Are Tokens Like Gold? Attorneys Ask Tough Questions on ICOs

It’s unusual for panels to get heated, but that’s just what happened during a discussion on securities law and the Simple Agreement for Future Tokens (SAFT) on Tuesday.

Called “Structuring Legally Compliant Token Sales,” the panel took place at the Cardozo School of Law, at Yeshiva University in Manhattan. There, much of the conversation centered on the SAFT white paper introduced by Cooley LLP attorney Marco Santori and Protocol Labs, as well as critiques leveled yesterday at that model by the Cardozo Blockchain Project.

Stepping back, Santori was there explain to the audience how the SAFT tries to break a token sale into two parts, separating the fundraising of a project from the code that will eventually help power the software project for which it has been designed.

In the first part, an investor gets a contract for coins once a protocol is launched and ready for use.

The people who pre-order these tokens “take on enterprise risk,” Santori said. That part is definitely a security, he granted.

Continuing, Santori compared this part to how bankers used to finance miners to dig gold. When the gold came back, no one thought that the gold was a security, he reasoned. In this way, he said that, with the SAFT, the entrepreneur doesn’t even have to sell what he made to pay his investors back. The investor just gives backers digital currency, the metaphorical gold…

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