SAFT vs Token Warrant

As crypto ecosystem matures, startups and investors increasingly rely on specialized legal frameworks to facilitate early-stage funding. SAFTs and Token Warrants have emerged as go-to instruments in token-based fundraising. While they serve similar purposes, they differ in structure, legal implications, and investor rights. If you are weighing fundraising options, this article will help you understand how SAFTs and Token Warrants stack up.

What Is a SAFT?

A Simple Agreement for Future Tokens (SAFT) is a legal agreement used by crypto startups to raise money. Instead of giving investors tokens right away, the SAFT promises that investors will receive tokens in the future, usually when the project’s blockchain or protocol is fully built and ready to launch. This approach was designed to help startups stay in line with U.S. securities laws while still allowing them to raise early funding.

The original SAFT first appeared in 2017 and was designed to serve as a standard template like its predecessor SAFE (Simple Agreement for Future Equity) from Y Combinator. They have become more flexible over time and today many SAFTs are customized to fit the specific needs of each project and investor. That means not all SAFTs look the same, and it’s totally normal for terms to vary from one deal to another. So if someone says a deal must follow the “original SAFT,” it’s okay to ask questions or suggest changes.

Key Features of SAFT

• Based on the SAFE framework.
• Often used in pre-launch crypto fundraising rounds.
• Tokens are delivered when created (Token Generation Event) unless vesting applies.
• Typically requires the issuing project to register the token offering with the regulator or ensure it qualifies for an exemption.
• SAFTs are generally considered securities during fundraising but tokens themselves may become “sufficiently decentralized.”

What Is a Token Warrant?

A Token Warrant is a legal agreement that gives an investor the right, but not the obligation, to buy a certain number of tokens at a fixed or discounted price in the future. Unlike a SAFT, where tokens are promised to be delivered automatically once the project is live, a Token Warrant must be actively exercised by the investor, meaning they choose when they want to buy the tokens.

Token Warrants are often used alongside other types of investment agreements, such as equity deals or convertible notes. This allows investors to benefit from both the company’s growth (through equity) and the future success of its token economy.

This tool is borrowed from traditional finance, where a stock warrant gives someone the right to buy shares in a company later. In the world of crypto, Token Warrants work in a similar way.

Key Features of Token Warrants

• Grants the right to buy tokens, rather than automatic delivery.
• May be tied to equity deals, giving investors token exposure alongside equity.
• Offers more flexibility in timing and conditions for token delivery.
• Like SAFT, may include vesting schedules, cliffs, lock-ups.
• Unlike SAFT, may include performance-based triggers that unlock additional tokens (e.g., continuous employment) or take away the unvested tokens in some circumstances (termination of employment, breach of contract, etc.)
• Can be structured to delay tax and regulatory implications.

Key Differences Between SAFT and Token Warrant

While both SAFTs and Token Warrants are used to raise funds and offer future access to tokens, they differ in how and when tokens are delivered, the investor’s rights, and their legal and financial structures. The table below highlights the key differences between them:

When to Use Each?

SAFTs are usually preferred by early-stage token projects that do not want to issue equity to investors. They simplify fundraising but can be risky if regulatory classification of the token changes. SAFTs are usually used by offshore entities.

Token Warrants are better for more complex fundraising that includes equity, companies designing token incentives for employees and advisors, or for founders seeking greater flexibility on token distribution and timing. They can be structured to align with long-term strategic goals. Token Warrants are usually used by U.S.-based projects.

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