Howey Test

The definition above places the test at the center of token classification; what it leaves out is how the prongs work. Howey asks whether there is an investment of money, in a common enterprise, with a reasonable expectation of profit, derived from the efforts of others. All four must hold. The 1946 case concerned Florida citrus groves sold alongside a management contract: the grove was never the security, the arrangement around it was.

That is where the comparison with conventional securities breaks. A share is a security by form. Howey looks past form to the economics of a transaction, so a token is not a security, or not one, in the abstract: the same token sold one way is caught and sold another way is not. The EU took the opposite route in MiCA, sorting assets into defined categories rather than judging each sale on its facts.

The fourth prong is the one that moves. As a network decentralizes, profit stops depending on an identifiable promoter and the argument for security status weakens, but there is no procedure for certifying that an asset has crossed that line.

So the decision a team faces is about the promotional record rather than the code. Roadmaps, supply burns framed as value accrual, and commitments to raise the price are the material the prongs get applied to, sometimes years later.