In the United States, determining whether a crypto asset is considered a security is based on the "Howey Test," which was established by the Supreme Court in 1946. The Howey Test is used to determine whether an investment contract qualifies as a security under U.S. federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934.
According to the Howey Test, an investment contract is deemed a security if it meets the following criteria:
Investment of Money: There must be an investment of money or assets that have value. In the context of cryptocurrencies, this usually refers to the purchase of tokens or coins using fiat currency or other cryptocurrencies.
Common Enterprise: The investment must be made in a common enterprise, meaning that investors pool their funds or assets with the expectation of profiting from the efforts of others. This typically involves relying on the efforts of a third party, such as a development team, to generate returns.
Expectation of Profits: Investors must have a reasonable expectation of earning profits from their investment. The profits can come from the efforts of others, specifically the third party mentioned above.
Efforts of Others: The profits generated from the investment must be primarily derived from the efforts of others. This element is often met when investors rely on the actions of promoters, developers, or management teams to create value and generate returns.
If a crypto asset meets all these criteria, it is likely to be classified as a security in the U.S. and subject to the regulatory requirements imposed by the Securities and Exchange Commission (SEC). It is important to note that the classification of a particular crypto asset as a security is determined on a case-by-case basis, taking into account the specific facts and circumstances surrounding the offering or sale of the asset.
I hope this helps you understand the issue concerning crypto asset as a security in the U.S.
