What Is the Howey Test and Why Is It Crucial for Crypto Regulation?
The Howey Test is a US Supreme Court precedent used to determine if a transaction qualifies as an "investment contract" and is therefore a security subject to federal regulation. It is crucial for crypto because it helps regulators decide if a token is a security token (STO) or a utility token (ICO).
The test requires an investment of money, in a common enterprise, with an expectation of profit, to be derived solely from the efforts of others.
Glossar
Howey Test
Investment ⎊ Contract analysis hinges on demonstrating the presence of an investment of money in a common enterprise with an expectation of profits derived substantially from the efforts of others.
US Supreme Court Precedent
Application ⎊ US Supreme Court precedent, within cryptocurrency, options trading, and financial derivatives, establishes a framework for regulatory interpretation, particularly concerning the application of existing securities laws to novel instruments.
The Howey Test
Jurisdiction ⎊ The Howey Test, originating from the 1946 Supreme Court case SEC v.