The Financial Industry Regulatory Authority known as (FINRA), is a Washington-based self-regulatory body, that has cautioned investors to be very careful of ICOs that are touting their adoption of the SAFT (Simple Agreements for Future Tokens) framework as an evidence of investment security or a regulatory compliance.
The warning, was seen in its August 16, 2018 Investor’s Alert publication where it addressed potential ICO investors stressing that the SAFT framework is not in anyway an iron-clad guarantee of regulatory approval, and rather it is actually comparable to a private opinion that the regulators may or may not actually choose to align with.
The statement reads in part:
“Know that investing in a SAFT contract does not mean the offering is “safe” or compliant with applicable federal and state laws…No matter what a company says about the ability of a token to change characteristics from a security to a non-security, there is no guarantee that the SEC or the courts would agree with a company’s assessment. A determination of whether something is a security is a facts and circumstances analysis, and titles don’t change that.”
A Simple Agreement for Future Tokens (SAFT) is actually an investment contract that is offered by cryptocurrency developers to the accredited investors, with a promise to deliver a certain number of tokens most especially when the network or company is operational. It differs from the standard ICO been that an ICO issues the tokens or coins immediately, while the SAFT is effectively just a promise to deliver the tokens.
SAFT contracts are also considered to be securities and because of that, it must meet the securities regulations. Under the framework, SAFT contracts are given as securities to investors during the ICO, with the assurance that the tokens would be delivered afterwards at the specified time. Again, at the actual point of issuance, the tokens can actually be labeled as utility tokens which operates beyond the extant security laws.