What is Howey Test?

The Howey Test is a series of four conditions that the U.S. Securities and Exchange Commission (SEC) uses to determine whether a financial transaction is considered to have involved the purchase of a security. The conditions are:
The transaction involves 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
If a transaction passes all four conditions of the Howey Test, it is legally considered to involve the purchase of a security.