That same year, Kik Interactive, a Canadian mobile news start-up, raised US$50 million after filing securities with the SEC and selling SAFT securities to accredited investors. However, when the same company launched its second round of financing a month later, they did not do so through SAFT agreements and instead sold digital tokens that could be used as utilities for its service. The company argued that tokens were no longer an investment. Now, two years later, Kik is facing an SEC complaint about a $100 million unregistered ICO. This shows why more and more crypto-projects are turning to SAFTs to raise funds – everything else seems to mean legal recursions on the street. In the United States, unlike ICAOs, FTAs are limited to accredited investors, which means that cryptographic projects cannot make public donations with retail investors at the beginning of public financing. An accredited investor is legally authorized to trade securities based on meeting a number of income, net assets, work experience, etc. requirements. A SAFT is most often used by development teams to meet international regulatory standards while selling tokens. The first SAFT was created by the crypto-Startup Protocol Labs and used in August 2017 for filecoin`s ICO – the investment contract was seen as a simple and inexpensive framework to achieve the fundraising goals of a typical ICO while remaining in compliance with the law. A SAFT is classified as a guarantee, because until the tokens are created and released, investors put their money into a business based on the hope that these tokens will be sold at a higher price once the project is more developed. This meets the most basic definition of a security: to invest in a company while waiting for future profits. Several creators, investors and independent lawyers came to the same conclusion: the industry needed a standard transaction framework to finance token networks.
Some industry players had already begun to use an exit tool for the popular SAFE, but the document had never been researched or publicly analyzed under existing legislation.