On November 28, 2018, Judge Gonzalo P. Curiel of the U.S. District Court for the Southern District of California denied the U.S. Securities and Exchange Commission’s motion for a preliminary injunction against Blockvest, LLC and Reginald Ringgold in connection with Defendants’ initial coin offering (“ICO”). In doing so, the court found disputed issues of fact existed regarding whether the so-called “BLV” tokens constituted “securities” under the test set out in SEC v. W.J. Howey Co. This is not the first time a court has characterized the question of whether an ICO token satisfies Howey’s requirements as a factual one. But, the decision is notable for being the first instance of a court ruling against the SEC in an ICO and because it focused its inquiry under Howey on the subjective understanding of particular investors rather than the objective characteristics of the tokens themselves.
In deciding whether to grant the SEC’s preliminary injunction freezing Defendants’ assets and enjoining them from participating in the offer or sale of BLV tokens, the court first confronted the threshold question of whether the tokens met the definition of a “security.” Under Howey, an instrument is a “security” where there is: (1) an investment of money; (2) in a common enterprise; (3) with a reasonable expectation of profits; (4) from the managerial or entrepreneurial efforts of others. As the Ninth Circuit has explained, courts conduct “an objective inquiry into the character of the instrument or transaction offered” to determine whether these criteria are met. Thus, “while the subjective intent of the purchasers may have some bearing on the issue of whether they entered into investment contracts,” courts generally “focus . . . on what the purchasers were offered or promised.”
The court in Blockvest appears to have focused on the subjective understanding of the particular purchasers of the tokens. Specifically, the court inquired into “what the 32 test investors relied on, in terms of promotional materials, information, economic inducements or oral representations at the seminars, before they purchased the test BLV tokens.” Given the factual dispute regarding investors’ understanding of and reliance on these materials, “the Court [could not] make a determination whether the test BLV tokens were ‘securities’ under the first prong of Howey.” While the court’s ruling reinforces the consistent view that evaluation under the Howey test remains a factual one in the ICO context, its use of a subjective, investor-focused standard is a departure from existing case law. Whether future courts follow suit will be important points to watch in this emerging body of law.
 328 U.S. 293 (1946).
 See, e.g., United States v. Zaslavskiy, No. 17 CR 647 (RJD), 2018 WL 4346339, at *1, 4 (E.D.N.Y. Sept. 11, 2018) (denying defendant’s motion to dismiss criminal securities fraud charges in part because whether ICO tokens at issue were “securities” was factual question for a jury).
 See 328 U.S. at 298-99.
 Warfield v. Alaniz, 569 F. 3d 1015, 1021 (9th Cir. 2009) (collecting cases).
 Order at *13 (emphasis added).