How Does the “Howey Test” Relate to the Classification of Security Tokens in the US?

The Howey Test is a US Supreme Court framework used to determine if a transaction qualifies as an "investment contract," and thus a security, subject to SEC regulation. It requires an investment of money in a common enterprise with the expectation of profits derived predominantly from the efforts of others.

If a digital asset meets these criteria, it is classified as a security token, bringing it under the purview of existing securities laws. This classification dictates registration and disclosure requirements.