust holds the asset’s title for administrative efficiency. Its role is transactional — it does not own the asset in any substantive sense. Ownership rests with investors.
3
Your Proportionate Beneficial Interest
Each investor holds a defined, proportionate beneficial interest in the asset. Your share is legally distinct from every other investor’s share and exists independently of the platform.
4
FRAX Units in the Property Token — On-Chain Record
Your ownership, recorded on blockchain
FRAX Units in the Property Token are not participation units in a scheme. They are the on-chain representation of a legal right vested through the Trust structure — digitally instantiating the beneficial co-ownership interest each investor holds.
What makes the architecture sound
Three principles every RealX product must satisfy
These aren’t compliance checklists. They are the substance tests that determine whether what you hold is genuine co-ownership of an identifiable asset — or a contractual claim against a manager.
PRINCIPLE 01
The asset has independent value
Every asset admitted to RealX must have identifiable, independent commercial value entirely separate from any platform, operator, or arrangement. If the operator were to exit, FRAX holders would be left holding a real asset of defined value — not a claim against an absent manager.
✓ Asset survives the platform
PRINCIPLE 02
The operator is a service provider
Operators, tenants, and managers are engaged on commercial service terms — defined fees, defined performance metrics, defined obligations. They are not profit-participants in the investors’ asset. The economic returns from the asset’s productive use flow proportionately to its beneficial co-owners.
RealX’s own principal fee is a Performance Fee — it accrues only on a successful investor exit. RealX’s economics are aligned with the investor’s long-term outcome, not with the asset’s operating cashflows.
✓ Ownership economics preserved
PRINCIPLE 03
Investors govern through the DAO
Each asset has an investor-level DAO (a digital governance body through which investors vote collectively on decisions affecting their asset) — constituted from the subscribed investors at the point of acquisition. The DAO holds decisional authority: operator selection and removal, major asset decisions, disposition. Investors are not passive contributors.
✓ Control rests with owners
Regulatory substance
How the RealX architecture reads against the four CIS conditions
The Indian CIS Regulations require the existence of a “scheme or arrangement” as a threshold condition before their four-part test is even reached. Two foundational propositions determine how the RealX architecture sits relative to that threshold.
Proposition One
There is
no scheme.
RealX does not create, offer, or operate any scheme. It enables a framework through which investors co-own identifiable assets. Co-ownership of an asset is not a scheme — it is ownership, in a fractional configuration.
The Indian CIS Regulations require the existence of a “scheme or arrangement” before their four-condition test is even reached. Where there is no scheme — as is the case with every RealX product — the framework does not engage at all. The four-condition analysis, set out below, is confirmatory rather than the primary defence.
“A scheme in which money is pooled and deployed by an operator is a fundamentally different proposition from investors co-owning an identifiable asset with commercial arrangements over it.”
Proposition Two
Aggregation
is not pooling.
When investors contribute to acquire a specific, registered asset, their contributions are aggregated toward a defined conveyance — each investor receives a legally enforceable beneficial interest in that specific asset.
Pooling means contributions go into a common fund, deployed at a manager’s discretion, across activities and assets not identified at the point of contribution. The destination of pooled money is the manager’s decision. The destination of aggregated contributions in a RealX investment is fixed at the outset — a specific, named asset.
“The distinction is not semantic. It is the difference between acquiring co-ownership of an identified asset and contributing capital to a managed scheme.”
The substance doctrine is symmetric. An arrangement structured with the substance of property ownership is not transformed into a scheme by virtue of being delivered through a platform, a trust, or a fractional ownership configuration.
Summary of the various legal opinions sought by RealX
The four-condition analysis below confirms what the threshold analysis already establishes. All four CIS conditions fail on the substance — but the more fundamental point is that the framework is not engaged in the first place.
The Four CIS Conditions — Applied to RealX
01
Are investor contributions pooled and deployed into a scheme?
