According to Cointelegraph, the United States Securities and Exchange Commission (SEC) has secured a victory in its case against Rivetz Corp and its CEO, Steven Sprague, regarding an initial coin offering (ICO). On September 30, Massachusetts federal court judge Mark Mastroianni ruled in favor of the SEC, determining that Sprague, through Rivetz, sold unregistered securities by offering the Ethereum-based Rivetz (RvT) token to U.S. investors.

The SEC filed the lawsuit against the now-defunct blockchain hardware firm and Sprague in September 2021, alleging that they sold $18 million worth of Rivetz tokens in 2017 to over 7,200 investors, with a significant portion being U.S. residents. While neither the SEC nor Sprague disputed the material facts of the case, Sprague, who represented himself, argued that the token was a software product and not an investment contract under the Howey test, which defines securities.

Judge Mastroianni, however, noted that from the ICO's announcement to its completion, Rivetz and Sprague made statements linking the value of RvT tokens to Rivetz's goal of creating a security ecosystem for mobile devices. He added that while the tokens were functional as ERC-20 tokens, they had no additional uses or inherent value because Rivetz did not yet have a functional security ecosystem. The judge concluded that the value of the RvT token was directly dependent on Rivetz's entrepreneurial efforts, meeting a criterion of the Howey test that indicates token buyers expected profits from these efforts.

The judge further stated that the tokens were promoted as a functional part of the Rivetz security ecosystem, and their value depended on future demand and usability, fulfilling other criteria that defined the token as a security. The SEC has been instructed to confer with Sprague and submit a proposal for injunctive and monetary relief by October 22. Sprague has not yet responded to requests for comment.

This ruling follows a partial victory for the SEC in a case against blockchain firm Opporty International on September 24. A New York federal court judge found that the firm and its founder, Sergii Grybniak, had sold unregistered securities through its $600,000 ICO in 2017 and 2018.