Crypto Ponzi Ruling May Influence Future Howey Analysis

By Daniel Michael, Alexander Drylewski and Stuart Levi (July 7, 2022, 5:50 PM EDT) — The question of whether a digital asset is a security under the federal securities laws has loomed over the industry for years.

Through its enforcement actions to date, the U.S. Securities and Exchange Commission generally has taken a broad view of which digital assets may constitute securities, which is consistent with SEC Chair Gary Gensler’s recent remarks that most crypto tokens bear the “hallmark of an investment contract or a security” under the test set forth in the U.S. Supreme Court 1946 case SEC v. W. J. Howey Co.[1]

And while the SEC’s enforcement activity has produced data points, open questions persist…

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