Cointelegraph reports that the U.S. Securities and Exchange Commission (SEC) has won its case against Rivetz Corp and CEO Steven Sprague regarding an unregistered initial coin offering (ICO). On September 30, a federal court in Massachusetts, presided over by Judge Mark Mastroianni, ruled in favor of the SEC, confirming that Rivetz sold unregistered securities by offering the Ethereum-based Rivetz (RvT) token to investors in the U.S.

The SEC initially filed the lawsuit against Rivetz and Sprague in September 2021, alleging that they raised $18 million through the sale of Rivetz tokens in 2017, targeting over 7,200 investors, many of whom were based in the U.S. While the material facts were not contested, Sprague, who represented himself in court, contended that the token was merely a software product and did not qualify as an investment contract under the Howey test.

However, Judge Mastroianni pointed out that throughout the ICO process, both Rivetz and Sprague made statements that linked the value of RvT tokens to the company’s aspirations of establishing a security ecosystem for mobile devices. He emphasized that although the tokens functioned as ERC-20 tokens, they lacked additional uses or inherent value, as Rivetz had not yet developed a working security ecosystem. The judge concluded that the token’s value hinged on Rivetz’s business efforts, aligning with the Howey test’s criteria indicating that token purchasers anticipated profits from those efforts.

Furthermore, the judge stated that the tokens were marketed as integral to the Rivetz security ecosystem, with their value reliant on future demand and utility, satisfying additional conditions that classify the token as a security. The SEC has been tasked with collaborating with Sprague to present a proposal for injunctive and monetary relief by October 22. Sprague has yet to respond to inquiries for comment.

This ruling follows a recent partial victory for the SEC against blockchain firm Opporty International, in which a New York federal court found that the company and its founder sold unregistered securities during their $600,000 ICO in 2017 and 2018.