SEC v. W.J. Howey Co.
Summary
The foundational securities-law case. The Supreme Court held that a sale of citrus-grove land coupled with a service contract was an "investment contract," and articulated the test now applied to digital assets: an investment of money, in a common enterprise, with a reasonable expectation of profits, derived from the efforts of others.
Holdings
What is an 'investment contract' under the Securities Act of 1933?
The Court defined an investment contract by its economic substance, not its form or label: an arrangement where one invests money in a common enterprise expecting profits from others' efforts. This functional test is what brings many crypto tokens within the securities laws.
Quote as reported (operator-verify): “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party”
Source: Cornell Legal Information Institute · fetched 2026-06-04
Why it matters
Every U.S. crypto securities dispute turns on applying Howey to a token. The SEC's position that most tokens are investment contracts, and the court splits below (Ripple vs. Terraform), are all fights over how Howey's functional test maps onto digital assets.
Mortgage relevance
Indirect. Howey governs whether a crypto asset is a security, which shapes who regulates a borrower's holdings and how an exchange must be licensed: the backdrop to GSE "U.S.-regulated centralized exchange" eligibility language.