Marketplace Legal & Risk 101 Workshop

Welcome to our Everything Marketplaces workshop, which is going to be on legal and risk for marketplaces. So legal and risk is a topic that's of course relevant to us all when building a marketplace. So we're going to be covering this today and some of the key considerations when starting a marketplace. Jeremy Gottschalk will be leading the workshop, and most of you probably know him from some of his posts in the community. But if not, he's a leading mind when it comes to legal and risk for marketplaces. He also runs the Marketplace Risk Conference and recently published his book, Bulletproof Your Marketplace, which I highly recommend. So as a quick note on the format before we jump into it, our workshops are about 20 to 25-minute presentations that'll be followed by group Q&A. So if you have any questions throughout the workshop, you can post them in the Zoom chat, and you can turn on your camera and use the Zoom raise hand functionality so that way you can call on you when we get to the group Q&A after the presentation. So with that said, thanks for joining us today to lead the workshop, Jeremy, and I'll let you start with the brief intro and take it from here.

Thanks, Mike. Hi everybody. As Mike introduced, my name is Jeremy. I am the founder of Marketplace Risk. I've been practicing law for a little over 20 years. I was an IP lawyer, technology lawyer, and recently wrote a book, which I'll talk about at the end, designed for founders and leadership teams to kind of issue spot legal and risk kind of right out of the gate. And so this workshop, I'm gonna go really quickly just because of the amount of information. Certainly the Q&A is a really good point to ask any questions if, if you have any related to this. And then at the end, I'll provide my contact information. You can always find me in the community. But you— I provide my email in case you have any So I'm gonna run through essentially, you know, these 12. I'll, I'll go pretty quickly through some of them just for the sake of time. In some cases, for example, like tax and compliance, if you have specific questions, we have a really good resource in the community. His name is Nick Furtwängler. I will refer you to him. We've got some, you know, privacy lawyers, Jeremy Siegel, who is, you know, a really good resource. Better at this than me. So, you know, I know enough to hang myself, and I can kind of wiggle my way through a conversation. But especially when you have very specific questions, I will gladly kind of refer you. So most of you are past this, so I'm not going to spend much time. But incorporation and governance, obviously, when you incorporate, it's super important, in large part because it protects your personal assets. I get a lot of questions about the entity type, the location of incorporation. Long story short is it doesn't really matter. You can always change it. It doesn't cost a whole lot. Delaware seems to be a really good choice. Your state of residence is a good choice. And beyond that, you can start as an LLC, convert to a C corp. LLC is a pass-through, so you don't pay taxes at the corporate level. C corp, which you will probably convert to if you take on fundraising or you take on investors, it's taxed at the corporate level and at the individual level. But just to get out of the gate, an LLC in Delaware will, will kind of get you going, and they have really easy filing requirements and processes. The next question I get a lot of is insurance. The reason you want insurance is because it protects your business in case you get sued, defamation, libel, any sort of liability that stems from the underlying business. Question I get a lot is, what insurance should I get? You want what is referred to as a CGL, a commercial general liability policy. As a marketplace, it's really interesting because you're, in many cases, you're competing with or kind of innovating in legacy industries. Insurance companies will use actuarial models from your kind of competitive or the legacy industry. So it's super important that your broker understands marketplaces. I can't, I can't emphasize this enough. I have plenty in my network. They will simultaneously work, provide information for free. They're great, great resources. And it also doesn't cost you anything. So I highly recommend when you're going out for insurance, talk to 2, 3, 4, frankly, as many— as much patience as you have to talk with insurance folks. I recommend doing it because, you know, they really understand. If they understand marketplaces, they really understand the risks and the blind spots and all of that. They will talk you through the different policy types. I won't spend time here, but the commercial general liability is the first place to start. And it's again, super important that the broker markets your Your marketplace accurately to the insurance markets so that you pay a premium that makes sense and that you're not rated on kind of the legacy industry that you're— that you fall in. When you're structuring your insurance program, I won't go into each of these. Just know that you can negotiate these different points, right? So I can share, and Mike, I can follow up with a checklist that basically has all this information, or we can share the deck. But ultimately, when you When you talk to an insurance broker, you don't even have to research these, each of these points, just say them like you understand them. What's a deductible versus retention, et cetera? They'll walk you through it. But these are the really, the really high-level terms within your insurance program that you really want to focus on and that you can negotiate and that will really impact your premium. So tax and compliance. This is a question again, I refer out in large part because the tax code is complex. Suffice it to say that there are more and more states, I think almost all states now that have what are referred to as marketplace facilitator tax obligations. Essentially, as