Crypto projects sell SAFTs to raise money before their tokens exist. The tokens usually arrive when the project’s network launches. A SAFE is the startup-equity version: it converts into shares, not tokens.
A SAFT sale can be a securities offering, which must be registered with the SEC unless an exemption applies. In 2017, Kik Interactive offered discounted Kin tokens through SAFTs to investment funds and other wealthy investors. It also offered Kin to the general public. On September 30, 2020, a federal court ruled for the SEC in its case against Kik. The court treated the SAFT sale and the public sale as one offering of investment contracts, which are securities. No exemption from registration covered that offering.
Telegram also sold tokens before delivering them: about 2.9 billion Grams, to 171 buyers. A federal court barred the delivery in March 2020. In June 2020, Telegram agreed to return more than $1.2 billion to investors.
As of September 2026, no Code section, regulation, IRS notice or ruling addresses SAFTs, so their tax treatment is unsettled. For the project, one open question is when it has income: when the investor pays, or when the tokens are delivered. For the investor, the open questions are the basis in the tokens and when the holding period starts. Once delivered, the tokens are property like any other crypto, so selling or swapping them is taxable.
Sources
- SEC, Kik Interactive Inc. (the SEC’s description of Kik’s SAFTs)
- SEC, Press Release 2020-262, SEC obtains final judgment against Kik Interactive for unregistered offering
- SEC, Press Release 2020-146, Telegram to return $1.2 billion to investors and pay $18.5 million penalty
- IRS, Digital assets (digital assets are property)
- IRS, Notice 2014-21 (virtual currency is property)
Reviewed and updated September 2026. General information, not advice for your situation.