Earlier this year, the United States Securities and Exchange Commission — in both the SEC versus Telegram and SEC versus Kik cases — vigorously argued that sales of contractual rights to acquire tokens on a when-issued basis (widely referred to as Simple Agreements for Future Tokens, or SAFTs) should be integrated with later sales of the tokens. When the judges in those cases issued rulings agreeing with the SEC, it felt like a door was closing on the SAFT process, making it unworkable for future crypto offerings. Then, on Nov. 2, a divided SEC adopted a series of amendments to its rules that, among other things, dramatically limit the integration doctrine. These amendments may have opened a new door, potentially paving the way for a viable SAFT process.
Adopted as part of an effort to “harmonize and improve” what the Commission called a “patchwork” of exemptions from registration under the Securities Act of 1933, the amendments were originally presented as a concept release in June 2019 and a proposing release in March 2020. The hope of those supporting the initiative was to reduce “costly and unnecessary frictions and uncertainties” as well as add certainty “in the context of a more rational framework” to facilitate capital formation and benefit investors.
Carol Goforth is a university professor and the Clayton N. little professor of law at the University of Arkansas (Fayetteville) School of Law.
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