Updating SAFT: Breaking the Security/Utility Token Conundrum
In the Simple Agreement for Future Tokens (“SAFT”) model,[1] investors are sold securities, often “investment contracts”[2] that fund development of a utility (i.e., platform or network), that will be accessible by using “utility tokens,” [3] i.e., tokens whose only use is to obtain access to the goods or services available on the platform.[4] In return for supplying capital, the investors receive the right to receive utility tokens when the platform and the tokens become fully functional.[5] At that point, the “SAFT investors’ rights in the SAFT automatically convert into a right to delivery of the tokens.”[6] SAFT purchasers are typically entitled to the number of units of the token equal to the investors’ purchase amount divided by a discount price (i.e., the investor obtains tokens at a discount to the issuance price of the utility tokens upon launch of the platform).[7]
