Today we’re excited to formally announce the launch of the SAFT Project, a collaboration between Protocol Labs, Cooley, and many other token creators, legal experts, and investors. The SAFT project, initially announced by Protocol Labs founder Juan Benet at the Consensus conference this past winter (opens new window), has been a work in progress for quite some time. Today we’re launching a dedicated website (opens new window) and Github organization (opens new window) which will serve as a forum to aggregate learnings, best practices, and published materials.
The SAFT Project is dedicated to evolving the token investment and sale ecosystem in a compliant and standardized fashion. We hope to approach legal protocol development the same way we approach developing software protocols: with a thoughtful community, significant goals, and rigorous work. We hope our work will save creators much of the current headache, uncertainty, and cost associated with raising money for token networks.
When we set out to raise money for the Filecoin network we encountered a host of unanswered legal questions and uncertainty around raising money for token networks. Though the first sales were several years ago, legal uncertainty remains high. There is little standardization, knowledge-sharing, or collaboration between creators, legal counsel, investors, users, policymakers, and regulators. Though fundraising is just one step in the life-cycle of a token-network, it is a critical one. Being able to fund research, development, and deployment has significant impact on the value created by any given network. Raising money for token networks should be approached with the same rigor and responsibility that other fundraising events follow.
Over the past year we’ve dedicated a significant amount of energy and resources to develop a framework for legally compliant token sales. Our work consisted of thorough analysis of token fundraising and past legal precedents across a host of areas: securities, commodities, money service businesses, taxation, and more. During our efforts we soon met several others in the industry exploring similar questions and with the same hope to make a standard for compliant fundraising. A standout example is Ryan Zurrer (opens new window) at Polychain capital, who had been concurrently developing a standardized contract for investing in token networks and shared many thoughts (listen here (opens new window) for a podcast with Protocol Labs and Polychain Capital on the evolution of both of our efforts). Another great example is the legal team at AngelList, who helped tremendously with the SEC's section 506(c) and crowdfunding knowledge.
As a Y Combinator company we’ve been impressed and thankful for the standardization of the Simple Agreement for Future Equity (SAFE) (opens new window), an effort sponsored by Y Combinator to bring clarity to early-stage startup fundraising documents. We took a page from their playbook when developing our own legal contract, which culminated in the Simple Agreement for Future Token (SAFT) that we used in the Filecoin Token Sale this past summer. This SAFT is a commercial instrument used to convey rights in tokens prior to the development of the tokens’ functionality. Considered a security in the United States, it can be offered in a private placement to accredited investors. The tokens that are ultimately delivered to the investors, though, should be fully-functional, and part of an extensive ecosystem with many organizations and powerful market forces independent from the original developers and therefore not securities under U.S. law. Outside of the U.S., the need to limit SAFTs to accredited investors will depend upon the laws of the local jurisdiction. Please refer to the SAFT whitepaper (opens new window) to learn more.
Though the Filecoin sale is now over, we are strongly committed to the SAFT Project and are excited to help contribute to best-practices and discussion for years to come. To become a global standard, The SAFT Project requires the collaboration of network creators, lawyers, policy gurus, users, and investors world-wide, across jurisdictions. We already have many contacts and collaborators around the globe, but let this be an open call for more. If you are interested in this work, please get in touch at email@example.com. To find out more please visit the SAFT Project website (opens new window) and Github organization (opens new window).
Legal expert interested in these types of issues? We’re hiring for a legal counsel and other related roles. See more here (opens new window)!