Crypto Law/Level V · Builders and launchers/5.1 Launching a token/Lesson 3

Promising returns: the words that make a security

Why, in US law, an issuer’s own statements about future work and profit decide whether a token sale is an investment contract, and which kinds of wording regulators and courts have treated as promises.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

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The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

Make no promise of price, yield, burns, listings or team milestones before or at launch. It costs nothing, and SEC Release 33-11412 says a buyer’s expectation of profit is not reasonable without the issuer’s promised managerial efforts.
If you post a roadmap, describe what the product does, not how holders will profit; the release treats vague statements with no actionable business plan as unlikely to create profit expectations, but there is no single decisive factor.
Do not pay for, or coordinate, fan hype. The SEC counts third-party hype only if the issuer authorised it or colluded in it, but this protection disappears once you pay promoters or write their scripts.
Add plain risk warnings (no profit expected, possible total loss), which are free and help with consumer law, but a disclaimer beside a detailed roadmap does not cancel it, and promised work left undone still invites antifraud claims.
For EU users, a MiCA white paper must make no claim about future value (Article 6(4)) and must warn of total loss and illiquidity (Article 6(5)), which reduces exposure at no extra cost.

MaterialsSEC Release No. 33-11412 (17 March 2026), section IV.A on representations and promisesThe SEC staff statement on meme coins (27 February 2025), including its footnote listing typical memecoin statementsArticles 6(4) and 6(5) of the EU’s MiCA Regulation on white-paper contentA project’s whitepaper, website and official social posts from before its launch

Wonder

Does saying a token is going ‘to the moon’ turn it into a security?
Will a disclaimer that buyers should expect no profit protect the issuer?
Do posts by enthusiastic fans count as the issuer’s promises?

Explore

Under the SEC’s interpretation of 17 March 2026 (Release No. 33-11412), a token that is not itself a security becomes subject to an investment contract when the issuer induces people to invest money in a common enterprise ‘with representations or promises to undertake essential managerial efforts’ from which buyers would reasonably expect profit. Without such promises being conveyed, the SEC says, a profit expectation would not be reasonable. For a US launch, then, the issuer’s words are the trigger. Lesson 3.1.4 covers the rules on source, timing and channel; this lesson looks at content, meaning which statements work as promises.
The release says promises are most likely to create a reasonable expectation of profit when they are ‘explicit and unambiguous’ about the work the issuer will do, show the issuer can do it, and explain how that work will produce profit. Its example is a plan with detailed milestones, a timeline, information about personnel, sources of funding and an explanation of how holders will profit. Statements that are vague or ‘contain no semblance of an actionable business plan’, with no milestones or funding, likely would not create that expectation. The SEC adds that no single factor is decisive. Unaffiliated fans’ hype does not count unless the issuer authorises or colludes in it.
Promises of returns are the clearest case. In SEC v. Edwards (2004) the Supreme Court held that a promised fixed return, there 14% a year on payphone leasebacks, can be an investment contract (lesson 3.1.4). In its BitConnect case, filed on 1 September 2021, the SEC alleged that investors were drawn into a ‘Lending Program’ by claims that a proprietary ‘volatility software trading bot’ would generate exorbitantly high returns. The SEC’s 2023 SafeMoon complaint quoted a whitepaper saying the token’s ‘tokenomics’ would ‘drive the price to stratospheric all-time highs’. Yield figures, price targets and promised burns to lift the price all speak directly to profit.
Disclaimers help but do not decide. The SEC staff statement on meme coins of 27 February 2025 listed typical memecoin statements: buyers should not expect profit, no one intends to work toward a return, the coins have no use, buyers may lose everything, and the coins are for entertainment only. But it did not extend to products labelled memecoins ‘in an effort to evade’ the securities laws, and the 2026 interpretation stresses that staff statements have no legal force. Since Howey, courts have looked at economic reality, so a disclaimer placed beside a detailed roadmap does not erase the roadmap (lesson 3.2.3).
Words matter even when the securities question goes the issuer’s way. In Aguilar v. Baton Corporation (S.D.N.Y. 31 August 2026), a memecoin promoted with ‘222,222× upside’ and a five-step roadmap ending in exchange listings was still held not to be an investment contract, because buyers’ money was not pooled to fund the project (lesson 5.1.4). But the SEC’s release says its analysis of promises is separate from antifraud law, and an issuer that fails to do the work it promised may face antifraud liability. Promising returns is therefore risky twice over: it can create a security, and it can turn out to be false (lesson 5.1.7).
Europe goes further on wording. Under MiCA Article 6(4), a crypto-asset white paper may not contain any assertion about the crypto-asset’s future value, and Article 6(5) requires clear statements that it may lose its value in part or in full, may not always be transferable and may not be liquid. A practical check: collect every pre-launch statement from official channels, highlight each that mentions price, yield, returns, burns, listings, milestones or team work, and ask of each whether a buyer could reasonably read it as the issuer undertaking to make the token worth more.

Key facts

SEC Release No. 33-11412 states that, absent the issuer’s representations or promises of essential managerial efforts being conveyed, a purchaser’s expectation of profit would not be reasonable.
The release says vague representations with no semblance of an actionable business plan likely would not create a reasonable expectation of profit.
In SEC v. Edwards (2004) the Supreme Court held that a scheme promising a fixed return can be an investment contract.
The SEC staff statement on meme coins (27 February 2025) does not extend to products labelled meme coins in an effort to evade the federal securities laws.
The SEC’s November 2023 SafeMoon complaint quoted the whitepaper’s claim that SafeMoon’s tokenomics would ‘drive the price to stratospheric all-time highs’.
MiCA Article 6(4) bars a crypto-asset white paper from containing assertions about the future value of the crypto-asset.

Exercise nine, six, three, one

9CollectList up to 9 statements from a token’s official website, whitepaper or social accounts (some lists will be shorter), copying the exact words and the date each was published.

6ClusterSort them into 6 categories: price or return claims, yield or reward figures, milestones and roadmap items, statements about the team or funding, risk warnings and disclaimers, and community or entertainment language.

3DistillReduce the 6 to 3 groups: statements that promise managerial work or profit, statements that warn against expecting either, and statements that do neither.

1CrystallizeWrite 1 sentence identifying the single statement on your list most likely to be read as a promise of profit, and what makes it so.

Fact check

Dates, figures and claims checked against the published sources listed below.

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