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.