SAFT Securities Risk: Why Kik and Telegram Matter

The SAFT was engineered to be the securities-compliant way to raise on a future token. The Kik and Telegram matters are why founders cannot treat that engineering as a shield. Courts looked at economic reality, not the two-stage form, and the structure did not exempt the token offering. This guide explains the risk carefully — it is not legal advice, and it reaches no conclusion about any specific instrument.

TL;DR

• SAFT = Simple Agreement for Future Tokens; designed to fit US securities law (private sale now, tokens at launch).
• Kik / Telegram: courts effectively treated the private SAFT sale + later public distribution as one transaction, judged on economic reality, not the two-stage form.
• The structure did not exempt the token offering — substance over form.
• SAFTs are generally treated as securities during fundraising; the SEC has taken an aggressive stance.
• Not a universal "every SAFT is a security" rule — fact-specific, jurisdiction-specific, economic-reality-tested.
• Securities counsel's determination on the specific facts — this article concludes nothing about any instrument. Not legal advice.

What the SAFT was designed to do

The SAFT (Simple Agreement for Future Tokens) promises future tokens at network/protocol launch. The design intent: sell the agreement privately during fundraising, deliver the tokens later when the network is live and the token might be argued to be functional rather than an investment. The structure is deliberately two-stage. That is precisely the structure the case law tested.

What Kik and Telegram established

In the Kik and Telegram matters, courts effectively treated the private SAFT sale and the subsequent public token distribution as a single transaction, and judged it on its economic reality rather than its two-stage form. The result: the structure did not exempt the token offering from securities laws.

The correct reading is narrow and important:

• It is not a blanket rule that "every SAFT, always, is a security."
• It is that the two-stage form alone does not insulate the offering — substance over form controls, and the later token delivery did not cure an economically investment-driven raise.

Why this is the highest-risk instrument

Compared with a SAFE (future equity) or a token warrant (an exercisable right), the SAFT carries the heaviest securities-classification risk: SAFTs are generally treated as securities during the fundraising stage, and the SEC has taken an aggressive stance. The instrument's defining feature — the timing split between agreement and token — is exactly what the case law collapsed. See the instrument comparison.

The hedge that matters

Whether any specific instrument is a security is fact-specific, jurisdiction-specific, and decided on economic reality under the applicable test — not by what the document is called. This article reaches no conclusion about any particular instrument and is not legal advice. The only defensible position is early, specific securities-counsel involvement on the actual facts.

Practical guidance

1. Do not treat the two-stage form as a shield — Kik/Telegram collapsed exactly that.
2. Assume securities analysis applies during fundraising; the SEC stance is aggressive.
3. Engage securities counsel before any token fundraising — not after.
4. Consider a token warrant alongside a SAFE where counsel advises (esp. US-registered) — see token warrant vs side letter.
5. Document the economic reality honestly — substance, not labels, is what is tested.
6. Reach no self-conclusion on security status — it is counsel's, on the facts. Not legal advice.

How vendor tools relate to SAFT risk

Pulley and Carta record and model fundraising instruments on the cap table and support the data and audit trail around a raise. They do not determine securities classification and are not a substitute for securities counsel. Confirm the tool can document the instrument terms and timeline as evidence — the legal characterisation is counsel's, on the specific facts.

How Wag3s helps

Wag3s HR records the instrument terms, dates and token-delivery schedule as a structured, auditable record supporting the raise — the evidence layer, not a legal opinion. The securities determination stays a securities-counsel question on the specific facts and jurisdiction. See the HR product page.

Further reading

• SAFE vs SAFT vs Token Warrant
• Token Warrant vs Token Side Letter
• Post-Money SAFE Explained
• Web3 Fundraising Instrument Stack
• Token Cap-Table Management
• BSPCE vs Token Grants for French Web3 Startups

Sources

• SAFT — Simple Agreement for Future Tokens; designed to fit US securities law via a two-stage structure (private sale now, tokens at network launch)
• Kik / Telegram — courts effectively treated the private SAFT sale and subsequent public distribution as a single transaction judged on economic reality; the two-stage form did not exempt the token offering (substance over form; later delivery did not cure)
• SAFTs generally treated as securities during fundraising; SEC aggressive stance — NOT a universal "every SAFT is a security" rule; fact-specific, jurisdiction-specific, economic-reality-tested
• Securities classification is securities counsel's determination on the specific facts and jurisdiction — this article concludes nothing about any instrument; not legal advice