Token Warrants, SAFTs, and SAFEs: Structuring Crypto Investments the Smart Way

Crypto projects need capital to grow, but raising funds is never as simple as offering a few tokens and calling it a day. Whether you are a founder, investor, or legal advisor, understanding the mechanics and risks of investment instruments like SAFTs, SAFEs, and Token Warrants is critical to avoiding legal headaches and regulatory scrutiny.

At LDU, we regularly advise crypto companies and investors on how to navigate these structures in a way that is both compliant and commercially sound. In this article, we break down the most common token investment tools, highlight the differences, and offer guidance on which structure might be right for your project.

What Is a SAFT?

A Simple Agreement for Future Tokens (SAFT) is an agreement where an investor gives money upfront in exchange for the right to receive tokens at a later date. The idea is that tokens will only be issued once the network or platform is live and fully functional.

SAFTs became popular in the 2017 ICO boom and were designed to avoid regulatory issues by delaying the issuance of tokens until they are considered "utility" tokens. In practice, however, regulators in many jurisdictions have taken the view that a SAFT itself may still be considered a security, and therefore subject to securities laws.

Pros:

• Delays token issuance until the network is ready
  
  
• Useful for raising capital during early stages
  
  
• Familiar to crypto-native investors
  
  

Cons:

• May still be classified as a security
  
  
• Can create delivery risk if the project never launches
  
  
• Investors may have limited rights or protections
  
  

What Is a SAFE?

A Simple Agreement for Future Equity (SAFE) is a popular structure from the startup world, especially in the US. It allows investors to provide capital now in exchange for future equity in the company, usually triggered by a priced funding round or liquidity event.

In the crypto context, SAFEs are often used in hybrid rounds where the investor receives both equity and tokens. This can be especially useful when the project includes both a legal entity (e.g., a protocol development company) and an on-chain ecosystem.

Pros:

• Simple and founder-friendly
  
  
• Can be structured to include token rights
  
  
• Commonly accepted by traditional VCs
  
  

Cons:

• Needs to be carefully drafted if token rights are included
  
  
• May create valuation uncertainty for investors
  
  
• Can lead to misalignment if the equity and token ecosystems diverge
  
  

What Are Token Warrants?

A Token Warrant is a contract that gives the holder the right to receive tokens under certain conditions, such as when a network goes live or after a token generation event. They are often used in conjunction with equity investments, where the investor receives both shares and a token warrant.

Warrants can be structured with vesting schedules, performance triggers, or lock-ups. This provides flexibility in aligning incentives between the team and investors, and can be especially helpful for projects still working out regulatory positioning for their token.

Pros:

• Highly customizable
  
  
• Can be layered with investor protections
  
  
• Keeps token and equity issuance separate
  
  

Cons:

• Requires more legal complexity
  
  
• Difficult to enforce if not clearly tied to a live token event
  
  
• Needs careful regulatory treatment in each jurisdiction
  
  

Which One Should You Use?

There is no one-size-fits-all answer. Here are a few guidelines:

• Use a SAFT if your token has strong utility value and you are pre-network launch. Ensure investors understand the risks.
  
  
• Use a SAFE with token rights if your project has both equity and token upside and you are planning a larger VC-style round.
  
  
• Use Token Warrants if you want to preserve equity investment flexibility while offering token exposure at a later date.
  
  

Each of these instruments comes with tax, securities, and jurisdictional considerations. The wrong structure can delay your token launch, alienate investors, or worse, attract regulatory enforcement.

How LDU Can Help

At LDU, we specialize in advising Web3 and fintech companies on how to structure investments the right way from day one. Whether you need to draft a hybrid SAFE, issue a compliant token warrant, or simply review an existing SAFT, our team of senior lawyers is ready to assist.

Our approach is fast, flexible, and always business-minded. We understand crypto, we understand deal dynamics, and we know how to help you scale without unnecessary risk.

Final Thoughts

Fundraising is not just about securing capital. It is about building sustainable relationships with aligned investors, while staying compliant across borders. The right legal structure can mean the difference between momentum and meltdown.

Book a free 15-minute consultation with LDU to discuss your token investment structure today.

👉 Book now or email us at hello@lduasia.com