Ether Review Legal #3 — The Simple Agreement for Future Token
Juan Benet and Jesse Clayburgh of Protocol Labs, and Ryan Zurrer of Polychain Capital, discuss the Simple Agreement for Future Tokens (SAFT). Inspired by Y Combinator’s “Simple Agreement for Future Equity”, the SAFT standardizes the legal framework surrounding token issuance and governs the nature of the transactions involved (i.e. the deployment of capital and distribution of tokens).
The complex legal environment surrounding tokens, especially in the US, has led many entrepreneurs to choose to leave Silicon Valley because they can develop the technology better elsewhere. Those who remain in the US have had to compromise on the optimization of their models in order to comply with legacy regulatory frameworks. Recognising these limitations, and seeking to mature the ecosystem beyond such models, several interested parties (including Protocol Labs, AngelList and CoinCenter) have worked together to create standard legal agreements for this novel asset class.
Essentially, a SAFT represents a promise for future tokens at a fixed price. The agreement can be structured so that investors receive these tokens when the network launches, or with inbuilt vesting to incentivise continued support by investors.
The development of the SAFT model involved consultations with the SEC and CFTC, as well as the foremost legal experts at the intersection of cryptocurrencies, securities law and regulatory compliance. By simplifying token issuance and the requisite compliance concerns, it provides an essential bridging of the gap between current technological progress and future regulation.