SEC Commissioner Hester Peirce Outlines Problems With the SEC’s Howey Test

Jon Breyfogle

Digital Securities Lab Community Manager
Staff member
May 30, 2022
Findlay, Ohio
SEC Commissioner Hester Peirce says the so-called Howey test, used by the Securities and Exchange Commission to determine whether a digital asset should be classified as a security, has some limitations. The test stems from a landmark Supreme Court case decided in 1946, establishing criteria under which a financial agreement qualifies as an “investment contract” and is therefore subject to federal securities law.

As it relates to crypto, Peirce described why the test is so significant for the industry. “There's been a lot of emphasis on the Howey test in the crypto world because [...] a lot of these things were sold as tokens plus a promise that we're going to build a network,” she said on the latest episode of Decrypt’s gm! podcast.

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