CTF Written Submission

RE: A Workable “Efforts of Others” Framework for Digital Assets Sold Pursuant to Investment Contracts

Feb. 22, 2025
  • The SEC should use its interpretive authority to protect investors, facilitate capital formation, and maintain fair, orderly, and efficient markets in digital asset transactions.
  • A flexible three-step test is proposed to delineate the "efforts of others" prong of Howey, providing a framework for blockchain projects to decentralize management and avoid being considered sold pursuant to an investment contract.
  • The SEC must draw an arbitrary line to determine whether digital assets are sold pursuant to an investment contract based on control of a blockchain, control of a protocol, and ownership rights in an enterprise or object.

Last Reviewed or Updated: April 3, 2025