and the world’s two largest cryptocurrency exchanges, Binance and Coinbase appear to have run out high-caliber legal arguments in their defense.
The hardest of the prongs to satisfy, according to several observers, will be the expectation of profit from the labor of others. The agency will have to define what “labor” is, who “others” are, and whether investors who did not obtain their tokens through direct transactions with the creators could have expected profits based on the issuers’ public communications.
With such tokens, however, “it's difficult to say that you're making anything other than a speculative investment that's not really dependent on what a certain individual is doing and what the activities of the company are,” says Jeff Novel, director at the Dallas office of Kane Russell Coleman. Key to proving there was an expectation of profits from the efforts of others will be the purchaser’s expectation itself, which could different from from customer to customer, says Fike. “Sometimes it's not even the exact contract that's making that decision. It's about who is the buyer? Who is the seller? What information do they have access to?”