a marketplace facilitating the transaction, the purchase and sale of goods and services, you have to, in some cases, collect and remit sales tax. The good news is, is you don't necessarily need a tax lawyer to help you with this. There's TaxJar, and Stripe manages some of this for you. So there are tools that can do this for you. You just have to be aware of it because there's features and functionalities within your payment processing platform that you need to opt into. And ultimately what they'll do is they'll automatically collect the sales tax and then they'll remit the sales tax to the appropriate state agency. You've got— most people are aware by now about the 1099-K and 1099-NEC. The 1099-K is going to be for the sale of goods. So like a Poshmark, for example, or an OfferUp, they're going to issue 1099-Ks to their sellers that meet a certain threshold. Where you have contractors where you're collecting payment and you're paying the supplier, the workers, you're going to issue a 1099-C if you meet the threshold, generally over $600 in a given year. With the 1099-K, interesting to note that that threshold has changed. It used to be, I think, $6,200 transactions to now something like $600 and no transaction limit. It's evolving. It's going to move back to that, but there's a lot of pushback. So long story short is whatever payroll platform or payment processing platform you use, explore the reporting functionality because you— this is not something that should be manual. for you by any stretch. And then income and gross receipts tax requirements. Income is just like it sounds. You know, if you are in a loss for the first few years, you're not going to pay an income tax. You're not going to pay tax based on income because you're still going to be in a deficit. Gross receipts tax has nothing to do with your— whether you're operating at a deficit or not. Gross receipts is literally what it says. What are your gross receipts? You pay a percentage in— by way of tax on your gross receipts. Not all states have them. But it's just something to be aware. Any questions about tax, shoot me a message and I'll connect you with Nick, usually within 30 minutes or less. He can kind of clarify everything and, and, you know, certainly you can determine if you need more support. But generally speaking, most of the payment processing tools can automate most of this. Okay, so the Communications Decency Act, Section 230, is really why you are doing what you're doing. A little bit of history on this, because it's really important. In 1996, they passed a law called the Communications Decency Act. And within it, there's a section called Section 230, which protects interactive computer services from liability for the online speech of their users. Okay, so think back in the days of like AOL chat boards, message boards, and chat rooms. If somebody were to defame somebody else, The person who was defamed couldn't sue AOL in that case, or they could, but it would get dismissed. Courts since then have interpreted this Section 230 to mean both online activity and offline activity. So online activity could be defamation, you know, libel, slander. Offline is just like it sounds, right? It's a physical good that's mailed that, you know, has some sort of contagion in it, is damaged, injures somebody else. could mean for services, right? You connect on a platform for in-home services, and the cleaning person steals your wallet, or the homeowner injures the cleaning person. Section 230 essentially protects you as the platform from liability for whatever happens online or offline. This law is a federal law that preempts all state laws, which means that no state can pass a law that essentially conflicts with this. So it's very, very powerful. And, you know, the other part of this protection is it doesn't mean you can't get sued. It just means that if you do get sued, the lawsuit should be dismissed before you get to the merits of the case. So it's, it's super important to understand and be familiar with this, not necessarily kind of to the level that probably I am, or some lawyers are in this space, but just understanding how this protection is kind of granted and how you can lose it. Ultimately, the, the letter of the statute really focuses on who is the author of the content. So if you get in between user communications, or, you know, in some cases you, you're creating dropdowns with fields already completed, etc., you can start messing with your 230 protection. And this is kind of the get-out-of-jail-free card for tech companies. You may have seen Um, really this came into purview after the Cambridge Analytica, um, kind of Facebook, uh, debacle and, and people trying to understand like why these platforms aren't liable for things, et cetera. And so this is ultimately it. Um, and so, you know, if you have questions about this, certainly reach out. But, um, this is, this pretty much explains why all of 90-something percent of the kind of marketplace unicorns are, um, based in the US. A lot of other jurisdictions kind of replicate it, but not to the extreme that we have here. So where the CDA ends and your kind of your, your terms of use kind of pick up, when I talk about kind of belt and suspenders for kind of liability and protection, right, the beginning is the CDA because what it's going to do is it's going to automatically dismiss a lawsuit against you for anything that happens between your users. But let's say there's some copy, there's some representation, there's some language on your platform that's, that's talking about the quality of a service or of the goods that are going to be shipped or received, et cetera. You can limit, further limit your liability with your terms of use, also referred to as terms and conditions, terms of service, et cetera. The super important thing here, if you take nothing away, right, is You want to make sure that your users agree to your terms of use with some action. Mostly you will see an unpopulated