The United States Securities and Exchange Commission (SEC) has declared that Bitcoin is not a security, so it doesn't have to be subjected to the regulatory laws.

First of all, we need to define what a security is. A security, according to American law, refers to assets or transactions that pass the "Howey Test". The Howey Test requires that for a thing to be a security it has to, one: be a group enterprise (which means the venture was embarked upon by a group rather than a single individual and the profits would be for the group). Two: there must be an investment of money.

Three: there must be the expectation of profit. Four: the investors are relying on someone (or some people) else to generate the profits, and the investors have no control over whether the profit comes or not. (For example relying on the Binance to keep doing good business so that their native token, BNB, would keep being relevant and appreciate in the future, generating profits for you. And all of these are not in your control, but rather under Binance's control.)

It is pretty simple, right?

So, the SEC, following this rule has said that Bitcoin is not a security, but that Cardano, Ethereum, BNB, and many other major alt coin is a security. And this has pissed a lot of people off, especially Charles Hoskinson the founder of Cardano. He took to Twitter some days ago passionately saying this:

".. explain to me the fking difference between Bitcoin, Ethereum, Cardano and the rest of the gang. Explain it to me like I'm 5 years old. Run the goddamn Howey Test on it! And show me the difference between the two. Tell me, is there an expectation of a return..? There's so many planks and angles that you can look at this thing from"

The most important takeaway from what he said is how he'd like the SEC to explain the difference between BTC and Cardano using the Howey Test to show why Bitcoin isn't security but Cardano is. One of the lead developers of Bitcoin, Adam Back, replied with this:

This explains it perfectly because, unlike Cardano and other altcoins, Bitcoin never promised returns back in the day. It simply came as a means of payment and nothing was said about it being an investment by Satoshi Nakamoto, the developers, or even the White Paper. And so the condition that there should be the expectation of profit is not there, therefore it does not pass the Howey Test and it is not a security.

Even though this is a good explanation, just like Hoskinson said, it would be very good if the SEC themselves came out and explained, giving their final words about the difference between all these currencies and lay the matter to rest.

But while waiting for the SEC's full and final statement on the matter, I realized I had seen the SEC say something about this before. I thought for a while and remembered I saw it in the documents the SEC filed against Binance (which you can read here). In that document, the SEC talked about why Cardano and a number of other altcoins are securities.

About Cardano, this is what they said:

This is simply the SEC showing when and where Cardano promised profits and improvements that would bring more adoption and profits. Based on this, Cardano passes the Howey test. It's a group venture, there's an investment of money, there is the expectation of profit, and the investors are relying on the team to generate the profit and have no control over this generation.

Maybe Cardano can disprove some of these in court, who knows? But for now, this is clearly the SEC's full explanation about Cardano, the Howey Test, and why Bitcoin is different.

A little confusion might arise from the fact that people expect profit when they buy Bitcoin, but the fact remains that people developed this expectation by themselves, the founders/developers of Bitcoin never promised this to investors or even hinted at it when Bitcoin was created.

So, the condition of expectation of profit seems to include that the originator(s) of the asset must be the one who made you expect profit. Could this be the case or does it matter to the Howey Test what gave you the expectations of profit? It seems it probably matters.

This would be a good point for argument in court. But if they win this point it would only make Bitcoin a security but not save Cardano from being a security. Because it can only make Bitcoin pass the Howey Test but not absolve Cardano.