A recent federal case in Utah, SEC vs. Traffic Monsoon, shows a potential roadmap for aggressive SEC enforcement of ICOs. The SEC's complaint against Traffic Monsoon' alleges the company was orchestrating a Ponzi scheme by inducing individuals to purchase 'AdPacks' - a product that promises visits to a website - in exchange for a share in the company's future revenues. The court found that Adpacks can be treat as 'securities' under U.S. law, opening the door for similar treatment of cryptocurrencies.
Traffic Monsoon has strong relevance for the ICO market because it defined a 'security' in a manner that arguably encompasses at least some ICO offerings. The court, ruling in the SEC's favor, decided that AdPacks constituted a security subject to the US securities laws, reasoning: The 'economic reality' of the AdPack purchases was more similar to an investment than a purchase of a service, because demand was "driven by members purchasing and repurchasing AdPacks in order to obtain the incredible returns on their investment, not by intense demand for Traffic Monsoon’s services". The returns from the AdPacks came "solely from the efforts of others", despite the fact that investors were required to personally visit other websites to participate in revenue sharing.