# Extra legal

**LEGAL MEMORANDUM**\
**Subject:** Legal Classification of OZ7 Coin under U.S. Securities Laws\
**Date:** January 14, 2025\
**Prepared By:** McMillan LLP\
**To:** OptimusZ7 Team

***

### **I. Introduction**

This memorandum assesses whether **OZ7 Coin** constitutes a **security** or an **investment contract** under **U.S. securities laws**, specifically under the **Securities Act of 1933** and relevant SEC regulations. The **Howey Test**, established in *SEC v. W\.J. Howey Co.*, 328 U.S. 293 (1946), is the primary legal framework used to determine whether an asset qualifies as a security.

***

### **II. The Howey Test Analysis**

Under the Howey Test, a transaction is considered a **security** if it meets the following four criteria:

1. **Investment of Money** – There is a monetary investment.
2. **Common Enterprise** – The investment is part of a common enterprise.
3. **Expectation of Profit** – Investors expect profits derived from the efforts of others.
4. **Efforts of a Third Party** – Profits come primarily from the managerial or entrepreneurial efforts of others.

A **token does not qualify as a security** if it fails to meet one or more of these conditions.

***

### **III. Application to OZ7 Coin**

1. **Investment of Money:**
   * OZ7 Coin will be available for purchase, meaning some users may provide funds in exchange for the asset.
   * However, **mere purchase of an asset does not automatically classify it as a security** unless other elements of the Howey Test are met.
2. **Common Enterprise:**
   * OptimusZ7 is a **decentralized Layer 1 blockchain**, and OZ7 Coin is designed as a **utility token** for network transactions, staking, and validator incentives.
   * OZ7 holders do not share in the company’s profits or losses, nor do they have ownership rights in OptimusZ7.
   * There is **no pooling of investor funds for the purpose of generating returns**, which is a key component of the **common enterprise** criterion.
3. **Expectation of Profit:**
   * OZ7 Coin is **not marketed as an investment opportunity** but as a **functional asset** within the OptimusZ7 ecosystem.
   * The token serves as **gas fees for transactions, staking rewards, validator incentives, and liquidity provisioning**.
   * Users are incentivized to **use the token** rather than hold it for speculative gains.
4. **Efforts of a Third Party:**
   * The **value of OZ7 is driven by its utility** rather than the managerial efforts of OptimusZ7 or its team.
   * Unlike securities, OZ7 Coin does not **promise profits** based on the efforts of the company or developers.
   * The network operates in a **decentralized** manner, further distancing the token from security classification.

***

### **IV. Conclusion**

Based on the above analysis, **OZ7 Coin does not meet the criteria of an investment contract under the Howey Test** and should **not be considered a security under U.S. law**. The token serves as a **utility asset** for **network operations, transaction processing, staking, and validator participation**.

However, given the evolving regulatory landscape, it is recommended that **OptimusZ7 continues to engage with legal professionals and regulatory authorities** to ensure compliance with any future guidance from the **Securities and Exchange Commission (SEC) and other relevant bodies**.

***

### **V. Disclaimer**

This memorandum is **for informational purposes only** and does not constitute **legal advice**. A final determination regarding OZ7 Coin’s classification should be made in consultation with **licensed U.S. securities attorneys**.

**Prepared by:**\
**Stephen Abosi**\
**Associate, Business Law**\
McMillan LLP\
**Email:** <stephen.abosi@mcmillan.ca>\
**Phone:** 416.865.7086\
Toronto, Canada


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