Howey Test

Crypto World Evolution, or CWE, recently launched trading bot software. That trading bot, like other trading bots, claims to generate profit by buying and selling cryptocurrencies.

You give money to the CWE trading bot software, then expect to earn a profit over time. The company mentions returns as high as 1% to 3% per day – which is absurdly high compared to any legal, real world investment platform or robo trader.

It’s unclear whether Crypto World Evolution auto trading bot provides returns anywhere close to 1% to 3% per day.

However, the main way in which people make money through the platform is by referring other people. CWE’s trading bot comes linked with a membership-based multilevel marketing program. The company pays 15% commissions on users you recruit into the platform. You’ll also need to continue paying money to the company to stay active as a representative (i.e. you need to stay continuously subscribed to the CWE trading bot software).

There’s some question about whether or not the CWE trading bot software passes the Howey Test.

The Howey Test, for those out of the loop, is a landmark ruling by the US Supreme Court. In that ruling, the US Supreme Court clearly defined the rules for what is and is not a security. Basically, if someone is selling you something as an investment, and you can earn money on that investment through the work of someone else, then that may constitute a security.

If someone is selling a security to you, then that security sale needs to be registered. Otherwise it’s illegal.

Cryptocurrencies and ICOs often struggle with the Howey Test. Some cryptocurrencies represent a genuine stake in the company’s business – which means they’re securities. Other cryptocurrencies are simple utility tokens.

So where does the Crypto World Evolution trading bot software fall on the Howey Test scale? Let’s take a closer look.

The Four Main Elements to the Howey Test

There are four main characteristics behind the Howey Test. These four elements must be met in order for an “investment contract” to fall under the definition of a security:

Investment of Money:

Are users investing into the service? Did the investor give up specific considerations in return for a separable financial interest with the characteristics of a security?

Common Enterprise:

Courts look at three approaches to determine “common enterprise”, including horizontal, broad vertical, and strict vertical. Without going into extreme detail, these three characteristics refer to how the investors are linked together in the enterprise. These characteristics rarely apply to cryptocurrency enterprises.

Expectation of Profits:

Is the investor buying a cryptocurrency with the expectation of profits? Is someone depositing money into the Crypto World Evolution trading robot software with the expectation that they’re going to earn money? Typically, this is the easiest aspect of the Howey Test to prove: people typically invest in something with the expectation of earning money. However, point 4 also comes into effect here.

Expectation of Profits Strictly from the Efforts of the Promoter:

Is the investor buying into a business with the expectation of earning profit – despite the fact that they intend to do no work themselves? Individual investors don’t typically play an active role in a company. If someone deposits money into the Crypto World Evolution trading robot with the expectation of earning money despite taking no action themselves, then it could trigger this part of the Howey Test.

Does Crypto World Evolution Pass The Howey Test?

Ultimately, I’ll leave it up to you to decide if Crypto World Evolution passes the Howey Test or not. However, as regulators clamp down further on the crypto industry and its enterprises, we’re going to see more companies get into trouble for violating the Howey Test.

Check out the file and see your thoughts on how it stacks up against the Howey Test. Available on a Google Drive here: CryptoWorld Evolution Howey Test

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