Understanding Illiquidity in CRT Investments

What Is Illiquidity?

Liquidity, in investment terms, refers to how quickly and easily you can convert an investment into cash without significantly affecting its price. A publicly traded stock on a major exchange is highly liquid — you can sell it in seconds during market hours, and for widely traded stocks, the price you receive will be very close to the last quoted price. Cash in a bank account is the most liquid asset of all.

Illiquidity is the opposite. An illiquid investment is one that cannot be easily or quickly converted to cash. You may want to sell, but there may be no buyer. You may find a buyer, but only at a price far below what you believe the investment is worth. The process of selling may take weeks, months, or longer — or it may not succeed at all.

Channel Revenue Tokens (CRTs) are illiquid investments. When you invest in a CRT through a primary offering on GigaStar Market, you are committing capital with no guarantee that you will be able to sell that position at any point during the revenue-sharing period. This is a fundamental characteristic of CRT investing that every Investor must understand and accept before committing capital.

Illiquidity is not unique to CRTs. Many alternative investments — real estate, private equity, venture capital, fine art — share this characteristic. What makes illiquidity particularly important for CRT Investors is the combination of illiquidity with the other risks inherent in Creator Economy investing, including Creator performance uncertainty and YouTube platform dependency.

Why CRTs Are Illiquid

Several factors contribute to the illiquid nature of CRT investments.

Regulatory Classification

CRTs are securities offered under SEC Regulation Crowdfunding (Reg CF). Reg CF securities are subject to specific resale restrictions that limit when and how they can be transferred. These restrictions exist to protect Investors and maintain the integrity of the crowdfunding framework, but they also constrain liquidity.

No Historical Secondary Market

Until the launch of the GigaStar Secondary Market (discussed below), there has been no structured venue for buying and selling CRTs after the primary offering closes. Investors who purchased CRTs held them for the duration of the revenue-sharing period with no formal mechanism to exit their position early. This lack of a trading venue is the most direct cause of CRT illiquidity.

Niche Asset Class

CRTs are a relatively new and specialized type of security. The total number of CRT Investors is small compared to the participants in public stock markets. The pool of potential buyers for any specific Creator's CRTs is even smaller. A limited buyer pool inherently constrains liquidity, even when a trading venue exists.

Valuation Complexity

Pricing a CRT is more complex than pricing a publicly traded stock. There is no standardized valuation methodology, no earnings-per-share equivalent, and no broad analyst coverage. Potential buyers must evaluate the specific Creator's channel performance, revenue trends, content pipeline, and numerous other factors. This evaluation complexity slows the buying process and can lead to wide disagreements on price, further limiting liquidity.

Information Availability

Public stocks benefit from extensive disclosure requirements, analyst research, financial news coverage, and real-time market data. CRTs have more limited information availability. While Form C disclosures provide important data at the time of the offering, ongoing information about a Creator's channel performance may be less comprehensive and less timely. This information gap can make potential buyers more cautious, reducing demand and liquidity.

The 12-Month Holding Period

Before discussing the Secondary Market, it is essential to understand a legal constraint that applies to all CRT investments: the 12-month holding period.

What the Law Requires

Under federal securities regulations governing the resale of Reg CF securities, CRTs cannot be resold for a minimum of 12 months from the date of purchase. This is not a GigaStar policy — it is a federal legal requirement established by the SEC. There are limited exceptions (transfers to family members, in connection with death or divorce, or back to the issuer), but for practical purposes, every CRT Investor should expect to hold their position for at least 12 months with absolutely no ability to sell.

Why This Matters

The 12-month holding period means that from the moment you invest in a CRT, your capital is locked up for at least a year. During that year, you cannot sell your position regardless of what happens to the Creator's channel, to YouTube's policies, to the ad market, or to your personal financial situation. If you invest money you might need within 12 months, you will not be able to access it through selling your CRTs.

Calculating Your Eligibility

Your 12-month holding period begins on the date your investment is confirmed, not the date the offering closes or the date distributions begin. If you invested on April 1, 2025, your CRTs become eligible for resale on April 1, 2026, at the earliest. Check your investment confirmation for the exact date.

Keep in mind that eligibility for resale is not the same as the ability to sell. After 12 months, your CRTs are legally eligible for resale, but you still need a venue to sell them, a buyer willing to purchase them, and a price that both parties agree on.

The Secondary Market: What It Changes and What It Does Not

The GigaStar Secondary Market, operated by GigaStar Securities (a FINRA-member broker-dealer), is scheduled to launch on March 16, 2026. This Alternative Trading System (ATS) represents a significant development for CRT Investors, but it is important to understand both what it changes and what it does not.

What the Secondary Market Changes

The most fundamental change is infrastructure. For the first time, there will be a regulated, structured venue where CRT holders can list their positions for sale and where potential buyers can place orders. This creates the possibility of secondary transactions that did not previously exist in any organized form.

The Secondary Market also introduces price discovery. Without a trading venue, CRTs have no observable market price beyond their original offering price. The Secondary Market enables buy and sell orders to interact, establishing prices that reflect the collective assessment of market participants. This price information is valuable for Investors evaluating their positions.

Additionally, the Secondary Market potentially opens CRT investing to a broader audience. Investors who missed a primary offering or who want to adjust their CRT portfolio can do so through secondary transactions, subject to availability and pricing.

What the Secondary Market Does Not Change

The Secondary Market does not make CRTs liquid. The existence of a trading venue does not guarantee that there will be active buyers for your specific CRTs at a price you find acceptable. Liquidity depends on the number of participants, the volume of orders, and the balance between buyers and sellers.

