The latest report notes the former chairman of Commodity Futures Trading Commission (CFTC), Gary Gensler shared his views on the recent court order against Telegram. 

Noticeably, a New York Judge Kevin Castel on Tuesday ruled against Telegram, ordering it to refrain from issuing its own token, dubbed “GRAM token”. The order came in favor of the US Securities and Exchange Commission (SEC) which had alleged that Telegram's Open Network (TON) ICO is the "sale of unregistered securities”. 

SAFT and Court’s Order Against Telegram ICO 

That being said, Gensler in a long interview expressed his concern towards the oldest concept of launching an ICO, SAFT (Simple Agreement for future offerings). He noted that the recent court order represents the deal knell for SAFT. Gensler is a former chairman of CFTC and is currently teaching at MIT’s Sloan School of Management. He elaborated that the "SAFT construct won’t spare companies from securities laws”. He further added that despite this, the token has to pass the Howey Test. 

“If the token, even two or three years later, is being bought in anticipation of profit, relying on some common enterprise, it's still a security” noted Gensler. 

While the Court Judge on Tuesday acknowledged that despite Telegram claiming it has no involvement in the TON network, investors need assurance as they are concerned about the profit from the ICO. 

On the other hand, Gensler’s view towards ruling was that it was a good day for investors and today for investor protection but almost 99% of all ICOs are nothing but ‘investment contracts’, noting that even if these tokens sales are issued with the tag of a SAFT contract. It’s worth describing that the so-called “SAFT” was initiated in Silicon Valley in 2017 and was reportedly based on Silicon Valley’s Y Cominoators’s Simple agreement for future equity. 

However, continuing his note on security and SAFT, Gentler continued stating that:

“The idea that somehow something could transition from being security to something that's not security was a novel suggestion in 2017 and 2018,” Gensler said. 

However, in 2019 SEC had answered that something could transition to a utility offering if at all it can be sufficiently decentralized. On the other side, the nib of the matter for Howey Test points that the essence of investment contract relies on the existence of investment of money with a "reasonable returns from the efforts involved”. 

That being said, The Gensler emphasized on SEC’s April guidance and added:

“I think that basically, Judge [Castel] was saying the SEC has the better argument in here, that people are still relying on Telegram, the company, for the value of the gram token.” 

Continuing his analysis he added that even if SEC wins the case, Telegram can still proceed with the issuance of its token by compiling with securities law. ï»¿