Investor contributions are aggregated to acquire an identifiable, registered property — each investor receives a defined beneficial co-ownership interest in that specific property. This is aggregation toward conveyance, not pooling for scheme deployment. It is structurally equivalent to multiple co-purchasers jointly acquiring a single asset.
02
Do investors expect returns from a scheme?
There is no scheme from which returns are offered. Investors receive their proportionate share of what the asset’s commercial arrangements — leases, operational contracts — actually generate. No fixed or assured return is defined or promised by any arrangement. The expectation is the intrinsic one that any owner of any productive asset holds: that the asset will generate economic outcomes through its use.
03
Is the property managed on behalf of investors by a manager?
The property is managed by its owners, collectively, through the DAO. The operator or tenant does not manage on behalf of investors in the sense that the condition targets — they execute day-to-day operations under the constraints, directions, and oversight of the DAO. The operator’s tenure is contingent on the DAO’s continuing approval. Decisional authority over the asset rests with the investors who own it.
04
Do investors lack day-to-day control over management and operations?
Investors exercise control collectively through the DAO, with defined voting procedures, regular decision triggers, and substantive authority over all major decisions affecting the asset — including operator selection, removal, capital decisions, and disposition. Collective governance through a DAO with real decisional authority is the appropriate mechanism for investor control in a multi-owner asset structure.
The four CIS conditions are conjunctive — all four must be satisfied simultaneously for the framework to apply. The RealX structure does not satisfy any of the four. More fundamentally, the primary analysis does not reach the four conditions at all: because there is no scheme or arrangement in the regulatory sense, the Indian CIS Regulations are not engaged at the threshold. The four-condition analysis is confirmatory.
What RealX admits — and what it doesn’t
Two architecturally distinct approaches to tokenisation
Not all tokenised investment propositions are structurally equivalent. The substance of the underlying arrangement — not the technology — determines the legal character of what investors hold.
● Pathway One
Ownership-anchored tokenisation
The token represents a direct beneficial interest in an identifiable asset. The investor’s economic exposure is exactly the asset’s exposure, proportionately scaled. Nothing more, nothing less.
✓ Identifiable asset with independent commercial value
✓ Investor as direct beneficial co-owner of a specific asset
✓ Operator engaged on commercial service terms
✓ DAO holds decisional authority over the asset
✓ Returns are asset returns, not scheme-defined payments
✓ Investor rights survive any platform change
Every RealX product — across all platforms and asset classes — is Pathway One. This is a strategic and doctrinal commitment, not a product-by-product decision.
● Pathway Two
Scheme-participation tokenisation
The token represents a contractual claim against an operator or manager for a share of scheme-managed outcomes. The investor’s exposure is to the operator’s activities, not to an asset they own.
✗ No distinct identifiable asset at investor level
✗ Contributions pooled, managed by operator on investors’ behalf
✗ Operator profit-participant, not service provider
✗ Investors lack decisional authority
✗ Returns are scheme-mediated and operator-defined
✗ Investor rights contingent on operator continuity
RealX does not host Pathway Two products. Any tokenisation proposition brought to RealX that cannot be brought within Pathway One through reasonable structural adjustment is declined. The decline is not regulatory caution — it is doctrinal fit.
Across jurisdictions
The substance analysis is portable
India’s CIS Regulations and the United States Howey doctrine — the world’s most influential investment-contract test — arrive at substantially similar conclusions when applied to the same structure.
Both apply substance-over-form analysis. Both distinguish between pooled investment in operator-managed outcomes and fractional ownership of identifiable assets. The RealX architecture is designed to be sound under both frameworks.
Go deeper
The architecture in full
Legal Architecture
The Full Legal Framework
The Indian Trusts Act, 1882 structure, the 2-Trust design, the Governance Framework, and the three government instruments that converge on RealX’s architecture.
Structural Choice
Why Trust, Not SPV
The SPV model is widely used globally. Here’s why it creates specific risks for Indian investors that the Trust structure was designed to avoid.
The Token
What is FRAX?
FRAX is not a cryptocurrency. It is a Secure Digital Right — a digitally-signed record of your beneficial interest in a specific, registered property.