Howey Test

The Howey Test is a legal framework established by the US Supreme Court in 1946 (SEC v. W.J. Howey Co.) used to determine whether a transaction qualifies as an "investment contract" and therefore a security. The test asks whether there is: (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profit, (4) derived from the efforts of others. In crypto, the Howey Test is central to debates about whether specific tokens are securities and should be regulated by the SEC.