In the United States Supreme Court case of United Housing Foundation, Inc. v. Forman et al., 1974, residents of a cooperative housing project sued the project's sponsors and directors for securities fraud under federal law. The plaintiffs claimed that they were misled about the profitability and investment value of their shares in the cooperative when they purchased them. However, these shares only provided them with an apartment in which to live; they did not provide any financial return or profit participation rights typically associated with traditional stocks or securities. The court ruled unanimously in favor of defendants (United Housing Foundation), stating that these "shares" did not constitute securities as defined by federal law because they lacked an essential characteristic: potential for profit-making on behalf of investors/shareholders. Therefore, this dispute could not be considered a matter involving security frauds under federal jurisdiction but rather was more appropriate for state-level contract laws.

In the dissenting opinion for United Housing Foundation, Inc. v. Forman et al., Justice William O. Douglas argued that the shares in question should be considered securities under federal law because they were sold to raise capital for a business venture and carried significant risk for buyers. He contended that the majority's narrow interpretation of "investment contract" was inconsistent with both precedent and Congressional intent, which aimed to protect investors from fraud by regulating all types of investment vehicles, not just those offering potential profits or dividends. Furthermore, he pointed out that these shares did indeed offer financial benefits in terms of affordable housing access and tax advantages; therefore, they could be seen as an investment opportunity despite their non-traditional structure.