SEC v. Howey: What It Means for Crypto Investors Today
When the SEC v. Howey, a landmark 1946 U.S. Supreme Court case that defined what counts as an investment contract under securities law. Also known as the Howey Test, it established that if money is put into a common enterprise with the expectation of profit from others’ efforts, it’s a security—no matter what you call it. This isn’t just old legal history. It’s the reason the SEC treats most crypto tokens like stocks, not digital collectibles.
The Howey Test has three parts: money invested, in a common enterprise, with profit expected from someone else’s work. That’s exactly how most crypto projects operate. You buy a token, hoping the team builds something valuable, and you profit when the price goes up. The SEC doesn’t care if it’s called a coin, utility token, or NFT—if it fits the Howey Test, it’s a security. That’s why projects like BitAI, Radx AI, and AIPAD get flagged. They promise returns based on team efforts, not user utility. Even airdrops like Corgidoge or LEOS can cross the line if you’re buying into future value created by others.
What’s missing from most crypto discussions is how this affects you directly. If a token is a security, the platform selling it must be registered. Exchanges like BitAsset, Tokenmom, and BitAI aren’t. That’s why they’re risky. Meanwhile, regulated platforms like HTX and KyberSwap Classic operate under different rules. The same goes for staking. When you stake ETH and earn rewards because Ethereum’s protocol runs on Proof of Stake, that’s fine. But if a project pays you for staking because they’re promising returns from their team’s marketing or development—that’s the Howey Test in action. Even blockchain supply chain, a real-world use case where blockchain tracks goods without needing financial returns doesn’t trigger this rule. It’s not about the tech—it’s about money, expectation, and effort.
The EU’s move to ban privacy coins like Monero and Zcash? That’s another extension of this. If regulators can’t track who’s making money from a token, they assume it’s being used to hide illegal securities trades. The same logic applies to no-KYC exchanges like XBTS.io. They’re not inherently bad, but they’re high-risk because they avoid the rules that apply to securities. And when projects like Ancient Kingdom (DOM) or SWAPP Protocol vanish without delivering anything, the SEC steps in—not because they’re scams, but because they sold unregistered securities.
You don’t need a law degree to understand this. If someone tells you to buy a token because they’ll make it valuable, you’re already in Howey territory. The posts below break down real cases: tokens that failed because they were securities in disguise, exchanges that got shut down for skipping registration, and airdrops that look like free money but are actually unregistered offerings. You’ll see what the SEC has already targeted—and what’s still on the chopping block. This isn’t about fear. It’s about knowing where the line is so you don’t accidentally cross it.