Popular in recent months scheme for selling tokens to investors, when ICO organizers use SAFT investment contracts, allegedly in accordance with US regulatory standards, has been criticized by the American supervisory authority.

The Financial Industry Regulatory Authority (FINRA), a Washington-based self-regulatory body, called on investors not to excessively rely on a such investment vehicle as simple agreements for future tokens (SAFT) that are currently often used by ICO projects.

The distribution of tokens through the sale of SAFT contracts is not a guarantee that the project meets regulatory requirements, FINRA warned in its Investor's Alert publication.

“Know that investing in a SAFT contract does not mean the offering is “safe” or compliant with applicable federal and state laws…No matter what a company says about the ability of a token to change characteristics from a security to a non-security, there is no guarantee that the SEC or the courts would agree with a company’s assessment. A determination of whether something is a security is a facts and circumstances analysis, and titles don’t change that.”

SAFT contracts are considered securities and therefore must comply with regulatory standards applicable to securities. ICO projects have recently started selling SAFT contracts, assuring investors that when tokens are distributed, they would already be considered not securities, since utilities, that allegedly derives them from the US security legislation.

FINRA also listed 7 tips about ICOs:

  • ICOs offer little investor protection.
  • ICO fraud is real.
  • Online platforms that facilitate trading in ICO tokens are not registered exchanges.
  • Investors are losing millions to ICO theft.
  • Receipt of future tokens is not a given in an ICO.
  • "SAFTs" don't make ICOs safe.
  • FOMO can inflate ICO valuations.