The Howey test has been influential in shaping the legal understanding of what constitutes a security, particularly in the context of cryptocurrencies and token sales, where the application of securities laws can be complex and subject to ongoing debate and interpretation.

Bitcoin is considered a security as it does not meet the Howey test. Please explain.

  • 3
    This seems to be a question for a legal question & answer site, as it is unrelated to the technology to support the Bitcoin currency. Still, I believe that one has to satisfy the Howey test to classify as a security. Jun 11, 2023 at 12:59
  • Too bad, was hoping to get a better understanding of the topic. Jun 11, 2023 at 17:55
  • 2
    I’m voting to close this question because it is a legal/regulation question while this site is about technical issues. Jun 20, 2023 at 20:09

1 Answer 1


You are confused, if an asset fails to pass the Howey test it is NOT considered a security. It is a highly common misunderstanding. This was also made clear by BTC not being listed by the SEC as a security.

Each prong of the test is a symptom of a security in the context of an asset being traded on the market. There are four main prongs:

  1. The existence of an investment contract
  2. The formation of a common enterprise
  3. A promise of profits by the issuer
  4. The use of a third party to promote the offering

I am not going to go over in detail how Bitcoin does not meet these characteristics because it has been discussed by more informed people a lot already. That being said the SEC has also clearly stated Bitcoin does not meet these qualifications. As you put it, it fails the Howey test. Usually failing sounds bad like in a school exam context, but the Howey is the opposite. You WANT to fail in order to avoid being regulated by the SEC. If you think about it, the only real way to avoid it is to avoid having a network that can be captured easily and that's exactly what Bitcoin does best.

Furthermore any assets that DO meet these qualifications are considered a security by the United States of America Securities and Exchange Commission.

(It should be noted that although this represents the qualifications for a security under the Howey test accurately, evidently the SEC does not prosecute these rules thoroughly/equally and many projects that might qualify as a security might still not listed as one by them)

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