WLFI: The token is the product
A business that gives away 75% of what it raises isn’t selling equity — it’s selling a product
Artwork by Crystal Le
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“People who are smart love my licensing deals because you don’t have any risk [and] you make tremendous amounts of cash.”
— Donald Trump
World Liberty Financial’s WLFI token became transferable for the first time on Monday, making the Trump family roughly $5 billion wealthier.
On paper, at least.
The 22.5 billion tokens that World Liberty granted to the Trump family’s DT Marks DEFI LLC are restricted, so they can’t be sold for the time being.
But the Trumps don’t need to: When World Liberty sells the WLFI tokens it created, 75% of the proceeds go to DT Marks DEFI LLC.
This is…unusual.
WLFI is the governance token for World Liberty Financial, which makes it a kind of pseudo-equity in the DeFi project.
If so, the arrangement between World Liberty and the Trump family is not just unusual, but a historic first — as if Steve Jobs personally pocketed 75% of the proceeds when Apple sold shares to investors.
In another sense, however, it’s only the scale of the profit-sharing that’s historic — because the arrangement between World Liberty and the Trump family is perhaps best understood as a licensing deal.
WLFI tokens have no claim on revenue or assets, which makes them look less like equity in World Liberty and more like a product World Liberty sells.
From that perspective, it looks like World Liberty is paying a 75% licensing fee to sell Trump-branded crypto tokens.
This has been the Trump family’s primary business strategy for some time now.
Long gone are the days when private citizen Donald Trump was in the business of developing real estate projects himself, like the Grand Hyatt in 1978 and Trump Tower in 1983.
After his Atlantic City casinos had failed and the Plaza Hotel had been surrendered to his lenders, Trump no longer had access to the capital required to build and then sell or operate large-scale developments.
So he pivoted to building and selling his brand instead.
In the 2000s, the Trump Organization became a global licensing empire, with the then not-yet president lending his name to projects like Trump SoHo (NYC), Trump Ocean Club (Panama) and Trump Tower Manila — all of which were financed and built by others.
This is a much better business than building things: No capital is required, there are no bank loans to worry about, there’s no operational risk and the profit margins are near 100%.
Investors love these kinds of asset-light businesses. It’s why Marriott International (which mostly licenses its brand) trades on 30x P/E, and Host Hotels & Resorts (which owns Marriott-branded hotels) trades on 17x P/E.
The president loves them, too. In 2016, Trump told Fortune he had “over 121 deals worldwide for licensing,” with “no investment” required.
I’m guessing that most of these, like Trump Steaks and Trump bottled water, probably did not work out.
(Trump-branded bibles appear to be a winner, though.)
But licensing deals don’t even have to work to be profitable.
In 2012, for example, Trump collected $2.5 million in licensing fees for a real-estate development in Azerbaijan that was never completed.
In 2017, The Washington Post tallied up his licensing deals and estimated the president had earned at least $59 million by monetizing his name — while noting that it raised “ethical questions around Trump’s involvement with his businesses while in office.”
(Such innocent times, the 2010s, when just $59 million could prompt questions about ethics.)
But nothing has monetized the Trump name quite like crypto: The family has made roughly $500 million from its licensing deal with World Liberty Financial.
“It’s one of the more successful things we’ve ever done,” Eric Trump told The New York Times.
It’s easy to see why: The licensing fee the family receives on Trump-branded tokens is multiples greater than what they receive on Trump-branded real estate.
In return for lending their name to the never-completed Trump Tower in Batumi, Georgia, for example, the Trump Organization would have received 12% of condo sales — far below the 75% they receive when World Liberty sells its WLFI token.
Similarly, in return for lending his name to the Trump SoHo hotel, Trump received an 18% ownership share — less than half the 40% share of World Liberty Financial the Trump family was granted for its participation.
And the 22.5 billion WLFI tokens the Trumps additionally received have no equivalent outside of crypto.
Why so much?
I suspect even President Trump would say it’s because he’s president.
Before becoming president, Trump explained that foreign developers paid for his name in part because it helped get their projects approved: “I help them a lot,” he told Vanity Fair. “If they need zoning, and they say they are doing a Trump job, every single time they get their zoning because the government wants Trump.”
This presumably works on the SEC, as well — and maybe even the DOJ.
As of today, WLFI has a fully diluted value of $23 billion, and a cynic might say that is a measure of the value of being in the good graces of the president of the United States.
World Liberty would dispute that, of course — I’m sure it’d say instead it’s because it’s “upgrading finance for the digital era.”
But a business that gives up 75% of the money it raises just to license a name can’t think very highly of its own abilities.
Either way, WLFI’s immense valuation suggests it’s been money well spent.
When the president said during his 2016 campaign that the Trump brand was worth $3.3 billion, no one took it seriously.
But licensing it to crypto has made it worth much, much more.
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