The Howey Test is a legal standard originating from a US Supreme Court case, used to determine if a transaction constitutes an investment contract and thus a security subject to federal regulation. It assesses whether there is an investment of money in a common enterprise with an expectation of profits derived solely from the efforts of others. This test is frequently applied to digital assets.
Context
The application of the Howey Test to various digital assets remains a primary point of contention in cryptocurrency regulation, particularly within the United States. Regulators often use it to classify tokens as securities, impacting their issuance and trading requirements. Legal challenges continue to seek clearer interpretations for different token structures and their decentralized governance models.
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