Partner Kayvan Sadeghi was quoted on the future of simple agreements for future tokens (SAFT) as a vehicle for digital currency offerings following the ruling from the U.S. District Court that Telegram, Inc.’s SAFT offering was an unregistered securities offering. Judge Castel granted the U.S. Securities and Exchange Commission’s (SEC) requested injunction on the distribution of Telegram’s token, Grams.
Kayvan said that while it may be possible to structure a compliant SAFT, the court ruling did not give clarity on what that would look like.
"Even if there are arguments that one could change the structure in one way or another to create a true distinction between the initial purchase and the later distribution, there's no clarity on exactly what would be necessary to do that effectively," he said. "And without that clarity, many early investors would not want to take on the risk of a structure like this, if there's another way that they can structure their investment.”
"This SAFT structure does not eliminate the risk for token distributions, and there is no clarity on how to avoid that risk."
The ruling may even stop future blockchain projects from developing in the U.S., Kayvan said.
"In the short term, this is likely to drive innovators to avoid the United States entirely." Sadeghi said. "There is a risk that even limited connection to the United States will leave you little choice but to shut down your project globally. And that's a risk that many projects will not want to take."
The SEC has also brought a case against Kik Interactive Inc., a messaging service similar to Telegram. Kayvan said that while the SEC has relied heavily on Judge Castel’s order in its briefs against Kik, further impact of the Telegram case on future litigation remains unclear.
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