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Earlier this week we saw the official release of the Simple Agreement for Future Tokens (SAFT) framework for issuing cryptocurrency tokens in the US, following on from an announcement about the project at Coin Summit in New York earlier this year. There has been significant uncertainty around the legal status of cryptocurrency tokens, especially following the SEC’s report on the Ethereum DAO. The SAFT framework removes some of the legal uncertainty by enabling anyone in the US to sell cryptocurrency tokens that comply with SEC Regulation D Rule 506(c) (“506(c)”)to Accredited Investors.

As it turns out, we’ve been in the middle of preparing for the Dala token sale during September 2017 and US counsel were advising us to consider excluding the US completely from the token sale due to regulatory uncertainty. We refused to give up on giving backers in the US an opportunity to participate. Elsewhere in the world, we’ve spent enough time with counsel in Switzerland, Singapore and the Cayman Islands to have a high level of comfort that the Dala token is not a security. It’s probably useful to understand why token issuers don’t want to issue securities:

the costs of doing a public sale of securities in the US are ridiculously high,

issuing a security in terms of 506(c) means that it can only be sold to Accredited Investors who also cannot resell the security for 12 months, and

current token exchanges are not licensed to trade in US securities, so the token wouldn’t have liquidity.

So, we’re going to sell SAFTs for Dala to only US backers that are also accredited investors, during the pre-sale. US backers will not be able to participate in the public sale. Non-US backers will still be able to participate in the pre- and public sale for Dala. Everyone else outside the US will be able to participate in the pre-sale and public sale without a SAFT. SAFT subscribers in the US won’t be able to use or dispose of their Dala tokens for 6 months, while everyone else in the world will get their Dala upon the conclusion of the Dala token sale. To incentivize US backers to hold onto their SAFTs and wait 6 months for their Dala tokens, we’ll offer a 15% discount to the regular issue price ($0.085 vs $0.10). We’re rewarding people for locking up their Dala tokens, not rewarding whales.

If you’re in the US and you’re not an accredited investor, we’re really sorry that we couldn’t find a way to make it possible for you to participate. If you’re in the US and not an accredited investor, we’ll drop you an email in the next while to ask you if you’d like to close your account at https://tokensales.newtownpartners.com/ and delete all account information forever. We think that limiting the sales of securities to accredited investors creates economic exclusion, but we don’t set the rules of the game.

We’re going to do something else that we think is pretty cool (and would have been even cooler if our lawyers let us have our way). We’re going to tokenize the SAFTs and issue them as a new security token using the ERC20 standard— DALA-S. DALA-S tokens won’t be transferrable for 6 months and at the end of the 6 month lockup period, holders of the DALA-S tokens will be able to send these tokens to a redemption address, which will enable them to redeem their regular Dala tokens and burn the DALA-S tokens forever. If it becomes possible to trade 506(c) securities before the expiration of the 6 month lockup period, during the next 6 months, then DALA-S tokens will become tradeable as tokenized securities in the US. Dala tokens, on the other hand, are and will always remain utility tokens.

And finally, in order to make it easier to create a flat distribution and enable more people to participate in the Dala pre-sale (SAFT and otherwise), we’re going to drop the minimum level of participation in the pre-sale to $10,000 (previously $50,000).

Let’s get out there and change the world!