Vault12, a crypto wallet backup company that raised $17.45 million through a token sale in 2018, says it has fulfilled or abandoned every commitment it made to investors. Despite that, its Vault Guardian Token (VGT) has never been listed on a centralized exchange, highlighting potential challenges with the U.S. Securities and Exchange Commission’s (SEC) proposed token safe harbor.

The company, which has backing from Winklevoss Capital and Naval Ravikant, warned that the SEC’s proposed framework may not give cryptocurrency exchanges enough legal certainty to list tokens without risking future regulatory action.

The proposed safe harbor is included in the SEC’s Regulation Crypto Assets initiative, introduced in August. The plan seeks to establish conditions under which a token could stop being treated as subject to its original investment contract.

In a comment letter submitted Tuesday, Vault12 said it raised $17.45 million from 38 investors through future-token agreements in 2018. The company argued that its experience raises questions about whether older crypto projects can realistically transition out of securities regulation under the proposed framework.

Vault12 Questions Whether the Safe Harbor Offers Enough Protection

Vault12 believes its token sale meets the proposed requirements. The company said it has completed or formally discontinued all commitments outlined in its white paper, yet VGT remains unlisted on centralized exchanges.

Its concerns align with a separate submission from industry organization The Digital Chamber, which Vault12 said it supports.

According to the letter, exchanges that Vault12 contacted about listing VGT repeatedly requested assurances that the SEC would not later dispute the token’s regulatory status. The company argued that the proposal does not offer sufficient certainty for exchanges to move forward.

Under the SEC’s proposed Regulation Crypto Assets framework, eligible projects could access fundraising exemptions and a conditional safe harbor for ending an investment contract linked to a token. To qualify, issuers would need to complete or permanently discontinue the essential managerial efforts they had promised, avoid making new commitments of that kind, and have no plans to introduce them in the future.

Issuers would also have to submit a transition report, known as Form TR, explaining why they believe the investment contract has ended.

Vault12 said exchanges considering VGT repeatedly raised a central concern: how could they know the SEC would not later determine that the token remained subject to its original investment contract?

SEC Could Still Challenge a Token’s Status

The SEC’s proposal allows the agency to question whether an issuer has satisfied the safe harbor requirements. If a certification is found to be inaccurate, the regulator could determine that the original investment contract remains in effect, meaning securities-law obligations would continue to apply.

The proposal also would not prevent other parties from arguing that a token remains covered by an investment contract or otherwise qualifies as a security.

To address this uncertainty, Vault12 proposed giving the SEC a 60-day period to object to an issuer’s certification. Once that period expires, a properly submitted certification would become conclusive for the agency, subject to exceptions such as fraud or material misrepresentations.

Vault12’s case highlights a key issue facing the proposed framework: even if a project believes it has fulfilled its original obligations, exchanges may remain reluctant to list its token without clearer assurances that its regulatory status will not be challenged later.