The Howey Test is a legal framework used in the United States to determine whether a transaction qualifies as an investment contract and, therefore, falls under the jurisdiction of federal securities laws. It derives its name from the 1946 U.S. Supreme Court case, SEC v. W.J. Howey Co., which set the precedent for this test.

The Howey Test consists of four main criteria:

1. Investment of Money: This criterion requires that individuals or entities invest money in a common enterprise. This investment can take various forms, such as purchasing stocks, tokens, or other assets.

2. Expectation of Profits: Investors must have a reasonable expectation of earning profits from their investment. These profits typically result from the efforts of others, such as a company or a third party.

3. Common Enterprise: The third criterion entails that the investors' money is pooled with that of others in a common enterprise. Essentially, they are participating in a collective effort rather than individually managing their investments.

4. Efforts of Others: The final and crucial criterion is that any potential profit must be primarily derived from the efforts of promoters, managers, or a third party. In other words, investors rely on the expertise and actions of others to generate returns.

If a transaction meets all these criteria, it is considered an investment contract and, consequently, a security subject to federal securities regulations. This means that entities conducting such transactions must comply with registration and disclosure requirements to protect investors and maintain market integrity. The Howey Test has been instrumental in regulating various investment schemes, including Initial Coin Offerings (ICOs) and certain cryptocurrency offerings, under U.S. securities laws.