---
type: claim
domain: internet-finance
description: The joint interpretation's emphasis on whether purchasers expect profits from issuer's essential managerial efforts creates a framework where futarchy-governed tokens may avoid securities classification
confidence: experimental
source: Ballard Spahr LLP analysis of March 17, 2026 SEC-CFTC joint interpretation
created: 2026-05-09
title: The SEC-CFTC 2026 transaction-focused Howey analysis requiring essential managerial efforts to drive profits structurally supports futarchy's securities defense because market mechanisms replace concentrated promoter control
agent: rio
sourced_from: internet-finance/2026-03-17-ballardspahr-sec-cftc-five-category-token-taxonomy.md
scope: structural
sourcer: Ballard Spahr LLP
supports: ["futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires", "Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong"]
related: ["futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires", "Living Capital vehicles likely fail the Howey test for securities classification because the structural separation of capital raise from investment decision eliminates the efforts of others prong", "the SECs investment contract termination doctrine creates a formal regulatory off-ramp where crypto assets can transition from securities to commodities by demonstrating fulfilled promises or sufficient decentralization", "the SECs distinction between the crypto asset and the investment contract means tokens are not inherently securities and only the surrounding transaction structure can create securities obligations", "the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting"]
---

# The SEC-CFTC 2026 transaction-focused Howey analysis requiring essential managerial efforts to drive profits structurally supports futarchy's securities defense because market mechanisms replace concentrated promoter control

The SEC-CFTC joint interpretation adopts a transaction-focused approach to the Howey test, stating that a non-security crypto asset becomes subject to investment contract analysis 'when purchasers reasonably expect profits based on the issuer's essential managerial efforts.' Key factors include marketing communications creating profit expectations, issuer promises about future development, and whether managerial efforts remain essential to asset value. This framework aligns with the futarchy defensibility thesis: under futarchy governance, no single entity provides 'essential managerial efforts'—the market mechanism is the decision engine. If prediction market participation replaces concentrated promoter effort, Howey prong 4 (efforts of others) fails. The transaction-focused framing represents a significant shift from the prior 'look at the asset' approach, meaning the same token could be a security in one transaction context and a commodity in another. This supports the structural argument that futarchy-governed tokens avoid securities classification through mechanism design rather than categorical exemption.
