Howey Test

The Howey Test is a set of four conditions utilized by the U.S. Securities and Exchange Commission (SEC) to determine whether a financial transaction qualifies as the purchase of a security. These conditions include: the investment of money, an expectation of profits, investment in a common enterprise, and reliance on the efforts of a promoter or third party. If a transaction satisfies all four conditions, it is legally classified as involving the purchase of a security.