What Is the Significance of the “Solely from the Efforts of Others” Prong in Modern Crypto Cases?

The "solely from the efforts of others" prong is significant because it determines if investors are passive participants relying on the promoters for profit, a key characteristic of a security. In modern crypto cases, courts often interpret "solely" as "predominantly" or "substantially" to reflect the economic reality of the transaction.

If a token's value appreciation is driven by the network's development team, it is more likely to meet this prong. Conversely, if profits depend on the efforts of the token holders themselves, the token may not be classified as a security.