The ruling says a security involves the investment of
money in a common enterprise, in which the investor expects profits primarily from others» efforts.
As noted by the SEC, an investment contract is «an investment of
money in a common enterprise with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.»
The parties accepted that the joint venture interest was an investment of
money in a common enterprise.
By now everyone in the crypto community can recite the legal test designed to identify a security, as announced in 1946 by the U.S. Supreme Court in SEC v. Howey: whether a scheme (the court's word) «involves an investment of
money in a common enterprise with profits to come solely from the efforts of others.»
Not exact matches
The test checks whether there is (1) an investment of
money (2)
in a
common enterprise (3) with an expectation of profits (4) which are derived solely from the efforts of the promoters or third parties.
According to the Howey test, an instrument is only an investment contract if it involves an investment of
money or other tangible or definable consideration
in a
common enterprise with a reasonable expectation of profits to be derived primarily from the entrepreneurial or managerial efforts of others.
Unfortunately named to sound like IPOs, initial coin offerings are sales of digital tokens that represent either a stake
in a
common enterprise (similar to equity) or a right to use the company's service (similar to Canadian Tire
money or redeemable points).
Applying the test, Canadian regulators will consider whether an ICO / ITO involves: (i) an investment of
money, (ii)
in a
common enterprise, (iii) with the expectation of profit, (iv) to come significantly from the efforts of others.
The holding that bitcoins were
money was needed
in that particular case because the definition of «investment contract»
in the US federal securities law required an investment of
money (
in a
common enterprise with an expectation of profit — the
common enterprise does not need to involve
money as its object).
test (named for the Supreme Court case that announced it), which says that something is an investment contract if it involves (1) an investment of
money (2)
in a
common enterprise (3) with a reasonable expectation of profits derived from the managerial efforts of others, the SEC found that DAO Tokens were securities because: