Nominee Agreement

nseidm1 · March 30, 2025, 4:07pm

Summary

This proposal seeks to formally adopt the Nominee Agreement for the FeeDistributor contract, located at address 0xD16d5eC345Dd86Fb63C6a9C43c517210F1027914. The Agreement designates the FeeDistributor contract as a nominee that holds legal title to distributed property on behalf of Curve Finance partners, while the partners retain beneficial ownership. This legal structure aims to enhance clarity, ensure compliance, and maintain transparency within Curve Finance’s decentralized framework.

Abstract

The Nominee Agreement formalizes the relationship between Curve Finance partners and the FeeDistributor contract. It establishes that the contract holds property as a nominee for the benefit of the partners, with distributions managed by its immutable smart contract logic. The Agreement clarifies partners’ entitlements, confirms their lack of direct control over the contract, and integrates decentralized governance for amendments and execution. By adopting this Agreement, Curve Finance aims to strengthen its legal foundation and partnership structure.

Motivation

Adopting the Nominee Agreement is a strategic step for Curve Finance for the following reasons:

*Legal Clarity: It defines the FeeDistributor contract’s role as a nominee, ensuring partners are recognized as beneficial owners of the property. This is critical for tax reporting, regulatory compliance, and ownership legitimacy.
*Decentralized Compliance: The Agreement aligns with Curve Finance’s decentralized ethos by leveraging blockchain-based governance for execution and changes, avoiding centralized legal dependencies.
*Transparency and Trust: Formalizing the nominee structure makes the system’s operations clear and verifiable, building confidence among current and prospective partners.
*Risk Mitigation: By reducing ambiguities around property ownership and control, the Agreement safeguards the partnership against potential legal disputes or regulatory challenges in the future.

This proposal is worthwhile because it bridges the gap between decentralized operations and real-world legal requirements, strengthening Curve Finance’s long-term resilience.

Specification

The Nominee Agreement includes the following key provisions:

*Nominee Arrangement: The FeeDistributor contract holds legal title to property as a nominee, acting solely for the benefit of Curve Finance partners.
*Distribution of Property: Property distributions are governed exclusively by the contract’s immutable code, ensuring consistency and fairness.
*Entitlement to Property: Partners’ shares are determined pro rata based on their stakes in the VoterEscrow contract.
*No Control Over Contract: Partners have no direct influence over the FeeDistributor’s autonomous operations, preserving its decentralization.
*Governance and Amendments: Any changes to the Agreement require approval via Curve Finance’s established governance processes, ensuring collective decision-making.
*Execution: The Agreement takes effect through a governance vote, with participation signaling consent.

These technical details integrate seamlessly with Curve Finance’s existing infrastructure, requiring no modifications beyond the governance vote.

For

*Legal Protection: The Agreement creates a robust nominee structure, minimizing risks related to property ownership disputes or taxation issues.
*Decentralized Alignment: It respects Curve Finance’s decentralized nature by embedding governance mechanisms into the execution process.
*Transparency: A formalized arrangement enhances visibility and trust, making the system’s operations publicly auditable.
*Future-Proofing: Adopting this structure prepares Curve Finance for potential regulatory scrutiny, ensuring compliance without compromising its principles.

Here’s the Nominee Agreement for Review: Nominee Agreement

Here’s the significance of the Nominee Agreement: The Voter Escrow Partnership

nseidm1 · March 30, 2025, 5:26pm

TLDR; If this proposal is put to vote it results in no code changes at all. This is a bridge of the legal world to DeFi applying the concept of Nominee Interest to the FeeDistributor contract. This concept has no meaning in crypto terms, has no impact on the function of any smart contracts, and technically is only a memorialization of the Nominee Interest given it’s reasonably argued that Nominee Interest is inherently existing based on the fundamental nature of smart contracts.

This memorialization of Nominee Interest strengthen the economic reality expressed in the Voter Escrow Partnership Memorandum. This is a proactive tax position within US Federal Partnership Laws given partnerships are what most closely align with the system that we all know.

Here’s the TLDR of tax treatment in consideration of Nominee Interest: Tax Treatment

For years folks have underestimated what DeFi means in traditional financial terms, and folks have not dug into the IRC tax laws written by Congress. Equally under investigated is court case presedents, and a long history of ruling that strongly favor significantly better tax treatment for partners of partnerships in the context of DeFi fundamentals.

I do try and refrain from saying explicitly the net effect of the economic reality of Voter Escrow, and the associated tax implications outright, but depending on reception to this proposal it may be necessary for me to explicitly state it outright. I’d like to encourage active engagement before resorting to writing strong statements though.

nseidm1 · April 2, 2025, 2:56pm

Step 1) Prove that it’s a partnership.
Step 2) Prove there’s no dominion enforced by technologic immutability.
Step 3) Prove that escrow distributions, no matter how acquired, are governed by nominee interest rules.