checkbox that they have to check before proceeding, right? So it's unpopulated checkbox. It says, I agree to the terms of use, terms of use hyperlinked to the actual copy of the terms of use. That's, that's a really good form. The best form is what you're accustomed to when you really transact with Apple, right? They have this scroll wrap where you have to scroll through all of the terms, accept it, then they offer to send it to you to be able to print it, etc. It's a little bit of overkill probably for any of our purposes or your purposes, but that's kind of like the Cadillac of the terms of use agreement. And, but really all you need is an unpopulated checkbox. On the backend, you want to record all of that information, the IP, the date, the time, the email, etc., because if someone sues you and you say, hey, you know, the CDA didn't work, but we have our terms of use, our terms of use limit our liability, you have to prove that they agreed to your terms of use. So on the back end, you're going to want to collect that information. Another point that I want to bring up is when people think about litigation or arbitration, so if there's a dispute, I think that, you know, historically, or certainly in our lifetimes, There's been this real push for arbitration because it's always thought to be cheaper, more efficient, et cetera. It's simply not the case anymore. In arbitration, you can also limit class actions. Unfortunately, now these plaintiffs' lawyers are getting crafty, and so they have what are called mass arbitrations, where they literally Xerox copy the complaint, and in arbitration, they refile it 300, 400, 500 times. So functionally, it's the equivalent of a class action lawsuit. Litigation I like more because you can determine You know, the city, the state, essentially the courthouse where anything must be filed. And you can, you can create kind of hurdles that prevent frivolous lawsuits. And ultimately, that's what you're trying to do. Privacy policies. So it's really important that you don't connect your privacy policy to your terms of use. What does that mean? A lot of times you will see when people are registering, or when you're registering for a mobile app or a website, It will say, I agree to the terms of use and privacy policy. You do not need agreement to your privacy policy. Your privacy policy, you simply need to notify your users of your privacy practices. End of story. You do need to get agreement to your terms of use because that's a contract. If you breach your privacy policy, meaning if you say we will never sell your information, etc., but you sell the company and thereby sell the— therefore sell the information, right? You've created a breach of contract claim, which you don't need or want to do. So your privacy policy is simply should say, for information about our privacy practices, see our privacy policy hyperlinks. End of story. Couple things you want to pay attention to, and you can look these acronyms up. GDPR, which is the European Union's privacy regulation. CCPA and CPRA are in California. CCPA and CPRA are essentially the strictest privacy regulations in the US. We do not have a federal law. It's being worked on right now with NetChoice and a bunch of other organizations. Who knows if it'll ever happen, but Currently, you, we have like what we refer to as a patchwork of laws. If you follow GDPR, CCPA, sorry, GDPR outside of the US, CCPA and CPRA in California, you should be good to go. It's much easier to comply than you think. If you Google those terms, you'll find checklists, you'll find kind of how-tos. It's super easy. This is definitely something I would not hire a lawyer to do. Certainly I can answer questions about it, but this is, this is super easy to implement. Digital identity and fraud prevention. So this is when I talked to Mike about doing this. One of the things we talked about is kind of stepping up this information along with kind of the, the, the stage of the marketplace. And so kind of the beginning, the incorporation, the insurance, those things, those are things that you need to think out, think of right out the gate. When you— the next kind of sections we're going to talk about are things you should be thinking about, but, and I think will become mission critical as you scale, but may not be or should not be a barrier to kind of shipping the MVP, for example. The, when you think about kind of risk and liability from the beginning, you want, you want to make sure you've got your CDA 230 protection, you've got your terms of use enforceable, you want your insurance policy backing you up. Now, this is more kind of product, product design, UX, things like that. Digital identity is really the cornerstone of what we'll call trust and safety, right? So understanding who your users are, and it becomes really, really important when you're— when people start to leverage your marketplace for nefarious reasons, right? So put it this way, if somebody is not using their proper identity, they're up to no good, right? I think that the days of like total anonymity, particularly anonymity, particularly when you're transacting on a marketplace, they don't really go together. You really need to know who your users are because, number one, obviously they're transacting on your platform and you kind of have that obligation. But number 2, you want to make sure you keep out those nefarious users. So it's important to understand what the different kind of what we'll call signals are, right? So you can identify people by their By data, by documents, by their devices, etcetera. And again, this is something you can easily Google. I'd be happy to walk you through it. There's a ton of digital identification vendors and solution providers out there. So it's kind of hard to wade through it all, but they don't all do the same thing. They mostly have kind of a similar goal, but for different, different solutions work in, in different environments and for different types of platforms.

