Where Blockchain Meets Contract Law #1: KOL Agreements
Since 2018 I’ve been advising blockchain projects on contracting matters. The blockchain space does things a little differently, which makes contracting more interesting than you might expect. In this series I’ll share some of the unique features and contracting matters I encounter.
KOLs?
A KOL (Key Opinion Leader) is the person behind a social media account that gets a lot of online engagement. They’re the go-to marketing machines in crypto. The reason why projects want to get KOLs on board is quite simple: they can easily reach the end-users that actually spend money.
Since everyone in the space knows a friend of a friend who’s been scammed or hacked, people have adopted a mistrusting behavior towards traditional advertisements. You see an ad for a new token project and your immediate reaction is “yeah, right.” But an endorsement from a KOL you follow? That gives a project some form of credibility and legitimacy. Or at least the notion of it.
It’s not actually about trust in the traditional sense. It’s more like social proof at scale. If someone with 500K followers is talking about a project, it feels less sketchy than a random Google ad. Whether that’s rational or not is beside the pointโit works.
The incentives
Projects throw serious money at this. Rewards range from $50 to $50,000 for a single tweet. Yes, you read that right. One tweet.
Sometimes KOLs are offered a percentage of the future token supply or NFT collection instead of cash. Most KOLs sell these assets instantly, which tells you everything you need to know about whether they actually believe in the projects they’re promoting.
The legal risk: no disclosures
The main legal risk lies in the lack of proper disclosures, for both the KOL and the projects. KOLs rarely disclose that they’re being paid for tweeting, and projects prefer they stay silent. Everyone just pretends it’s organic enthusiasm.
Under the EU Unfair Commercial Practices Directive and Digital Services Act, both the influencer and the company are liable for misleading commercial practices. Penalties vary by member state, with some countries like France imposing high criminal penalties.
In the USA, the FTC requires disclosure of brand connections, with violations costing up to $53,088 per undisclosed post. And if the token happens to be a security? The SEC can seek forfeiture of all compensation plus civil penalties exceeding the original payment. Suddenly that $10,000 tweet costs you $50,000 in fines.
In recent years, KOLs and projects have actually become more receptive to the legal risks. Or at least they were, until presidents and celebrities started launching memecoins and NFTs. Then the market “normalized” openly profiting from project endorsements without any disclosures whatsoever. When a sitting president can shill a memecoin, why should a crypto influencer worry about FTC guidelines?
How is a KOL agreement structured?
In traditional influencer marketing, you’d expect to see clear deliverables and performance metrics, representations and warranties about follower authenticity, indemnification clauses for regulatory violations and disclosure requirements. You know, actual legal protections.
KOL agreements are not your average legal agreement. No 10-page contracts full of legal clauses. No warranties, no indemnification, no performance metrics.
Just a DM on X or Telegram.
They’re based on trust and the contract is incredibly simple: “We will pay you $10,000 for 4 engaging tweets about our project, to be posted each Friday from now. Please share your Ethereum address for payment after the last tweet.”
That’s it. That’s the industry standard.
No discussion of what happens if the tweets don’t perform. No clause about what “engaging” actually means. No protection if the KOL ghosts you after two tweets. No recourse if they trash your project the following week. No indemnification if regulators come knocking. Just vibes and a wallet address.
Would you agree to such a deal?
Most projects do. Because in crypto, speed matters more than legal protection. By the time you’d negotiate a proper contract, the opportunity’s gone. The token has already launched, the hype cycle has moved on, and that KOL is promoting someone else’s project.
So everyone operates on a handshake (or really, a Direct Message) and hopes for the best. Until something goes wrong. Then they realize why traditional contracts exist in the first place.
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