Your seed round is nearly closed. The equity terms are agreed, but your investors have asked how they will share in the token you plan to launch next year, and your lead investor has put two documents on the table: a simple agreement for future tokens, or SAFT, and a token warrant. Both are ways to give investors exposure to a token that does not exist yet, and both are showing up more often in Australian web3 raises. The choice between them looks like a fundraising decision, but it is also a legal one, because the two instruments create very different rights, very different risk allocations, and very different regulatory exposures under Australian law.
The two instruments on the table
A SAFT is best understood as a pre-purchase. The investor pays their money now, and the company promises to deliver a set allocation of tokens when the agreed trigger arrives, usually the token generation event, the launch at which the tokens are actually created, or a development milestone that comes before it. The company gets committed capital today, and owes token delivery later. The investor is locked in from day one.
A token warrant works like an option. The holder gets the right, but not the obligation, to buy a set number of tokens at a set price, called the exercise price, at or after the token generation event. Warrants are usually issued as part of a priced equity round: the equity subscription raises the capital, and the warrant is the separate right to token upside. If the holder decides the token is not worth the exercise price, they simply do not exercise, and the warrant lapses.
Two things are worth flagging before you weigh the factors. First, the simple agreement for future equity, or SAFE, is a different animal entirely: it is a promise of future equity in the company, not future tokens, and it is not a substitute for either of the instruments discussed here. Second, both the SAFT and the token warrant assume there will be a token and a token generation event. If the token never launches, a SAFT leaves investors holding a contractual claim against your company, while a warrant simply expires worthless. The two structures can also collapse into the same regulatory outcome, as the third factor below explains, so do not assume they are legally interchangeable just because they both raise pre-launch capital.
Five factors to weigh before you choose
What each instrument commits you to
The cleanest way to compare the two is to ask what each side is committed to do.
- SAFT: The investor commits money now. You commit to deliver tokens when the trigger is met, and that delivery obligation is mandatory. It does not matter whether the token has risen or fallen by launch; you owe the allocation regardless. If you cannot or will not deliver, investors may have a claim against the company for breach.
- Token warrant: The investor commits nothing beyond holding the warrant. You commit to deliver tokens at the exercise price if and when the holder exercises. If the holder never exercises, you owe nothing and keep the token supply unallocated.
The practical difference is certainty. A SAFT locks in funding and a known allocation. A warrant leaves the actual token sale uncertain until exercise, but it also leaves you with less exposure if the token launch goes badly.
Who carries the price and timing risk
The four positions each carry a different slice of the price and timing risk:
- SAFT investor: carries the price risk. They pay now and take delivery at launch regardless of what the token is worth, although the agreed terms may give them a discount or a more favourable price if the launch price is lower.
- SAFT company: gets certainty of capital, but must deliver a fixed allocation, so if the token performs well the company is giving away upside at the pre-launch price.
- Warrant holder: hedges. They exercise only if the token price is above the exercise price, so their downside is capped at whatever they paid to hold the warrant, usually nothing.
- Warrant company: keeps the optionality, but at the cost of certainty. If the token never trades above the exercise price, the warrants expire unexercised and the raise is smaller than the headline number suggested.
Timing risk cuts the same way. A SAFT locks both parties to a launch that may slip by months, while a warrant with a long exercise window gives the holder room to wait out delays.
Whether the instrument is a security or a financial product
This is the factor that most Australian founders underestimate, because it decides whether your offer triggers disclosure and licensing obligations. The question is not what you call the document. It is what rights and benefits the document actually confers, assessed under the Corporations Act 2001 (Cth).
The starting points are two statutory definitions. Section 92 of the Corporations Act 2001 (Cth) defines securities to include shares, debentures and interests in managed investment schemes, and section 763A defines a financial product as a facility through which a person makes a financial investment, manages financial risk, or makes non-cash payments. A token, a SAFT or a warrant can fall within either definition depending on its terms, and ASIC's Information Sheet 225 makes clear that the analysis turns on the rights and benefits attached to the asset and the arrangements around it, not on the label you give it.
