The $50,000 Millionaire
ICO’s or token sales are booming. (Call them what you like-it won’t sway regulators.) This speculative bubble has been building steam all year and the smart money is getting ready for the SEC. The SAFT agreement, an open-source legal document to ensure compliance with securities laws for token pre-sales, is due out shortly.
Token pre-sales stand on the proverbial slippery slope and can easily tumble into the muddied current of the Howey test. Most token sales (read more on ICO’s vs. token sales) can avoid regulation as securities under the Howey test if the tokens themselves are exchangeable for a service (and not just as an investment vehicle and store of value). The idea is “Hey SEC, I’m not selling securities, I’m selling access to my awesome new service (that should be live in 18 months).”
A token pre-sale is when a start-up wants to sell tokens before they have the token infrastructure in place. The sale is on the promise of a future distribution of tokens. This cuts too close to a security for many, though pre-selling services is common in other industries (think healthcare). Instead of cutting out all U.S. investors subject to the Howey test (as has been done), enter the SAFT agreement.
Developed by CoinList, the SAFT agreement generally limits investment in token pre-sales to accredited investors. In simplistic terms, an accredited investor has an annual income over $200k or net assets of at least $1 million. The idea is that these high-net worth individuals are sophisticated enough to evaluate risky investments and/or wealthy enough to sustain the loss of their investment.
The interesting wrinkle here is that most token sales accept cryptos for payment (basically Bitcoin and Ethereum). As the values of these cryptos have gone stratospheric since January, it means that in June 2017, a person who bought about $30k in Ethereum in January 2017 was a millionaire. Today the number is closer to $50k, but you get the idea.

