---
title: Howey Test
url: "https://www.unknowngravity.com/en/glosario/howey-test"
site: Unknown Gravity
published: "2026-05-31T13:44:38+00:00"
modified: "2026-07-30T15:43:02+00:00"
language: en-US
description: "The Howey Test is the case-law criterion established by the US Supreme Court in SEC v. W. J. Howey Co., 328 U.S. 293 (1946), to determine the existence of an investment contract and, therefore, of a…"
section: "Home > Howey Test"
---

# Howey Test

GLOSSARY · BLOCKCHAIN & WEB3

What the Howey Test is: the US criterion for deciding whether a token or investment is a security subject to financial regulation.

WHAT IS IT? · FOR DUMMIES

Imagine a four-question test used to decide whether something you sell is, in reality, a “serious” investment that the regulator must oversee. That test was born in the US in 1946 from a case about orange groves (the Howey company), and it is still used today for tokens.

The questions are simple: do people put in money? Into a common enterprise? Expecting to profit? Thanks to the work of others? If the answer to all four is “yes,” then it is a *security* and must comply with financial rules. That is why, when someone launches a token, people in the US ask: “does it pass the Howey Test?”

WHAT IS IT? · PRO

The **Howey Test** is the case-law criterion established by the US Supreme Court in *SEC v. W. J. Howey Co.*, 328 U.S. 293 (1946), to determine the existence of an *investment contract* and, therefore, of a security subject to US federal securities law.

It is met where there is: (i) an investment of money; (ii) in a common enterprise; (iii) with a reasonable expectation of profits; (iv) derived essentially from the efforts of a third party or promoter. The SEC has applied this test to classify numerous tokens as securities. It is a criterion of US law and is not directly applicable in the EU, where the classification of a token as a financial instrument is governed by MiFID II (Directive 2014/65/EU) and, in Spain, by Law 6/2023 (LMVSI); nonetheless, it serves as a common conceptual reference in international tokenization practice.

## 01 / Key points

- Origin: the **SEC v. W. J. Howey Co. (1946)** judgment of the US Supreme Court.
- Four prongs: **investment of money, common enterprise, expectation of profit and the efforts of others**.
- If they are met, the asset is a **security** subject to the SEC.
- It is US law: in the EU, **MiFID II (Directive 2014/65/EU)** and Law 6/2023 govern.

This entry is informative. It is not legal, tax or investment advice. The rules cited change: check the current version on [BOE](https://www.boe.es) and [EUR-Lex](https://eur-lex.europa.eu).