What Is the “Howey Test” and Its Relevance to Tokens?

The Howey Test is a US Supreme Court standard used to determine if a transaction qualifies as an "investment contract," and thus, a security. It requires four criteria: an investment of money, in a common enterprise, with the expectation of profit, to be derived from the efforts of others.

If a token sale meets these criteria, the token is classified as a security and subject to SEC regulation. This test is crucial for token classification.