What is the Definition of a Security insofar as the Securities and Exchange Commission is Concerned?

Problem scenario
You want to know if a security should be registered with the SEC based on the Securities Act. When is an asset considered to be a security?

It depends on if it is an investment contract. The 1946 lawsuit of SEC v. W.J. Howey Co., 328 US 293 provides guidance or a test. https://supreme.justia.com/cases/federal/us/328/293/

The four criteria for a scheme or asset for the "Howey Test" are as follows:

  1. An investment of money
  2. In a common enterprise
  3. With the expectation of profit
  4. To be derived from the efforts of others

(The four points were taken from https://www.investopedia.com/terms/h/howey-test.asp; this Investopedia page mentions how an initial coin offering could be a security.)

The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or nonspeculative, or whether there is a sale of property with or without intrinsic value.


With Dai, USDC, or Tether (USDT), there is no expectation of profit; these are used to buy other cryptocurrencies on exchanges that do not receive dollars from traditional bank accounts. It seems to us that Dai, USDC, and Tether (USDT), would have intrinsic value, no expectation or profit, and not be derived from the effort of others. For non-stable coins, they would not derive value solely from the effort of others. It seems like many cryptocurrencies would not be a common enterprise. It is irrelevant if the coin was speculative or had intrinsic value as long as its value was not solely from the effort of others.

To read more about the Howey test and digital assets (e.g., cryptocurrency), see these two pages:



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