Simple Agreement for Future Tokens (SAFT) is security that blockchain developers offer investors to raise capital. Regarding investment contracts, SAFT is very similar to the Simple Agreement for Future Equity (SAFE) agreement, allowing investors to contribute to an early stage company, but instead of gaining equity when a company becomes more mature, they are given tokens to access a product or service once it is fully functional.
An ICO Investment Focused on Utility Tokens
Thought blockchain is still a young technology, Security tokens like Bitcoin, used as a currency or representative of a share in a company, have fallen under separate regulations directed by the Security and Exchange Commission. Utility tokens, used exclusively to access a future product or service, have typically been operating in a legal gray area, leaving both developers and investors a great deal of uncertainty.
The SAFT framework is an attempt to create a standardized process for ICO investment that mirrors the current startup market. Companies can access to capital they need to grow and investors can not only contribute to the development of a new network, but also turn a profit if they decide to sell these tokens once the network is live. As opposed to a securities-backed ICO, many companies are calling these funding rounds Token Generated Events or Token Distributed Events to further distinguish these two markets.
The previous uncertainty also compelled many US companies to move their operations outside of US/SEC jurisdiction to avoid potential conflicts. Proponents of the SAFT framework are hopeful that this standard might not only bring those companies – and the jobs they create – back to America, but also give current developers the confidence they need to stay in the country.
Issues with SAFT
Ironically, one of the biggest downfalls of SAFT is that it focuses largely on US federal laws and doesn’t always incorporate laws worldwide. This makes the agreement unenforceable or potentially illegal in other markets. Plus, SAFT is set up for exclusive, accredited investors, so the general public doesn’t participate in these types of agreements.
How to Get SAFT to Work for You
SAFT, and blockchain investment at large, is a complex area of law that requires an expert. LawTrades is happy to connect the client with seasoned cryptocurrency lawyers to offer insight and guidance throughout the process. In addition to our flat-rate fee, clients can choose to opt for a subscription-based legal service that allows unlimited legal consultations throughout the year. Contact us to set up a consultation to learn which plan works best for you.