If the instrument is a security, offering it to investors for issue can trigger the fundraising disclosure regime in Chapter 6D: section 706 says an offer of securities for issue needs disclosure unless an exemption applies, and section 727 prohibits making the offer without a disclosure document lodged with ASIC. If the instrument is a financial product, issuing, dealing in or advising on it can require an Australian financial services licence, and a warrant is option-like enough that its classification as a derivative or a security needs careful work. ASIC also warns that the classification is not static: if the rights attached to the token change after launch, the legal characterisation can change with them, so a structure that is unregulated at the seed stage can become a regulated product later. The regime itself is still moving, with Treasury consulting on new digital asset platform reforms, so this factor alone is usually enough reason to take advice before you commit to either form.
What the warrant covers and what the SAFT delivers
If you lean toward a warrant, the document needs to answer several questions that are easy to leave vague, and each one changes what the warrant is worth:
- Which tokens: does the warrant cover a named token, or any future token the company or its affiliates issue?
- Excluded tokens: tokens from mining, staking, airdrops or rewards programs are often carved out, and so can be NFTs and stablecoins.
- How the share is calculated: the holder's allocation is commonly tied to their fully diluted ownership percentage of the company, which can be measured at issuance, at launch, or at exercise, with very different results.
- Lockups and transfers: warrants typically restrict when tokens can be sold after exercise, often with staggered release schedules.
- Expiry: a warrant that never gets exercised is a promise that cost you nothing, but it is also investor goodwill that evaporated.
A SAFT has its own drafting decisions: the size of the allocation, the milestones that trigger delivery, the price or discount formula, and crucially, what happens if the launch is delayed indefinitely or cancelled. That last question decides whether your SAFT is a simple delivery promise or, in substance, a debt the company owes.
Tax treatment on both sides
The ATO treats crypto assets as property, not money, and applies the ordinary tax rules to them. Its guidance says the treatment depends on how you acquire, hold and dispose of the asset: for investors, crypto assets are usually capital gains tax assets, while businesses may need to account for them as trading stock or ordinary income.
For the company, the key questions are when the pre-sale proceeds are recognised and whether they are income or capital, which can depend on whether the raise is part of an ongoing business of issuing tokens. For investors, a SAFT means paying now and receiving tokens later, with the CGT clock starting when they acquire the tokens, while a warrant means acquiring tokens at the exercise price only if they choose to exercise. Staking rewards and airdrops are ordinary income, and the same characterisation questions that affect the securities analysis can affect the tax treatment. The answers differ for every raise, so the tax factor is one to work through with an accountant or tax adviser in parallel with the legal analysis, not after the documents are signed.
Getting the choice right with an Artificer Legal practitioner
The point where most founders lose value is choosing the instrument first and checking the law second. An Artificer Legal practitioner can help you work through the decision in the right order. We start by stress-testing the assumptions the choice depends on: that the token will launch, that the milestones are realistic, and that the raise is genuinely a token sale rather than something a court or ASIC would characterise differently. We then model the downside of each structure, including what the company owes if the launch fails, what happens to unexercised warrants, and how the allocation dilutes the cap table. If the instrument is a security or financial product on the terms proposed, we can tell you before you circulate it, and work through whether Chapter 6D disclosure, an AFSL, or an exemption applies. Once the structure is settled, we draft the instrument itself: the delivery triggers and default provisions in a SAFT, or the token scope, excluded tokens, exercise mechanics, lockups and expiry in a warrant, with terms that match the commercial deal rather than a template copied from an offshore deal. We also coordinate with your tax adviser so the securities analysis and the tax treatment are settled together, and we negotiate the terms with investors so the document you sign is the deal you understood.
The document, not the label, decides what you have signed up for
If there is one thing to take from this comparison, it is that the name of the document settles nothing. A SAFT and a token warrant are commercial shorthand, not legal categories. Australian law characterises the arrangement by the rights and benefits it confers, and that characterisation drives whether you need disclosure documents, a licence, or neither, and it can shift after launch as the token's rights change. The founders who get burned are the ones who choose a form because it sounded familiar and copied the terms, rather than drafting rights that match the deal they actually made with their investors.
On the substance: a SAFT commits investors to pay now and commits you to deliver tokens at launch, while a token warrant gives holders the option to buy at a set price and leaves you with less certainty about the token side of the raise. The price and timing risk falls differently under each, the warrant's scope and expiry need careful drafting, and the tax treatment depends on your circumstances on both sides of the table. Because the regulatory analysis is fact-specific and the regime is still evolving, the sensible path is to take the structure you are leaning toward to a lawyer and a tax adviser before you circulate the documents, and to let the rights you draft, rather than the label you choose, carry the deal.