What Is the Howey Test and How Does It Apply to ICOs?

The Howey Test is a legal test used by the U.S. Supreme Court to determine whether a transaction qualifies as an "investment contract" and is therefore subject to securities laws. It has four prongs: an investment of money, in a common enterprise, with an expectation of profits, primarily from the efforts of others.

The SEC applies this test to ICOs to determine if a token is a security.