The Howey Test is a U.S. legal standard for determining whether a transaction constitutes an investment contract and can be used to determine whether a cryptoasset is a security. The test is based on U.S. Supreme Court precedent and, in the context of cryptoassets, is primarily but not exclusively used to determine a cryptoasset's status within U.S. markets. For an asset to pass the Howey Test and, thus, be classified as a security, the following criteria must be met:
1. Its sale constitutes an investment of money.
2. The investment is in a common enterprise.
3. Investors have a reasonable expectation of profit.
4. This profit is derived primarily from the effort of others.