The use of this two-tiered model is intended to provide a funding model for symbolic investments that serve the company`s purpose. If successful, token exchanges can allow investors to participate financially in the (new) development of the network, without taking significant financial risk. In addition, these agreements are intended to encourage more institutional investors to participate in the markets. The absence of guidelines for sales of tokens, SAFT and secondary futures contracts on SAFTs means that it is virtually impossible to determine with certainty the tax treatment of the various instruments in the United States and to determine whether a constructive sale takes place at the conclusion of one or more of these agreements. Therefore, SAFT holders entering into a secondary futures contract for the FTSA should consult with their tax advisors to determine whether the conclusion of the secondary futures contract on the basis of the actual facts of the transaction will likely lead to a constructive sale of the FTSA for tax purposes and the applicable tax reporting obligations. In Telegram`s previous decision, the court rejected this theory and found that Telegram`s plan to distribute its Grams tokens using the SAFT structure was an offer of securities subject to U.S. securities law, including registration requirements. Telegram has sparked speculation about whether Kik`s sale of Kin in 2017, which relied on a slightly different structure from SAFT, could survive the judicial review. The Kik court also ruled that this was not possible. These two cases send a strong message to cryptocurrency issuers that they are probably unable to circumvent the registration requirements of U.S. securities law by structuring cryptocurrency takeover bids via SAFT. SISIs are offered and sold as an investment to accredited investors to finance the development of a business or project in a way that is no different from how shares change ownership in traditional venture capital.
A SAFT was developed from the simple, often used contract for future capital contracts (SAFE) in the configuration of venture capital. In the case of a juice sale, no parts are offered, sold or exchanged. On the contrary, the money is exchanged for traditional paper documents that promise access to future products. In principle, a SAFT is based on the premise that the future product is not in itself a safety. That same year, Kik Interactive, a Canadian mobile news start-up, raised US$50 million after filing securities with the SEC and selling SAFT securities to accredited investors. However, when the same company launched its second round of financing a month later, they did not do so through SAFT agreements and instead sold digital tokens that could be used as utilities for its service. The company argued that tokens were no longer an investment. Now, two years later, Kik is facing an SEC complaint about a $100 million unregistered ICO. This shows why more and more crypto-projects are turning to SAFTs to raise funds – everything else seems to mean legal recursions on the street. The Tribunal rejected Kik`s argument that the « joint venture » had not been met because the terms of its agreement with the IPO participants kin expressly denied any contractual obligations pending after the Distribution of the Kin and that IPO participants could sell their Kik whenever they wished.