The Howie Test was created by the United States Supreme Court to determine if an investment was subject to the securities laws, most notable the Securities Act of 1933 and the Securities Exchange Act of 1934.
This stems from a case in 1946 in Florida where a leaseback agreement was put in place for the growing of citrus. The defendants in the case sold the land with the option to lease it back to them if the buyers didn't want work the land themselves. Since they were not in the agriculture business, it was an easy decision.
Ultimately the Court came up with 4 parameters used to determine if an offering falls under the Securities Acts.
- It is an investment of money
- There is an expectation of profits from the investment
- The investment of money is in a common enterprise
- Any profit comes from the efforts of a promoter or third party
There is also another idea that is used, whether the outcome of the investment is beyond the investors control.
Cryptocurrency is being questioned as to whether it is a security or not. This is being discussed among regulators and the Howie Test is what is being applied to see if the offering passes or fails.
The Securities and Exchange Commission took the position that almost all cryptocurrencies are securities. Anything it deems outside the bounds of the Howie Test could face civil action from the agency.