While we do not offer legal advice, our position here at w3if is to present thoughts for discussion and consideration.  Through these activities, engage each other and legal and regulatory framed constructs to chart a path through these emerging times.

To this extent, we consider how the SEC evaluates a cryptocurrency as a Security.

Cryptocurrencies, such as Bitcoin and Ethereum, are not automatically considered securities by the U.S. Securities and Exchange Commission (SEC). However, certain cryptocurrencies or initial coin offerings (ICOs) may be classified as securities if they meet the definition of a Security under U.S. federal securities laws.

The determination of whether a cryptocurrency is considered a security depends on how it is structured and offered, and whether it meets the criteria outlined in the U.S. Supreme Court case SEC v. Howey (1946) and subsequent interpretations by the SEC. According to the "Howey Test," an investment contract, which is considered a security, exists when there is an investment of money in a common enterprise with the expectation of profits solely from the efforts of others. If a cryptocurrency or ICO meets these criteria, it may be classified as a security and subject to federal securities laws and regulations.

There are several reasons why cryptocurrencies may be considered securities:

1. Investment of Money: If investors provide money in exchange for a cryptocurrency with the expectation of making a profit, it may be considered an investment of money, which is one of the elements of the Howey Test.

2. Common Enterprise: If the cryptocurrency is part of a common enterprise where investors pool their resources, and their fortunes are interwoven with those of the promoters or other investors, it may meet the common enterprise element of the Howey Test.

3. Expectation of Profits: If investors expect to make a profit from their investment in the cryptocurrency based on the efforts of others, such as the developers or promoters, it may meet the expectation of profits element of the Howey Test.

4. Efforts of Others: If the success or failure of the cryptocurrency depends primarily on the efforts of others, such as the developers or promoters, it may meet the efforts of others element of the Howey Test.

If a cryptocurrency is considered a security, it would be subject to federal securities laws and regulations, including registration requirements, disclosure requirements, and anti-fraud provisions, designed to protect investors. Failure to comply with these laws and regulations could result in legal and regulatory consequences.

It is important to note that the classification of cryptocurrencies as securities is a complex and evolving area of law, and the determination depends on the specific facts and circumstances of each cryptocurrency or ICO. It is advisable to consult with legal and financial professionals for specific guidance on compliance with securities laws and regulations when dealing with cryptocurrencies.