Define “Common Enterprise” in the Context of the Howey Test

"Common enterprise" is the second prong of the Howey Test, requiring that the investment be pooled together or that the fortunes of the investors are interwoven with those of the promoter or other investors. It can be satisfied by two main theories: horizontal commonality, where investors' funds are pooled and they share pro-rata in profits and losses; or vertical commonality, where the investor's fortunes are tied to the success or failure of the promoter's efforts.

Most courts, including the SEC, typically focus on horizontal commonality in crypto cases.