AI.

I mean, this is kind of all the rage right now. One thing that's super, I think, important is you've got AI tools like ChatGPT and, and kind of all of the ones that we're familiar with that you can, you can integrate into your solution, but you can also create your own. Right? Particularly when you're, you have sufficient amount of data from, for transactions on your own platform. In fraud prevention, for example, when you're looking, when you're trying to detect and kind of decision different type of of transactions. Obviously, at the very beginning, it's a little harder to do when, when your dataset is, is small. But it can be super powerful if you have the capacity to kind of create your own dataset and leverage your own, your own platform. But understand that a lot of these vendors and solution providers are using AI now for the identification and prevention of fraud and abuse. And, you know, there's really important, especially for platforms that have a lot of data, that you teach your, whatever your tool is based on your data. A lot of times what we'll see is they'll, they'll use some sort of a fraud tool, but the tool has been taught with somebody else's data, and it just, there's kind of, there can be misalignment. Ultimately, at the end of the day, it's just kind of more time and energy for you to get it right. Kind of moving along, trust and safety, you've probably heard a lot about Meta. They've, they've kind of essentially booted their content moderators. They've gone to kind of these community notes and X, etc. So I think trust and safety was probably top of mind for a lot of the larger platforms a few years ago. I think there's been a kind of a turnaround or a reversal on much of that. What's important here though is not to follow the leaders, but rather to understand kind of the risks on your platform and adopt processes and procedures that make sense for your platform. And, and again, not what the quote unquote leaders are doing. I won't belabor this too much. I think a lot of it's self-explanatory, but I, I, you know, often, certainly in the, in the early days of the internet and of marketplaces and e-commerce, This wasn't even— this term hadn't really even been coined yet. Now it's obviously a much, much bigger kind of concept, and now has evolved into a discipline. There are conferences around it, etc. But this is something I would think— I think you want to be thinking about from the beginning. But, you know, I know this is being recorded, but I always tell people, don't let the tail wag the dog when it comes to this. I'm not gonna go too much further into this. Some of the tools to think about when you're trying to screen your users, there's background checks, there's all different types of Reference checking, social media checks. There's a lot of products out there. Some are better than others. There are risks with all of them. So if you're implementing any type of background check or screening tools, it's worth a conversation, and it's worth a conversation with somebody who's implemented them at a platform before. These types of conversations, you're not going to get a straight answer, or probably a legitimate answer from the sales teams at these various companies. I hate to say it, but But they're very aspirational products, and I think they're on the right track, but they're not perfect. And so you want to really understand kind of the pitfalls here. Content moderation. This is obviously something you're going to be thinking about as you go and as you kind of scale your trust and safety. The reality is you can find no shortage of different policies. Eric Goldman, who's a professor at UC Santa Clara, I recommend all of you follow him. He blogs about all of the precedent in the legal cases that have to do with internet in general, but a majority of them, a vast majority, have to do with social media and marketplaces. It's a free blog, and he writes in it. It's super— you don't have to be a lawyer to understand it. You can kind of get the gist of most of it. Crisis management. So as I tell people, it's not if something bad is going to happen, it's when, right? When you scale, statistically, something bad is going to happen. Coming up with a plan ahead of time. There's some comments here I won't I won't dig into them, but really understanding like when the worst thing happens, there's an injury on your platform or some horrible, some product was injured, injured somebody, the media's calling, it's something salacious. You wanna have a plan and you don't wanna come up with that plan on the fly. Again, and Mike, this might actually be something worth doing a workshop on because this is one of those things where almost nobody's prepared until after it happens when, you know, kind of everybody's a Monday morning quarterback, particularly your investors. And so this is something that it's worth spending a little time just to have kind of that comfort that you understand kind of who does what in the face of some media story or some crisis. Okay, this is getting to the end here. Incidents, claims, and kind of legal threats. So if you've done everything kind of on the previous slides, right, something bad is still going to happen. Some lawyer is going to threaten you. I would call extort, right? They're going to say, you know, if you don't settle with us, we're going to go to the media. Number one, who cares? Because that's free media. And so go with it. Ultimately, if you've got an insurance policy, you need to understand when a lawyer reaches out to you, if you have to notify the insurance company. If you don't notify the insurance company of the incident or of the, the legal threat or demand, you could lose coverage. So it's super important when something bad happens to understand how that interplays with your insurance policy. You can't sit on that information and then 6 months later, you know, tell your broker when it's time for your renewal, because the insurance company likely will say, sorry, we're not covering it. So you need to understand with your insurance company, if you have general liability or any insurance, what triggers notification to the insurance company, and then like what information should you be collecting? What's the threshold? When do you share it? And kind of what requirements the insurance company has.

