Howey Test

The Howey test is the standard United States courts use to decide whether an arrangement is an investment contract, and therefore a security. It comes from the Supreme Court's 1946 decision in SEC v. W. J. Howey Co. and asks whether there is an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. Applied to crypto, the question is not what a token is called but how it was sold and what buyers were led to expect, which is why the same asset can be treated differently at issuance and in later secondary trading. Other jurisdictions apply their own tests, so a Howey conclusion does not travel abroad.