What is a SAFT?

A SAFT is an investment contract. A SAFT transaction contemplates an initial sale of a SAFT by developers to investors. The SAFT obligates investors (institutions) to immediately fund the developers. In exchange, the developers use the funds to develop a genuinely functional network, with genuinely functional utility tokens and then deliver those tokens to the investors once functional. The investors may then resell the tokens to the public, presumably for a profit, and so may the developers.

Often venture capitalists and private equity investors invest long before projects and teams have a genuine functioning product; and these funds are used to accelerate the development and functionality. Purchasers in these direct presales receive a discount purchasing price with the intent and expectations of profits predominantly from the seller’s efforts to create functionality in the token.

To be sure, public purchasers may still be profit-motivated when they buy a post-SAFT utility token. Unlike a pre-functional token, though, whose market value is determined predominantly by the efforts of the sellers in imbuing the tokens with functionality, a genuinely functional token's value is determined by a variety of market factors. Sellers of already functional tokens have likely already expended the “essential” managerial efforts. A SAFT framework elegantly navigates the money services and tax laws and addresses the significant policy concerns with the direct token presale alternative.