That was a super helpful presentation. I know you packed it in there. So really appreciate, you know, walking us through it, Jeremy. And I know we have some questions that founders sent in advance. So I'll jump on here and start by asking a few that they sent me. And I'm sure we might have to kind of edit out some of the other questions from founders live here on the group Q&A. But, you know, to start with, with the first, it was around at the earlier stages and, you know, founders looking to learn more about, like, initially having a co-founder agreement. So what are some of the best practices when it comes to having co-founder agreements and also for potentially adding another co-founder to the team?

So let's work backwards. Whenever you're adding anybody to the team and there's equity involved, you know, I look at any sort of co-founder relationship like a marriage, and I kind of explain it this way. If there's 2 co-founders that kind of have been dating since high school and they get married, Oftentimes, you know, they don't even have co-founder agreements. They're both owners of the company equally, or they agree on whatever percentage. But there's that trust there, and things can go wonky. But you own your percentages. You kind of either one buys the other one out and you go your separate ways. The difference between that and adding a co-founder later, especially when you don't necessarily know the person, they're untested, you haven't worked with them before. You know, it's hard to both say, yes, come be a founder, co-founder. Um, but we're going, you're going to have a 60-day, 6-month trial period because it's like, are you in? Are you out? Um, but at the same time, you don't want to give, if you give them equity right up front, it's theirs. And if they don't do a good job, it's too bad for you because they own the equity. So in those types of cases, I like, um, some sort of a stock plan, a stock option plan, particularly. where there's a certain period of, you know, 6, a year cliff ideally, but some, um, co-founders won't like that. The reality is if you've got co-founders who, uh, can't see past 1 year, uh, that to me is a little bit of a red flag. And so I think that, you know, I would have no issue with a 1-year cliff or a 6-month cliff. Um, and when the par value of the stock is 0.001 or whatever it is, a stock option plan makes perfect sense because in order to exercise those options, you're writing a check for like $2 or $4 or $20 or something like that. So I think that it protects the, what we'll call the kind of legacy founders, and the entering founders essentially walk away with the same if it goes well. If it goes sideways, then the incoming founder does not get to walk away with all of that equity that's basically unearned. In terms of a co-founder agreement, you can memorialize all of that in an agreement. The reality is that you need a stock option plan or some sort of stock grant, some sort of stock plan and the grant agreement. So those are the 2 kind of operative things there. You can have a co-founder agreement that kind of sets expectations, et cetera. It kind of cuts both ways because On the one hand, you can say, hey, we've detailed our expectations here and you're not meeting them. And so you're out, or we're going to terminate this agreement. On the other hand, if you own all of the equity or a majority of the equity, you can do the same thing anyway. So I'm not sure that I, I don't love co-founder agreements other than to clearly set expectations. But as a kind of contractual device or tool. I'm not sure that they're amazing, but again, more so to set expectations so everybody knows exactly what kind of each founder is expected to do.

Then another question that founders sent in advance was around fundraising. And they were, you know, of course, like raising on a SAFE has become very popular at the very early stages. And so they were asking, you know, what the kind of, you know, raising on a safe versus kind of like a priced round, um, when you might have like, you know, legal involved. So we're looking to learn more about, you know, with a priced round, you know, what the scope of work and, uh, you know, potential costs go into like closing a pre-seed or seed round if it's priced.

