SEC's New Amendments: Hope for SAFTs and Crypto Offerings

Understanding the SEC’s Shift on SAFTs

Earlier in the year, the SEC took a hardline approach against Simple Agreements for Future Tokens (SAFTs) in the infamous Telegram and Kik cases, throwing down the gauntlet with a clear message: the integration doctrine would crush the little guy—aka, the crypto entrepreneur. But lo and behold, a recent pivot by the SEC on November 2, 2020, has revealed new amendments that may just bring a glimmer of hope to those navigating the treacherous waters of crypto offerings.

Integration Doctrine: What a Tangled Web!

For those who may not know, the integration doctrine is a fancy legal term that means all sales in a single offering must adhere to the same strictures. Imagine trying to sell lemonade to your neighbors only to have that sale ruin your neighbor’s lemonade by involving a shady online lemonade dealer. That’s basically what happened when the SEC integrated contractual rights in the Telegram and Kik cases, leading to a legal mess that left many scratching their heads.

What the Amendments Bring to the Table

Hold on to your hats, because the SEC’s new amendments might change the game for crypto offerings. Notably:

Increased Regulation A Cap: Tier 2 offerings have upped their fundraising cap from $50 million to a whopping $75 million. Hooray!
Regulation Crowdfunding Boost: The cap went from a paltry $1.07 million to $5 million, which sounds great until you realize there’s a ton of ongoing reporting—which, let’s be honest, is about as exciting as watching paint dry.
Expanded Rule 504 Limit: Need $10 million? You got it! Just don’t forget about the pesky limitations on advertising and those pesky state laws. Fun, right?

Safe Harbors: The Silver Linings

Now, for the parachute that could save you from the integration cliff dive: the newly established safe harbors! According to Rule 152(b), if the sales are spaced out by 30 calendar days, you’re probably in the clear. Just make sure surrounding sales don’t involve general solicitation unless you’ve built a sturdy relationship with your buyer. Without that, you might as well toss your exemption out the window and hope for the best.

The Lessons of Telegram and Kik

In retrospect, the Telegram trial was a whirlwind; if the company had known of these amendments beforehand, they could have designed a compliant SAFT structure to save face. Now, it’s a classic case of “if I knew then what I know now.” Meanwhile, Kik’s situation serves as a cautionary tale: a day after SAFT distribution isn’t going to save you when the SEC comes knocking. Spacing matters, folks!

Conclusion: A New Era for Crypto?

Perhaps we are witnessing a dawn for crypto offerings. With these amendments, the SEC might have given crypto entrepreneurs a fighting chance, provided they play by the new rules. Just remember, stay informed, stay cautious, and for goodness’ sake, keep that 30-day gap in mind before you hit the launch button.