SAFT (Simple Agreement for Future Tokens): What It Is and Why It Is Needed

A SAFT (Simple Agreement for Future Tokens) represents a legal mechanism regulating the attraction of venture capital into Web3 projects at the stage of development before the actual generation of digital assets. This financial instrument makes it possible for blockchain startups to lawfully accumulate seed investments, providing professional participants of the market with a legally secured right to the receipt of tokens after the launch of the decentralised network. An understanding of to whom and why a SAFT agreement is needed helps the founders of a business to structure cross-border transactions without the immediate alienation of interests in the authorised capital of the company and reduces the risk of the qualification of such transactions as an unregistered emission of securities.

Within the framework of the publication, the legal nature and the essential conditions of this agreement are examined in detail, including the mechanisms of discounting, the limits of valuation and the procedure of the actions of the parties upon the non-achievement of the technological goals of the project. The expert analysis covers the current regulatory practice of the specialised departments, the requirements for the verification of investors, as well as the particularities of the international structuring of rounds of financing with the use of the legal constructions of the Cayman Islands.

What a SAFT (Simple Agreement for Future Tokens) Is: the Legal Nature and the Basic Model of the Instrument

The attraction of financing in the blockchain industry requires the application of legal constructions capable of protecting the capital until the moment of the deployment of the technical infrastructure. In international practice, a Simple Agreement for Future Tokens (SAFT) is a specialised investment contract, fixing the obligations of the developers to transfer a specific quantity of digital assets to the investor after the launch of the decentralised network. 

Unlike the classic crowdfunding sale of crypto assets directly at the moment of the circulation, this model excludes the transfer of a non-functional utility instrument in the process of development. Realising a contract for the future receipt of tokens, the founders separate the financial transaction and the direct distribution of the cryptographic units. The legal basis is built on the fact that the investor provides working capital for the covering of the operational expenses, receiving in exchange an obligatory right of claim.

The legal nature of a SAFT agreement goes back to the American doctrine of venture investing. The agreement has a direct conceptual kinship with the traditional instrument of the provision of equity capital. The main parameters of the continuity and the differences are fixed in the presented classification.

A comparative analysis of early investment models

A SAFT in simple words is explained as a deferred supply of an intangible benefit. The basic economic scheme includes three consecutive stages: the transfer of the monetary equivalent, the development of the program code and the automatic emission of the settlement units. Implementing a SAFT contract for future tokens, a technology company guarantees the investor the receipt of a discounted share in the right of ownership of the future ecosystem. At the same time, the issuer itself is exempted from the necessity of transferring shares or interests in the corporate structure.

The developers use this format exclusively at the stage of the creation of the protocol. Examining how a SAFT differs from the sale of tokens, lawyers point to the absence of a ready blockchain at the moment of the signing of the documents. The instrument makes it possible to lawfully accumulate liquidity at the seed stage, when the direct issuance of digital assets is connected with high regulatory risks of the compulsory closure of the project by the supervisory bodies.

Why a SAFT (Simple Agreement for Future Tokens) Is Needed: the Economic Logic and the Role in the Financing of Projects

The application of deferred investment obligations is dictated by the change of the approaches to compliance on the part of the international supervisory departments. An understanding of why a SAFT is needed in crypto projects lies in the plane of the minimisation of the risks of the recognition of early sales as a violation of the legislation on securities. The founders use this model as a lawful gateway for the interaction with professional participants of the financial market, bypassing the stage of the chaotic collection of funds from retail users.

Institutional funds and venture companies prefer closed rounds to open token sales. Carrying out investments through a SAFT agreement, a professional investor receives legal guarantees of the protection of their rights within the framework of the customary contractual paradigm. The project, for its part, ensures stable long-term financing, not dependent on the momentary fluctuations of the market conjuncture.

The practical application of the instrument makes it possible for technology companies to solve a complex of parallel tasks within the framework of a single round of financing:

• the provision of lawful interaction with large venture capital;

• the accumulation of funds without the immediate creation of tokens;

• the protection of the rights of investors through the fixing of the conditions of conversion in the contract;

• the possibility of the long-term planning of the expenses on the development of software.

Carrying out the financing of a crypto project before the issuance of the token, the developers lay the foundation for the predictable distribution of the resources of the ecosystem. The instrument eliminates the price uncertainty, making it possible to determine the volume of the supply of the assets before their actual appearance. The correctly built-up role of a Simple Agreement for Future Tokens in the tokenomics of the project helps to balance the economic interests of the team, the market makers and the early investors of the early rounds.

