What Are the Key Elements of the Howey Test Used by the SEC?

The Howey Test has four essential components. First, there must be an investment of money.

Second, the investment must be in a common enterprise. Third, there must be an expectation of profit.

Fourth, the profit must be derived solely or primarily from the efforts of others (the promoter or a third party). The US Securities and Exchange Commission (SEC) uses this test to determine if a token offering constitutes an unregistered securities offering.