Overview 

Many people new to the cryptocurrency space are surprised to hear one of the industry’s largest and more complex regulatory agencies is the U.S. Securities and Exchange Commission (SEC). That is all because of a 1946 case called SEC v. W. J. Howey Co.  In Howey, the defendants offered real estate contracts for tracts of land in citrus groves. This case formed the test for determining whether transactions are investment contracts (and subject to securities registration requirements). Under the Howey Test, a transaction is an investment contract if there are the following elements:

  1. An investment of money
  2. A common enterprise
  3. Reasonable expectations of profits
  4. Profits derived from the efforts of others
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