Early market conditions are likely to reflect the reality of a new, niche trading venue:

• Limited volume: The total number of CRT holders is relatively small, and the number who are both eligible and willing to sell at any given time is smaller still. Similarly, the number of buyers seeking specific CRTs may be limited.
• Wide bid-ask spreads: When there are few buyers and sellers, the gap between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) tends to be wide. Wide spreads mean that selling may require accepting a price significantly below what you believe your CRTs are worth.
• No guaranteed execution: Placing a sell order does not mean it will be filled. If no buyer meets your price, your order remains unfilled. If you place a market order (selling at whatever price is available), you may receive a price well below your expectations.
• Variable conditions by Creator: Liquidity will likely vary significantly across different Creator CRTs. CRTs tied to popular, high-performing Creators may see more trading activity than those tied to smaller or underperforming Creators. Your ability to sell depends not just on the Secondary Market existing, but on there being specific demand for the specific CRTs you hold.

The Secondary Market is a positive development, but Investors should not invest in CRTs with the expectation that the Secondary Market will provide an easy or quick exit. For the comprehensive operational guide, see The GigaStar Secondary Market: Complete Guide.

Illiquidity vs. Loss

A common misconception is that illiquidity means your investment is losing value. This is not accurate, and it is worth clarifying the distinction.

Illiquidity Means You Cannot Easily Sell

An illiquid CRT may be performing well. The Creator may be uploading consistently, viewership may be growing, and distributions may be arriving monthly. The CRT may, by any reasonable measure, be a good investment. But if you need cash and there is no buyer available for your specific CRT, the investment is illiquid regardless of its performance. Illiquidity is about the ability to convert to cash, not about the underlying value.

Loss Means the Investment Declines in Value

A CRT can lose value if the Creator's channel underperforms, if revenue declines, or if other risk factors materialize. Loss and illiquidity are separate risks. It is possible to experience one without the other, and it is possible — in a worst-case scenario — to experience both simultaneously: a declining investment that you also cannot sell.

Distributions Continue Regardless of Liquidity

An important practical point is that CRT distributions are independent of secondary market activity. Whether or not you can sell your CRTs, if the Creator's channel is generating YouTube revenue, your distributions continue. You receive your proportional share of the Creator's revenue as specified in the CRT terms, regardless of whether the Secondary Market is active, whether there are buyers for your CRTs, or whether you have ever attempted to sell.

This means that for Investors who do not need to sell, illiquidity may be less impactful on a day-to-day basis. The distributions represent the ongoing economic benefit of the investment, and they are not affected by the CRT's liquidity status.

How to Account for Illiquidity in Your Investment Decisions

Illiquidity should be a central consideration in every CRT investment decision. Here is how to factor it into your approach.

Only Invest Money You Will Not Need

This is the most important guideline. Given the 12-month holding period and the uncertain liquidity even after the Secondary Market launches, you should only invest capital that you can commit for the foreseeable future. Do not invest emergency funds. Do not invest money earmarked for near-term expenses like rent, tuition, medical costs, or debt payments. Do not invest money you might need within the next one to three years.

Understand the Commitment

A CRT investment is a long-term commitment. Even in the best-case scenario — a functioning Secondary Market with active buyers — selling may take time and may require accepting a price below your expectations. In a less favorable scenario, you may hold your CRTs for the full duration of the revenue-sharing period. Plan accordingly.

Do Not Count on Being Able to Sell Quickly

Even after the Secondary Market launches, do not assume you can exit your position within days or weeks. Build your investment plan around the possibility that you will hold your CRTs for an extended period. If you can sell sooner than expected, that is a positive outcome, not the baseline assumption.

Consider Illiquidity Alongside Other Risks

Illiquidity compounds other risks. If a Creator's performance declines and you want to cut your losses, illiquidity may prevent you from doing so. If your personal financial situation changes and you need cash, illiquidity means your CRT investment cannot help you. Evaluate illiquidity not in isolation, but in combination with Creator performance risk, platform risk, and your own financial flexibility.

Size Your Investments Appropriately

Given the illiquidity of CRTs, position sizing is particularly important. Investing a small amount that you can truly afford to have locked up is more prudent than investing a large amount that might create financial strain if you cannot access it. The illiquidity premium — if one exists in CRT pricing — does not compensate for the stress and financial risk of overcommitting illiquid capital.

Key Takeaways

• CRTs are illiquid investments. You cannot easily or quickly convert them to cash. This is a fundamental characteristic, not a temporary condition.
• A 12-month holding period applies. Federal securities regulations prohibit resale of Reg CF securities for 12 months from the purchase date. There are no practical exceptions.
• The Secondary Market launches March 16, 2026. This creates trading infrastructure but does not guarantee liquidity. Expect limited volume, wide spreads, and no guaranteed execution.
• Illiquidity is not the same as loss. An illiquid CRT may still be performing well and generating distributions. Illiquidity means you cannot easily sell, not that your investment is worthless.
• Distributions continue regardless of liquidity. Your CRT distributions are based on actual Creator revenue and are not affected by whether you can sell your position.
• Only invest money you will not need. The combination of the holding period, limited secondary market liquidity, and the speculative nature of CRTs means you should only invest capital you can commit long-term and afford to lose entirely.
• Plan for the possibility of holding long-term. Do not count on being able to sell quickly, even after the Secondary Market is operational.

This content is for educational purposes only and does not constitute investment advice. CRT investments involve significant risk, including potential total loss of invested capital. Past performance does not predict future results.