How Does the “Howey Test” Determine If a Crypto Derivative Falls under SEC or CFTC Jurisdiction?

The Howey Test, established by the Supreme Court, determines if an asset is an "investment contract" and thus a "security" under SEC jurisdiction. If a crypto derivative is based on an underlying asset that is deemed a security (e.g. a token that passed the Howey Test), the derivative is likely a security derivative.

If the underlying asset is deemed a commodity (e.g. Bitcoin, Ethereum), the derivative is likely a commodity derivative and falls under CFTC jurisdiction.