What the cost for the law firm is? Is that the question? Yeah. Um, God. So part of the reason I wrote, wrote the book and not to self-promote, but is, is kind of to avoid, um, you all from spending on lawyers. Um, the, the, the thing about any type of securities Is, I mean, the safe is, it's still a security, but I think that it's, it's kind of new enough and novel enough that I don't think like the SEC is really involved with them until something horrible goes wrong and some, you know, consumers get, get messed with. I think the SEC probably stays out for a while, but when you're selling securities, you really can't mess it. You don't want to mess it up. That involves lawyers and unfortunately they're just expensive. So how much? I mean, 10 grand, 20 grand. I've worked on, I don't know how many rounds, dozens of financing rounds, and I've spent anywhere from— and granted, these were millions and millions of dollars with some of the bigger VCs, but the minimum I've seen is 40, 20, and we negotiated it, but it can get up to 100 real quick, especially if people are nitpicking documents. Even though, let's be all super clear, at every deal that I've ever worked on, they are all template NVCA agreement documents.

Yeah.

So every single person in the room understands exactly what's included. And by the way, you can go download them from the NVCA website, most of the documents. But you get lawyers being lawyers, and it just can get really expensive really quickly. So what I would recommend, and I recommend with any, anytime you work with lawyers, get an estimate that they're gonna stick to or a flat fee. So if you say, hey, listen, I'm gonna, can you do this round essentially review the documents, edit, et cetera, et cetera. I want a flat fee. They've done— if they're worth their weight in salt, they've done this a million times. They're not reading those documents word by word. I guarantee you they're scanning them for the kind of the important terms. And so I would always negotiate a flat fee.

Helpful tip. So I think a lot of times founders are surprised how quickly the costs, you know, and how expensive it can get. So.

Well, and by the way, let me just say, when they see that, oh, hey, you've got all this money coming in, there's not— I don't feel like there's really this like urgency Or not urgency, but like this importance to cut costs and be cost effective. Like, hey, you're getting millions of dollars, you can afford it, which is unfortunate.

And then another question that was— it was around insurance and it was, you know, founder asking, you know, what are some of the considerations when they might be looking into like self-insuring? So they're in a non-regulated, you know, industry and that's to kind of prove out, you know, insurance before working with like a third party.

So if you're going to self-insure, any of anybody can kind of self-insure. Now you have to be careful what you call it. Because you can easily guarantee something. So let's say you're guaranteeing transactions or experiences or goods or whatever, the shipment of goods. You can do that. You can't call it insurance unless it's actually an insurance product that's been licensed, etc. Self-insurance is also its own thing. So it kind of depends on what you're going for. If you're going for what I would call kind of like the, the sizzle, right? Like you want to use it for marketing. Hey, we are self-insured up to $10 million. You have to be careful because you actually have to allocate that money. And there's, and I don't know enough about this, but there are insurance regulations that kind of govern what self-insurance looks like. But the, the kind of the other side of that doesn't require you to be licensed or insured or anything like that. And that is we guarantee all transactions up to X number of dollars. Self-insurance also, it doesn't really generally make sense, true self-insurance, until you've really hit kind of a good scale. So a lot of the larger platforms are all self-insured. And they do it because They're— they basically, they have so many claims, they have so many, so much assets, etc., so much revenue, that it makes sense for them to do it in-house because they cut out the 10-15%, um, cut that insurance companies take. Um, and of course, they can, um, kind of augment the process and the claims and all that stuff. So generally speaking, um, in my experience anyway, it doesn't really make sense to you hit kind of pretty good scale and, and, um, you've got the volume.

And then another, uh, related, um, you know, topic that kind of question that comes up quite a bit now, I'm sure you've probably seen it in the community But it's around like marketplace initially offer like, you know, say for instance, like buyer guarantees to kind of attract, you know, demand and kind of consumers. Are there maybe like kind of best practices for that, for creating like buyer guarantees?

Creating buyer guarantees? Give me an example.

Say for instance, if it's a vertical marketplace for like, you know, like sneakers, right? And they offer like a buyer guarantee. So like, you know, or like satisfaction guarantee. So like if you're not happy, you know, kind of return policy off that.

One is, and part of the reason why you should differentiate like insurance versus guarantee is You and I, all of us on this call can guarantee anything. Now, contractually, we're gonna be responsible for that, right? So we'll be liable if you guaranteed the sneakers and they were, you know, supposed to be Jordans and they were Jordache, right? Like, those are 2 very different things that, that you then as the marketplace must make the buyer whole because they didn't get what they paid for. And contractually, you know, that, or you've at least represented that. And if you don't do it, it's misrepresentation, right?

Yeah.

