If you’re a loan originator working with Real Private Credit to tokenize receivables, the legal framework you need is now live in 33 jurisdictions.
New York takes effect June 3, 2026. Article 12 created a priority regime where control beats filing and where a filed financing statement is explicitly not notice of a competing claim. It’s flexible enough to accommodate multi-sig wallets, smart contracts, and custodial agents. It’s also as of now mostly untested by courts so correct structuring involves legal nuances.
The transaction documents are the only thing standing between a properly structured deal and one that fails the control test when priority is contested. This piece covers the three places where the structuring matters most.
Filing vs. Control
Article 12 flips the priority rules most lenders are used to. Under new Section 9-326A of both the New York and Delaware Uniform Commercial Code (UCC) rules, a security interest perfected by control beats one perfected only by filing. Always, and regardless of timing: A lender who files a UCC-1 first but never obtains control loses priority to a later party who does.
Under Section 12-104(h), a filed financing statement is explicitly not notice of a property claim in a controllable electronic record (CER). A qualifying purchaser (a buyer who obtains control for value, in good faith, and without notice of competing claims) takes free of a filed security interest, even if that financing statement has been sitting on the public record for years. Financing statements are indexed by debtor name. Blockchain-based assets are not. There’s often no practical way for a subsequent purchaser to discover the prior lien.
The Uniform Law Commission built this gap on purpose. Controllable Electronic Records are designed to be negotiable, like instruments and securities. The notice exclusion is a feature of that negotiability framework: it’s what makes a liquid secondary market for tokenized receivables legally possible. But it means any lender relying solely on a UCC filing is structurally exposed.
The consequences of getting this wrong are immediate. Under Section 9-314(b), perfection by control exists only while the secured party retains control. There is no grace period. A hard fork, system migration, custodian breach, or technical failure that disrupts control strips super-priority on the spot. What remains is whatever filing-based perfection the lender maintained. And in a workout or bankruptcy, filing-based perfection is subordinate to any secured party that obtained control. That’s the difference between recovery and subordination.
No court has interpreted these provisions yet. The earliest state adoptions took effect January 1, 2024, and New York doesn’t go live until June. Pre-Article 12 bankruptcy cases like In re Celsius Network (Bankr. S.D.N.Y. 2023) raised hard questions about how courts evaluate control over digital assets in insolvency, but those decisions predate the statute.
Everything under Article 12 is first-impression risk.
What “Control” Requires, and Where It Gets Complicated
Section 12-105 sets three requirements. The person must have the power to enjoy substantially all the benefit from the CER, the exclusive power to prevent others from doing the same and to transfer control, and the ability to be readily identified as having those powers.
The statute is flexible by design. Multi-signature wallets, smart contract automation, custodial agents, time locks, and programmatic triggers are all compatible with control. Subsection (b) provides that shared power does not automatically defeat exclusivity.
But two narrow exceptions in subsection (c) require careful attention. If a person can exercise power only when another person also acts, and that other person can act unilaterally without the first person, the asymmetric dependency defeats control. Similarly, if a person can act only with the consent of the original transferor, the retained veto defeats control. In practical terms: a 2-of-3 multi-sig wallet where the lender holds two keys is structured toward preserving control. An arrangement where the borrower holds two keys typically creates control risk under the subsection (c) exceptions. These distinctions matter at the transaction level, and they have to be reflected in systemic structure at the time the CER is created.
Jurisdiction Designation and Choice of Law
The control analysis is only half the problem. You also have to get the jurisdiction right. Section 12-107(c) establishes a five-tier waterfall for determining which state’s law governs a CER. The strongest option, Tier 1, applies when the CER itself expressly designates a jurisdiction for Article 12 purposes. A generic governing-law clause (”governed by the laws of New York”) may fall to Tier 3 or lower, and may not satisfy the express-designation requirement at all. If nothing designates, the default sends you to D.C. Every CER should embed an explicit Tier 1 clause. It’s a one-sentence addition to the record, and it removes ambiguity that can otherwise take months to litigate.
There is a related wrinkle that catches people. Perfection by filing follows the debtor’s jurisdiction under Section 9-306B, but priority follows the CER’s jurisdiction under the Section 12-107 waterfall. These can point to different states. Recent analytical commentary demonstrated that this split can produce scenarios where a court in a non-adopting state applies Article 12 priority rules because the CER’s designated jurisdiction has adopted.
And New York adds its own complications. The state uses a subjective good-faith standard for qualifying purchaser status: “honesty in fact” only, without the objective “reasonable commercial standards” element found in the uniform text. Combined with New York’s heightened notice standard, which requires actual knowledge of a property claim rather than reason to know, it’s significantly easier to qualify as a qualifying purchaser under New York law than in most other states.
What Working With Altum Looks Like
The TriBar Opinion Committee’s May 2024 report in The Business Lawyer acknowledged that legal opinions on CER transactions require extensive factual assumptions about technology and systems involved. The statute accommodates almost any technical architecture, but the market needs certainty, and certainty comes from the documents. That’s the work Altum does when an originator brings a deal through Real Private Credit’s platform.
At structuring, Altum maps the Section 12-105 control requirements to the specific technical architecture of the deal: who holds keys, what custody arrangements exist, how the system identifies the controlling party. The control provisions, Tier 1 jurisdiction designations, and perfection mechanics go into the transaction documents before the CER is created, not after. This is where the subsection (c) exceptions get examined against the actual key structure and custody model.
At closing, the perfection strategy is belt-and-suspenders. File a UCC financing statement in the debtor’s state of organization regardless of whether that state has adopted Article 12. Obtain control of all CER collateral to achieve super-priority in adopting states. Filing extends to proceeds under Section 9-315 while control perfects only the CER itself. Both are necessary.
Post-closing, the work continues. New York’s adjustment date is June 3, 2027, after which super-priority for control takes full effect. As more states adopt and transition periods expire, existing positions may need to be updated to maintain priority. For deals touching states that have not yet adopted (Texas, Ohio, New Jersey, and Maryland among them), CERs are still treated as general intangibles perfectable only by filing, which means the cross-jurisdictional analysis is ongoing for every portfolio that spans state lines.
Thirty-three jurisdictions have adopted. No court has tested the provisions yet. For now, the structuring on each deal is the only line of defense. If you are working with Real Private Credit on a tokenization and need counsel who knows both the statute and the operational mechanics, reach out.
This article is for informational purposes and does not constitute legal advice. No attorney-client relationship is created by reading this piece.