What Is the “Common Enterprise” Prong of the Howey Test?

The "common enterprise" prong typically requires either horizontal or vertical commonality. Horizontal commonality means the pooling of investors' funds, with the investors sharing ratably in the profits and losses of the venture.

Vertical commonality focuses on the connection between the promoter and the investor, where the investor's fortunes are dependent on the promoter's efforts. In the context of an ICO, the pooling of funds to develop the platform often satisfies the horizontal commonality requirement.