The other thing, if you do have an insurance policy that covers the transactions from a marketing perspective or a conversion kind of tactic, people, consumers particularly, they think that the fact that something is insured, that it's, you know, everything is guaranteed, everything's perfect. It's interesting how consumers view insurance. And so, and they also don't always understand the difference between a guarantee and insurance. They know that an insurance is guaranteed. They don't necessarily know that a guarantee is insurance.

Right.

is the same. So one of the things I would definitely encourage you to, to, to look into is, you know, insurance, micro insurance, transactional insurance, which is available, and basically you can fold it into the transaction. But if you do want a guarantee, right, you know, Airbnb has their guarantee, it's backed by insurance. Rover's as well is backed by actual insurance products. But there are other platforms that I've worked with that they guarantee it, and it just comes out of kind of the income, the revenue If and when they need to kind of make good. The other thing to keep in mind too is guaranteeing to a customer, to a user, doesn't necessarily mean if something falls through or the service doesn't perform well or the goods don't end up being what they're supposed to be, that you have to give them a refund, right? You can be creative with how you guarantee that and make good. They could push the issue and say, hey, no, I want all my money back, in which case, well, you're kind of out on a limb. But you could say, hey, listen, we're going to give you $200 or $500 in credits for other sneakers, right? So you can be super creative with what that guarantee looks like, as long as you're clear about it.

It can be helpful also too for founders to kind of thinking about like considerations on should they take on that risk at the early stages too, right? Yeah. Cool. There's a, there's a question in the chat here around, you know, on their, they have a mobile app. So as far as like on the onboarding, when users create an account, it's, you know, by tapping it's to, you accept like creating an account. Sorry, you accept the privacy policy and terms of service. So they were asking if they Do you need to create like a checkmark for an opt-in on that?

Yes. Short answer is yes. This comes up in a couple contexts, right? I think logging in with Facebook, logging in with Google, it is not good to say by logging in or by continuing with Google, you agree to the terms of use. There's case law that says the consumer may not be aware that they've agreed to the terms of use. They may be agreeing to continue with their Google credentials. And you don't want to get caught. That's not universal, You don't want to get caught in that mess, right? You want something that clearly states some agreement to the terms of use and requires some— what they call the magic phrase is manifestation of assent. And so that would be populating a checkbox. So whether that's with Google, whether that's with Facebook, whether it kind of— however the flow happens, you want that, that you want them to have to take some action.

So we're out of time, you know, but Jeremy, thanks for taking the time to join us to, you know, lead the workshop today. is super helpful and we packed it in with all the, you know, information here. So, and this is going to be a lot for founders to kind of take it into the community. And, you know, on that note too, I will put together a recap post to share the recording, you know, resources and notes from the workshop in the community. And so that way we can continue the conversation there and chat through things in more detail because I know it is, you know, specific on a kind of on a marketplace level. And also too, I'll make sure that I include a link to, you know, Marketplace Risk Conference and also your books. Everyone can check it out. And I guess on that note, you know, time for a quick plug. Can you share a little bit more about Marketplace Risk and Absolutely.

So Marketplace Risk is a company that I founded. I was in-house GC for 7 years and really created— looking for resources to connect on legal risk compliance, uh, didn't exist. So we created a working group and evolved into a conference, and we now have 5 conferences in San Francisco, London, New York, Austin, and São Paulo launches this year. And it's all legal risk, trust, and safety for marketplaces and digital platforms. So think social media, Things like that. Coming out of— gosh, it's been 10 years now. I wrote a book that published in May, really based on— obviously a lot more substance, but based on what we just talked about today, all of those topics. I wrote it with Forbes. No one's written on the topic before. There aren't a lot of resources focused on legal risk compliance, trust and safety for marketplaces. And marketplaces are probably the largest growing sector within e-commerce and retail. So it was a about time that we got some sort of a resource out there. You can find it on Amazon, and we'll also be giving them away along with codes for— and Mike, I'll share those with you— codes for all of our upcoming conferences. We have one in New York in September, São Paulo in October, and London in November if you want to attend the conferences as our guests.

Well, I really appreciate it. And yeah, definitely, I highly recommend the book. So I have a copy myself. And yeah, I'll include links to everything in the recap post that we'll share in the community after. So really appreciate it once again, Jeremy, for joining us and, you know, all you do to, you know, pay it forward and help founders in the community as well. And thanks everyone for the great questions.