# Howey Test

> A US legal test for deciding whether something counts as an investment contract, and so a security.

Canonical URL: https://fudfomo.co/glossary/howey-test
Source: What The Block! Dictionary v1.0 (last updated 2026-04-25), browsable at https://wtb.fudfomo.co.

## Definition

The Howey Test comes from a 1946 US Supreme Court case. It defines an investment contract as an investment of money in a common enterprise with an expectation of profit derived from the efforts of others.

Regulators and courts use the Howey Test to decide whether a particular crypto token or sale should be treated as a security. If it is, the strict rules around securities offerings and trading apply.

## Regulatory context

The Howey Test is just one part of US securities law and only applies in the United States. Other countries use different tests.

## Related terms

- [Securities](https://fudfomo.co/glossary/securities): A regulated category of financial instrument, like shares or bonds. Tokens that meet the test are subject to strict rules.
- [SEC](https://fudfomo.co/glossary/sec): The US Securities and Exchange Commission. The American regulator that decides whether a token counts as a security.
- [ICO](https://fudfomo.co/glossary/ico): Initial coin offering. An early sale where a project raises money by selling its new token.

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