If one analyses the reasons why a SAFT is used instead of the sale of tokens, the main factor becomes the elimination of the speculative pressure on the asset in the first days after its listing. Concluding the agreements, the parties initially establish a stage-by-stage schedule of the unblocking. A SAFT for the attraction of investments acts as a civilised alternative to the outdated models of the initial offering of coins, which often led to court proceedings on the part of the US Securities and Exchange Commission. As a result, the instrument has become a standard for technology companies planning a long-term presence on the international market.

How a SAFT (Simple Agreement for Future Tokens) Is Structured: the Conditions and the Structure of the Contract

The legal architectonics of the agreement requires a detailed working through of the conditions under which the obligations of the parties will be considered fulfilled. The typical structure of a SAFT contract opens with a section of definitions, where the exact parameters of the future digital asset and the technical criteria of the event of its generation are fixed. The issuer undertakes to use the received sum of the purchase strictly for the purposes of the development of the decentralised network. The investor, for their part, must confirm the correspondence to the qualification censuses established in the chosen jurisdiction of the transaction.

The main element of the commercial block is the settlement algorithm of conversion. The basic conditions of a SAFT for investors always contain the rules of discounting and the upper boundary of the value of the project. The discount determines the size of the reduction from the price of the subsequent public placement of the asset, acting as a premium for the high risk of the early stage. The limit of valuation protects the investor from the dilution of the value of their contribution upon an anomalously high demand at the subsequent stages of the attraction of capital.

The stages of the conversion and the distribution of the assets under a SAFT agreement

The entire essence of a SAFT contract comes down to legal triggers. The contract is structured thus: as soon as the developers achieve an important technical milestone (for example, launch the mainnet), the trigger provided for by the contract is set off, after which the distribution of the tokens to the investors begins. From this moment, the schedule of the gradual transition of the rights of ownership begins to act, preventing the one-time dumping of the coins onto the secondary market. 

If the launch of the network does not occur within the timeframes established by the contract, the protective scenarios of the termination of the transaction are activated. An official SAFT agreement provides for the procedure of the proportional distribution of the funds remaining on the accounts of the company among the participants of the round. In the contracts, the right of the issuer to retain up to 20% of the sum for the covering of the actual expenses on the development is often secured, whereas the remaining 80% is subject to mandatory return.

The Regulatory Risks of a SAFT (Simple Agreement for Future Tokens): the Legal Status and the Jurisdictional Particularities

The main legal difficulty of the use of the instrument is connected with the specifics of the qualification of the transactions by the supervisory departments. The law enforcers unanimously recognise a Simple Agreement for Future Tokens as an investment contract falling under the action of the national legislation on the securities market. In the United States of America, this conclusion is based on the classic criteria of the Howey Test, formulated by the US Supreme Court in the case of W. J. Howey Co. 

The current legal status of a SAFT in the USA and the EU requires of companies the observance of strict compliance procedures. In accordance with the official explanations of the US Securities and Exchange Commission, published within the framework of a special release in the spring of 2026, a doctrine of the separation of the nature of the contract and the token has been implemented. The department ruled that the sale of the rights to future assets is a transaction with securities, however the native utility token itself, upon the achievement of the full decentralisation of the network, may come out from under this regulation. 

For the lawful dissemination of the agreements, companies are forced to rely on regulatory exceptions. When studying the risks of tokenisation through a SAFT, corporate lawyers use the following regulatory regimes:

1. Rule 506(c) of Regulation D (USA) — permits the public advertising of the round on the condition of the mandatory verification of the status of accredited investors.

2. Rule 506(b) of Regulation D (USA) — prohibits the general attraction of attention to the transaction, but allows the participation of a limited number of financially literate persons.

3. Regulation S (USA) — regulates the offering and the sale of financial instruments outside the limits of the American jurisdiction to persons who are not residents of the USA.

Foreign crypto regulation in various jurisdictions forces startups to create separate structures for the issuance of digital rights. As a neutral legal field, the Cayman Islands are often chosen, where a specialised shell company in the form of a fund without a share participation is registered. Such an arrangement of a SAFT agreement makes it possible to optimise the tax load and to act within the framework of an understandable corporate regime. The fund acts as the nominal issuer, taking upon itself the obligations on the subsequent distribution of the tokens to the investors.

Conclusion

The instrument of the deferred supply of digital assets has become a standard for technology companies striving to combine the attraction of venture capital with the rigid requirements of compliance. A clear understanding of what a SAFT (Simple Agreement for Future Tokens) is and why it is needed makes it possible for the founders of blockchain projects to lawfully build up relations with large investment institutions, avoiding the risks characteristic of the early models of public crowdfunding.