In 2020 Telegram agreed to hand back more than $1.2 billion raised from 171 purchasers under future-token agreements, after a US court looked through the structure. A SAFT agreement can still be used, but it is not a shelter. As of October 2026, the instrument is the same; the SEC’s reading of what surrounds it has changed.
Who decides this
The CFO and general counsel own the decision together. The CFO answers for the money: what was raised, on what terms, and what the company owes if the token never ships. General counsel answers for the exemption: who could buy, what was said to them, and what the company filed. The board approves the round, but these two must be able to defend it to a regulator years later.
What does a SAFT actually promise, and to whom?
A SAFT is a contract sold for cash today that converts into tokens once the network works, and it is itself a security. That last point is not a regulator’s gloss. The 2017 SAFT Project whitepaper, written by Cooley and Protocol Labs, says so plainly.
The model in that paper is narrow. Buyers are accredited investors. The example relies on Rule 506(c) of Regulation D, with a Form D filed. Investors pay up front, at a discount to a later token sale, and the developer spends the money building the network. The SAFT is not transferable. When the network is functional, investors receive tokens and the contract ends.
The theory was that a token delivered into a working network is bought for use, not for the developer’s efforts. So the token, unlike the SAFT, might fall outside securities law. The paper’s own authors flagged the limits. No court or regulator had tested the framework, tax treatment was unclear, and they wrote that a SAFT is not “safe.”
Two things the original paper did not settle still need answers in your document. It did not address what happens if the network never launches. It also left open when, exactly, a network counts as functional. Both are commercial terms the CFO must define, not leave to later argument.
Why did Telegram and Kik change how SAFTs are read?
The courts looked at the whole plan, not the contract on its own. In both cases, the question was whether the private sale and the later public distribution were one scheme.
Telegram raised capital from January 2018 and, per the SEC, sold about 2.9 billion Grams to 171 initial purchasers. The SEC sued in October 2019. In March 2020 the Southern District of New York blocked delivery, finding a substantial likelihood that the sales were part of a larger plan to distribute Grams into the secondary market. The June 2020 settlement required $1.224 billion in disgorgement, an $18.5 million penalty and three years of advance notice to the SEC before any new digital-asset issuance.
Commentary from Bryan Cave Leighton Paisner explained the logic. The SEC argued that the accredited buyers acted as underwriters, so the private placement was really a public offering. The court’s preliminary finding that the sales were likely one integrated distribution put the Rule 506(c) exemption Telegram relied on in doubt; the case settled before a final ruling.
Kik’s case reached the same place by summary judgment. The SEC said Kik raised more than $55 million from US investors in 2017, selling to the public and, at a discount, to wealthy buyers. In September 2020 the court held the Kin sales were investment contracts and treated the private and public sales as one integrated offering. Kik agreed to pay a $5 million penalty and accepted three years of advance notice to the SEC.
The lesson for a CFO is practical. A SAFT is judged with everything said and done around it, from the first deck to the listing.
What changed in 2026, and what has not?
The SEC now says, in a formal Commission interpretation, that an investment contract can end. That is the main shift since 2018. On 17 March 2026, the SEC issued Release No. 33-11412, and the CFTC joined it.
The release sets out five token categories: digital commodities, digital collectibles, digital tools, stablecoins and digital securities. It says a token that is not itself a security can be sold as part of an investment contract. It can later separate from that contract once the issuer has delivered the promised managerial efforts, or buyers can no longer reasonably expect them. Gibson Dunn and Morrison Foerster both note that it supersedes the SEC staff’s 2019 framework for digital assets.
Three things have not changed. First, separation does not erase liability for earlier offers or sales. Second, the release is an interpretation, not a rule; Morrison Foerster notes that courts need not defer to it and still decide for themselves whether an asset is a security. Third, the analysis now centres on what the issuer promised at or before sale. That makes the deck, the roadmap and the launch posts evidence.
New routes may follow. On 18 August 2026 the SEC proposed Regulation Crypto Assets, published in the Federal Register on 21 August with a 60-day comment period. As of October 2026 it is a proposal, not a final rule.
| Route | Who can buy | Size limit | Filing and disclosure | Status, October 2026 |
|---|---|---|---|---|
| SAFT under Rule 506(c) | Accredited investors only, verified by the issuer | No cap stated by the SEC | Form D within 15 days of first sale; buyers hold restricted securities | Available; courts look at the full plan |
| Proposed startup exemption | No accreditation requirement in the proposal, per law-firm summaries | $5 million in total over four years, once per token | Short notice (Form NOR), narrative disclosure on the issuer’s website, transition report within four years | Proposed |
| Proposed fundraising exemption | Retail, with investment limits for non-accredited buyers | $20 million (Tier 1) or $75 million (Tier 2) per 12 months | Offering statement (Form 1-CRYPTO), financial statements, ongoing reports; US-organised issuers only | Proposed |
| Proposed investment contract safe harbor | Not a sale route | None | Issuer certifies on Form TR that managerial efforts are complete or have permanently ceased | Proposed |
Sources for the table: the SEC’s Rule 506(c) page, and Debevoise & Plimpton, Simpson Thacher and DLA Piper summaries of the proposal.
Which SAFT terms should the CFO and counsel settle first?
Settle the delivery trigger, the long-stop and the disclosure record before you settle the discount. Price is the term investors push on. The others are the terms that decide who carries the risk.
Define “functional network” in measurable terms that both sides can check. Agree a long-stop date and what happens after it: refund, conversion to equity, or extension by vote. Fix transfer restrictions and unlock schedules for delivered tokens, and match them to the team’s schedule so no insider exits first.
Then lock down what investors were told. Under the 2026 release, specific plans with milestones and timelines weigh toward an expectation of profit from your efforts. Keep every version of the deck and data room, dated. If the token is also airdropped close in time to a sale, Morrison Foerster notes the release says later trading may be caught by the same investment contract.
Our view: a SAFT is a reasonable instrument for a narrow round of verified accredited buyers, run by a team that keeps its records. It is a poor one if the team expects it to clean up a later public sale. Where an equity round is also live, a token warrant attached to the equity may be the cleaner way to hold the same economic promise. Both instruments, and how a SAFT fits with strategic and public rounds, are covered in the guides linked below.
What goes wrong: the question you could not answer
The SAFT failure is rarely the contract. It is a question asked three years later that nobody can answer from the files. Which exemption did the 2023 round rely on, and how was each buyer verified as accredited? Which version of the roadmap did they see? Did any SAFT holder resell before delivery?
The 2026 framework makes this sharper, not softer. A token can leave its investment contract only when the issuer’s promised efforts are done. Under the proposed safe harbor, the issuer would certify that on Form TR with supporting analysis. You cannot certify that promises are complete if you cannot show what was promised.
The fix is simple and dull. Keep a dated record for each round: the exemption memo, the verification evidence, the Form D, every investor-facing document and every change to the delivery terms. Assign one owner. Review it before each new raise and before listing.
How Alcyone approaches it
Drafting the SAFT and choosing the exemption is counsel’s work. Alcyone works around it: sequencing rounds so the private sale does not collide with the public plan, and aligning vesting and unlocks across investors and team. That sits inside Alcyone’s fundraising and tokenomics advisory, which opens with a fixed-scope, fixed-fee assessment credited against any further work. In one engagement, a major Layer-1’s first token launch on its chain put about $10M into vesting.