Securities and Exchange Commission v. Koscot Interplanetary, Inc.

Koscot (defendant) let individuals pay for the right to sell discounted cosmetics, with the discount increasing based on the amount paid, and recruited new participants at 'Opportunity Meetings' where investors read from a script Koscot itself provided; the SEC (plaintiff) sued, alleging the scheme was an unregistered security, but the district court ruled for Koscot, finding investors' own recruitment efforts defeated the Howey test's requirement that profits come from others' efforts.