The Howey Test: How a Florida citrus farmer altered the course of crypto regulation

It turns out that selling leaseback agreements for an orange farm isn’t all that different from selling tokens on the blockchain.

In 1946, the US Supreme Court passed a ruling on Securities and Exchange Commission v. W. J. Howey Co that would set a precedent for how the term “security” would be defined for all future assets.

Quite simply, a Security is an investment in an enterprise with the expectation of future profits. But determining whether an investment was made with the intention of raking in future profits isn’t always clear cut. The legal uncertainty surrounding the nascent cryptocurrency industry makes things even murkier.

In 1946, the US Supreme Court Case was presented with the case of William John Howey. Howey, who owned vast tracts of citrus groves in Florida, decided to be smart about his agricultural enterprise. He kept half of the land for himself and sold the other half to outside investors under the auspices of the W.J. Howey Company. The catch was that investors would immediately sell the land back to Howey — or more precisely, “Howey-in-the-Hills” — via a service contract which gave Howey the right to work the land and market the produce. In other…