Page 6 of 40 16. Further, in evaluating digital assets or cryptocurrencies, courts have typically found that a “common enterprise” exists. In this matter, the “common enterprise” is Bitcoin Latinum. 17. The issues in analyzing a digital asset or cryptocurrency under the Howey Test are whether there is an expectation of profits from the investment and whether those profits come from the effort of a promoter or third party. 18. In determining whether a reasonable expectation of profits exists, the United States Securities and Exchange Commission (“SEC”) has issued guidance stating that, the more of the following characteristics that are present, the more likely it is that there is a reasonable expectation of profit: (a) The digital asset gives the holder rights to share in the enterprise’s income or profits or to realize gain from capital appreciation of the digital asset; (b) The digital asset is transferable or traded on or through a secondary market or platform, or is expected to be in the future; (c) Purchasers would reasonably expect that a promoter or third party’s efforts would result in capital appreciation of the digital asset and therefore be able to earn a return on their purchase; Case 2:22-cv-10208-RHC-JJCG ECF No. 1, PageID.6 Filed 02/01/22 Page 6 of 40
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