# ATOM is Not a Security and Never Was

Recently, the SEC stated in their complaint about Binance that ATOM was a security.

We need to consider the prongs of the Howey test if ATOMs unique history meets those prongs.

1. Investment of money: There must be an investment of money or something of value by the investor. This can include cash, assets, or even services provided in exchange for the investment.

1. Common enterprise: The investment must be in a common enterprise, which usually means that the fortunes of the investor are tied to the success of the enterprise. Courts have adopted different approaches to defining a common enterprise, such as horizontal commonality (investors pooling their funds together) or vertical commonality (the investor's returns are tied to the success of the promoter or third party).

1. Expectation of profits: The investor must have an expectation of profits from the investment. This means that the primary motivation for the investment is to derive financial returns, as opposed to other motivations such as consumption or utility.

1. Efforts of others: The profits must be derived primarily from the efforts of a promoter or third party, not from the investor's own efforts. This means that the investor relies on the work of others to generate returns, and the success of the investment is largely dependent on the performance of those managing the enterprise.

However, ATOM has a unique history among tokens from the 2017 era.

We can concede the first prong of the Howey test. Please put money into the fundraiser.

The question of a common enterprise is more complex. The technology funded by the fundraiser was used to launch LOOM, BNBchain, MATIC and IRIS months before the ATOM token launched. The technology has a variety of use cases beyond that ATOM token. There was extremely minimal marketing of ATOM as an opportunity. It's entirely plausible that fundraiser participants participated because they were interested in use cases beyond the ATOM token like launching their own chain.

Cosmos consistently communicated that active participation from fundraiser contributors was required. The third prong of the Howey test involves the expectation of profits through the efforts of others. Cosmos represented a collective effort from fundraiser participants who ran nodes, found bugs, reported security vulnerabilities, launched Game of Stakes, and eventually initiated the network independently. The idea that AiB or the ICF were essential any part of this process is negated by the launching of independent chains throughout the process and successful compeletion of the white paper inspite of the engineering teams leaving AiB en mass.

In contrast to many 2017 teams, Cosmos did not issue an ERC-20 token and create a secondary market for the token through an Ethereum smart contract.

The fundraiser participants, [skilled in forking networks](https://medium.com/stakecapital/game-of-stakes-recap-of-a-historic-journey-6ba0ff1fa8c6), could have easily agreed on an alternative genesis file other than the one recommended by the ICF. It was these participants who decided to stake their ATOM and enable token transfers, resulting in a secondary market for ATOM. These actions took place in March and April 2019 and undermine the idea that secondary market purchasers expected value accrual efforts from third-party entities.

No core entity in Cosmos made any effort to accrue value to the token via market-making, exchange listing agreements, etc. CZ famously tweeted about listing ATOM on Binance for free. A similar story unfolded on every exchange.

https://twitter.com/cz_binance/status/1122424740180742144?s=61&t=SDKhsAr8_xgCgb5FUNJ-pA

The claim that the ICF's efforts to build freely available open-source software, which has numerous use cases, creates value for ATOM is preposterous. It is a widely debated topic within the cryptocurrency industry whether the success of Cosmos software will accrue value to ATOM. So far, the stack has accrued more value to BNB, LUNA, and MATIC than to ATOM.

In the light of the rejection of Cosmwasm for the HUB, ATOM 2.0 and ATOM One, it seems ridiculous to assume any team is responsible for accrueing value to the hub. We are all just participants in a marketplace.

In a decentralized world, regulators must conduct thorough research on projects. There is no entity in Cosmos responsible for interacting with a regulator like the SEC. The SEC's comments on ATOM suggest only the most superficial research on the Cosmos.network website and the project's co-founders.