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What is the Howey test?
The Howey test is the US Supreme Court's test, from a 1946 case, for whether a deal is an 'investment contract' and so a security: an investment of money, in a common enterprise, with an expectation of profits from the efforts of others. The SEC applies it to crypto assets.
What it means for you
In the US, the SEC's 2026 interpretation says a token can be sold under an investment contract and later separate from it: while buyers reasonably expect the issuer's promises of essential managerial efforts to stay attached, resales can be securities transactions; once those promises are fulfilled or publicly abandoned, the token is no longer subject to it. Buyers in an unregistered offering keep rights against the issuer.
How it works
The 1946 case, 328 U.S. 293, involved citrus groves: buyers did not want to farm the land, only to share in profits from the promoter's work. In March 2026 the SEC, with CFTC guidance, issued an interpretation that superseded its staff's 2019 framework. It confirms the common enterprise element must be met, holds that digital commodities, collectibles and tools are not themselves securities, and says a non-security crypto asset becomes subject to an investment contract through the issuer's representations or promises, made before or at the sale through channels such as its website or whitepaper. Protocol staking and mining as described there are not securities transactions.
Sources: SEC and CFTC: Application of the Federal Securities Laws to Certain Types of Crypto Assets (Release 33-11412, 2026), SEC: Framework for 'Investment Contract' Analysis of Digital Assets (superseded 2026) · checked 4 October 2026
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