On April 3, 2019, the SEC announced the framework it would use to determine whether a digital asset would be considered an “investment contract” in light of the Supreme Court’s ruling in SEC v. W.J. Howey Co. and subsequent case law. Howey found that an “investment contract” exists where there is an investment of money in a common enterprise with a reasonable expectation that profits will be derived from others’ efforts. In applying the framework to digital assets, the SEC focuses on three main prongs. First, in determining whether there is a reliance on the efforts of others, the SEC analyzes whether a purchaser of the assets is reasonably expecting to rely on the efforts of a promoter, sponsor, or other third party and whether such efforts are “essential managerial efforts”. Second, the SEC examines whether there is a reasonable expectation of profits by looking at several factors, including whether the purchaser has a right to the enterprise’s income or profits and whether there is an ability to trade the asset through a market or platform. Third, the SEC considers other relevant considerations, including whether the digital asset is fully developed and operational and whether there would be an appreciation in value incidental to the asset obtaining its intended functionality.
- Partner
Jim Kennedy practices in the Business Representation & Transactions Group. The focus of his practice is corporate, securities, and financing law, where he has extensive experience in mergers, acquisitions and ...
- Partner
Mark Reuter advocates for business clients in transactions, proceedings and conflicts regulated by federal and state securities laws and stock exchange rules. A partner in the firm’s Business Representation & Transaction ...
- Partner
As a partner in the firm’s Business Representation & Transactions Group, Allie Westfall’s insight and proven analytical skills help translate the complexities of the often-challenging securities laws. Allie’s counsel ...
- Partner
Chris Brinkman practices in the firm's Business Representation & Transactions Group with a concentration in venture capital transactions, start-ups & growth companies, securities, and mergers and acquisitions.
Chris ...
Topics/Tags
Select- Securities Law
- SEC
- Nasdaq
- Securities Regulation
- Clawback Rules
- Corporate Law
- Coronavirus
- Cybersecurity and Privacy Law
- Mergers & Acquisitions
- Economic Sanctions
- Ohio LLC Act
- Tax Planning
- Dodd-Frank
- IRS
- Paycheck Protection Program
- Corporate Tax
- JOBS Act
- Cybersecurity Regulation
- FAST Act
- Proxy Access Rules
- Securities Litigation
- Corporate Governance
- Consumer Protection Act
- SEC Enforcement
- Crowdfunding
- Cryptocurrency
- Hedging
- Conflict Minerals
- Real Estate Law
- Taxation
- Emerging Growth Companies
- Investors
- Private Offerings
- Pay Ratio Disclosure
- Whistleblower
- Intellectual Property
- Technology
- Opportunity Zone
- LIBOR
- Accredited Investors
- Sales Tax
- United States Supreme Court
- Online Trading Platforms
- Executive Compensation
- Health Care Act
- IPO
- Registration Statement
- Annual Reports
- Wall Street Reform
- Ohio Foreclosure Reform
- Director Compensation
- Family-Controlled Entities
- Gift and Estate Transfers
- Board of Directors
- Director Independence
- Total Shareholder Return
- Cyber Insurance
- Data Breach
- Lenders
- Receivership Statute
- Regulation A
- Regulation D
- Compensation Committee Certification
- CDEs
- CDFI Fund
- Community Development Entities
- Community Development Financial Institutions Fund
- Government Shutdown
- New Markets Tax Credit
- NMTC
- NMTC Financing
- Regulation Fair Disclosure
- Social Media
- Benefits
- Healthcare Reform
- Litigation
- Marketing
- Public Company Transition Rules
- Employment Incentives
- HIRE Act
- Social Security Tax
- Tax Credit
Recent Posts
- NYSE and Nasdaq Propose Clawback Listing Standards: What You Need to Know
- Corporate Transparency Act Update – FinCEN Issues Notice of Proposed Rulemaking
- SEC Amends Insider Trading Rules: New Conditions, Requirements, and Related Disclosures
- SEC Reopens Comment Period for 11 Proposed Rules Due to Technological Error
- Corporate Transparency Act Update—FinCEN Issues Final Rule
- SEC Provides Sample Guidance on Disclosure of Russia-Ukraine Invasion
- Proposed SEC Climate-Related Disclosure Requirements
- Proposed SEC Cybersecurity Rules
- International Unrest and its Impact on M&A
- The United States Ramps Up Severe Economic Sanctions on Russia and Export Controls