OneGoodDude · April 2, 2025, 11:50pm

I think this is a great contribution. I know that Noah has been researching this extensively. This is the benefit of DAO, if we agree and move it forward.

LlamaRisk · April 4, 2025, 12:17am

We acknowledge the thoroughness of the research and the extensive scope of the analysis, yet we believe that several key considerations merit a more detailed explanation for all parties involved.

How do you envisage formalizing the agreement in a manner that ensures it is both validly executed and legally enforceable? Clarity on the procedural steps, governing law, and dispute resolution mechanisms is vital to securing confidence among stakeholders.

We are also seeking an explanation as to why the Voter Escrow arrangement is being treated as a partnership for U.S. tax purposes. Such a classification could lead to substantial tax implications, especially for participants based outside the United States, who may face unforeseen liabilities or reporting requirements.

Further, we would like to understand whether you have examined the tax position of non-U.S. residents who might join the arrangement. Their obligations under U.S. tax law, potential filing requirements, and any exposure to withholding or other liabilities should be fully outlined to avoid complications.

Finally, designating the arrangement as a partnership could cause the group to be regarded as a general partnership by default unless another legal form is selected. This raises crucial considerations beyond tax matters, as general partnerships generally impose unlimited personal liability on each partner, including non-U.S. participants. It would be helpful to know whether you anticipate forming a specific legal entity or plan to proceed with an unincorporated partnership structure, recognizing the potential liability risks.

nseidm1 · April 4, 2025, 1:33pm

Thank you for taking the time for a constructive interaction.

A governance vote is more than enough for a formalization. I argue in the memorandum that the FeeDistributor contract already inherently possess nominee interest characteristics, meeting the formal requirements established in Commissioner v. Bollinger, 485 U.S. 340 (1988). Therefore, the governance vote is merely a formality, a memorialization of understanding of this statutory reality.

This proposed vote does not establish that Voter Escrow arrangement is to be formally treated as a partnership per IRS expectation. The memorandum asserts that partnership laws are already inherently applicable, breaking down how the laws are to be applied based on the technological reality. The status quo is that crypto broadly exists in a grey area, therefore the memorandum deconstructs the laws of Congress (IRC), and inspects substantive court case history, showing that the substance of the partnership is compliant with Congressional laws already. There’s substantive supreme court rulings that show a partnership is a partnership no matter its capacity or incapacity to file 1065s or K1 forms. IRS forms are a compliance expectation of the IRS, but the IRC and common law is a different story that warrants the deconstruction provided by the memorandum.

With regard to international partners, that is not the inspection of the memorandum. But, neither the memorandum nor the vote formalize treatment as a partnership from an IRS compliance perspective in any case. The memorandum does not change anything about the contracts, nor the voter escrow arrangement, it merely is an application of existing laws to the economic reality of what already exists. Implications of the economic reality, and the application of existing laws is what the memorandum breaks down.

The vote specifically does not designate the arrangement as a partnership, it is entirely focused on nominee interest rules, inherently already existing, which technically is not conceptually relevant to a partnership. Nominee interest is something unto itself.

With regard to partner liability, that is exactly what the memorandum is designed to conclude. Specifically aligning with nominee interest rules to prove that current law affords much more favorable reporting and tax treatment as compared to what is commonly understood.

Overall I believe these three bullets clearly express the overarching goal of the memorandum:

Prove that The Voter Escrow Partnership achieves the qualifications of a partnership independent of formal compliance with IRS reporting expectation; achieved by aligning with the Congressional IRC established in §7701(a)(2) and statutory precedents from the Supreme Court and certain inferior courts.
Prove there’s no Partnership dominion over property or money, therefore no income, enforced technologically by smart contract immutability. The focus here is explicitly the application of Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955) to prove the technologic reality in the context of dominion.
Prove that escrow distributions to partners, no matter how acquired, are governed by nominee interest rules with form established in Commissioner v. Bollinger, 485 U.S. 340 (1988).

The net result in Curve terms, is that “claim” button presses aren’t what’s commonly understood. It’s a claim from an escrow contract with inherent nominee interest characteristics. It’s a distribution of property where basis is preserved from initial deposit by third parties that engage peer to peer. If basis is preserved from the time of deposit by third parties, and partners retain that basis because of nominee interest, the point of the memorandum is understood in partner tax liability terms.

What is income? What is property? What is dominion? Ironically these simple questions warrant a not so simple explanation. 39 pages are currently required to explain in detail.

Given the depth of the memorandum’s content I can appreciate it’s complexity to fully digest the implications in legal terms. I’m more than happy to explain, elaborate, and clarify anything.