Amicus Brief

Amicus of Securities Law Scholars Supporting Summary Judgment in SEC v Coinbase


To determine whether the tokens traded on Coinbase and through Prime constitute unregistered “securities,” this Court must determine whether these “unusual instruments not easily characterized as ‘securities,’” Landreth Timber Co. v. Landreth, 471 U.S. 681, 690 (1985), are “investment contracts,” and, as such, are one of the enumerated types of “securities” covered by the Securities Act of 1933, see 15 U.S.C. § 77b(a)(1) (Section 2(a)(1) of the “1933 Act”), and the Exchange Act of 1934, see 15 U.S.C. § 78c(a)(10) (Section 3(a)(10) of the “Exchange Act”).

The answer requires the application of the Supreme Court’s seminal decision in S.E.C. v. W.J. Howey Co., 328 U.S. 293 (1946), which held that an offering in a Florida citrus grove coupled with the right to receive a share of the grove’s profits constituted an “investment contract”—and hence a security—because it “involve[d] an investment of money in a common enterprise with profits to come solely from the efforts of others.” Howey, 328 U.S. at 301; see also Revak v. SEC Realty Corp., 18 F.3d 81, 87 (2d Cir. 1994) (same). This test is meant to “embod[y] the essential attributes” of a “security.” United Hous. Found., Inc. v. Forman, 421 U.S. 837, 852 (1975).

In Howey, the Court held that by including “investment contract” in the federal securities statutes, Congress used a term with a well-settled meaning based on judicial interpretations of state blue-sky laws. As a result, to assist the Court in assessing how “investment contract” was understood by Howey and at the time of the federal securities statutes’ enactment, amici offer their analysis of how the term was interpreted in the state blue-sky laws. That analysis makes clear that an arrangement is an “investment contract” only if the investor receives, in exchange for an investment, a contractual undertaking or right to an enterprise’s income, profits, or assets. That core notion has carried through in the federal cases since Howey.