What is the Howey test in Crypto?

Adekunle Joshua

This important legal concept plays a crucial role in determining whether a cryptocurrency is considered a security under securities regulations

The Howey test takes its name from the landmark US Supreme Court case, SEC v. Howey (1946)

– According to the Howey Test, a transaction is an investment contract and thus a security if it meets the following criteria: -Investment of money -In a common enterprise -With an expectation of profits -Primarily from the efforts of others

In the context of crypto, the Howey Test is applied to token offerings and ICOs

If a token satisfies the four criteria mentioned earlier, it is likely to be classified as a security token and subject to securities regulations

Being classified as a security has significant implications for a crypto project.