The Howey test’s impact on cryptocurrency, explained — legal implications, compliance requirements and more.
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What is the Howey test?
The Howey test is a legal test used in the United States to determine whether a transaction qualifies as an investment contract and, thus, is considered a security under federal law. The test was established by the U.S. Supreme Court in SEC v. W.J. Howey Co. (1946), and it has since been applied in numerous cases to determine whether various financial arrangements and offerings constitute securities.
According to the Howey test, a transaction must contain an investment of funds in a group venture with the expectation that all gains will come from group
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