The Howey test, which originated from the United States Supreme Court case of 1946, remains the core criterion for determining whether or not encrypted tokens are securities. It is not only about whether the SEC has the right to intervene, but also about the cost of project issuance, currency on the trading platform and United States market compliance.
Four standard decisions
The Howey test is the legal standard used by courts to determine whether an arrangement constitutes an “investment contract”. It may be considered as securities if the four conditions of investment, common cause, expected gain and the proceeds are met, mainly from the efforts of others.
The article states that these four conditions must be established at the same time, but that courts are not normally mechanical. In particular, in the case of encryption, factual differences tend to change conclusions. Where token values are highly dependent on team development and operation, regulators are more likely to claim proximity to securities.
There's been an escalation of the conflict after the heat.
According to the article, the encryption industry clashed with the concentration of the Howey test, mainly in 2017, following the surge in the distribution of coins. A large number of projects rely on white papers and road maps to sell tokens to the public, while investors expect the team to put the network together and drive the tokens to appreciate.
The SEC subsequently reinforced its position, through the DAO report, the staff framework and years of enforcement, that many token sales were consistent with the characteristics of the securities. The industry countered that the token itself was an asset and should not automatically be equated with an investment contract, and that secondary market transactions should not be treated as a single security.
The regulatory border is still open.
It is argued that a major problem with encryption regulation in the United States over the past few years is that projects and platforms often see a regulatory profile only in law enforcement cases. As a result, it is difficult for the issuer to determine in advance the course of compliance and for the trading platform to identify which assets can be safely mounted.
It is also mentioned that in March 2026 the joint interpretation of SEC and CFTC has changed part of the analytical framework, and that the CLARITY Act, which is being promoted by Congress, may continue to adjust the regulatory division of labour. Howey testing remains the core tool in place, but the legal boundaries of encrypted assets in the United States are still changing.