What Is the ‘Investment Contract’ Definition and Why Is It Crucial for Token Regulation?

An investment contract is a term from US securities law, defined by the Howey Test. It is crucial because if a token offering is deemed an 'investment contract,' it is automatically classified as a 'security' and must comply with all registration and disclosure requirements.

The definition is flexible and principle-based, allowing regulators to apply old laws to new technologies like tokens, ensuring investor protection.