Latium Network Inc. can’t duck a would-be class action over its initial coin offering because the company’s tokens seem to pass the legal test for securities, a New Jersey federal judge said Dec. 10.

The blockchain-based task platform faces an investor suit alleging its ICO was an unregistered offer and sale of securities.

The first wave of putative class actions alleging unregistered ICOs violate federal securities laws began in late 2017. Since then, judges have been grappling with how to apply the 72-year-old test for securities to cryptocurrencies.

Here, Latium said its LATX tokens weren’t securities because they weren’t part of a common enterprise and the investors didn’t expect profits solely from Latium’s efforts, according Judge Susan D. Wigenton’s unpublished order.

But the investors sufficiently alleged that ICO funds were “pooled to develop and maintain” the company’s platform, Wigenton said, refusing to dismiss the case.

The investors also provided enough facts to suggest that they expected to profit from their purchase of LATX tokens, the order said. Latium “stressed the limited supply of tokens, " according to the judge. The company also touted the tokens as a “unique investment opportunity,” the judge said, quoting the company’s white paper.

Although investors could eventually use the tokens to pay for tasks through Latium’s platform, the platform wasn’t fully functional yet, the judge said. The investors sufficiently alleged that they were dependent on Latium to promote the ICO and finish building the platform, according to the order.

Calcagni & Kanefsky LLP represented the investors. Lewis Brisbois Bisgaard & Smith LLP represented Latium.

The case is Solis v. Latium Network Inc., 2018 BL 456329, D.N.J., No. 18-10255, unpublished 12/10/18.