The Howey test is a legal test used in the United States to determine whether a particular transaction is an investment contract or a security. The test takes its name from SEC v. W.J. Howey Co., which was heard before the US Supreme Court in 1946.

The essence of the Howey test is to determine whether a transaction meets the following 4 conditions:

  1. investment has been confirmed,
  2. into a common enterprise,
  3. with expected income, and
  4. this income will be derived solely from the efforts of others.

If a transaction meets all four conditions, it is considered an investment contract or security and is subject to regulation under the US federal securities laws.

However, it is important to note that the Howey test only applies in the context of American law and is not necessarily valid in other jurisdictions.