# Howey test `kaal:entity:howey-test` **Status.** derived This node is assembled mechanically from the 10 claims that carry the concept tag `howey-test`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself. ## Every claim under this term 10 claims across 4 works, 2018 to 2025. **2018** - [3249860-024](https://wulfkaal.github.io/claims/3249860-024) [empirical/evidenced] *(failure mode)* -- The utility token model dominates the top 100 tokens, but the utility category as coded includes tokens that behave like a security, and no Howey test was performed in this research. > attributes: tokens offer owners clearly defined utility within a network or application (utility tokens); tokens that behave like a security, although no Howey test was performed in this research; Wulf A. Kaal, Crypto Economics - The Top 100 Token Models Compared (2018). SSRN: https://ssrn.com/abstract=3249860 **2022** - [4021599-013](https://wulfkaal.github.io/claims/4021599-013) [condition/evidenced] -- Under the Howey framework the U.S. Supreme Court supplies the investment contract analysis that determines whether a digital asset carries the characteristics of a typical security. > In Howey, 18 the U.S Supreme Court provides a framework for investment contract analysis which can help determine if a digital asset has any of the characteristics of typical securities.19 Although Wulf A. Kaal, Securities Versus Utility Tokens (2022). SSRN: https://ssrn.com/abstract=4021599 - [4021599-014](https://wulfkaal.github.io/claims/4021599-014) [condition/evidenced] -- For digital assets the decisive element of the Howey analysis is whether the purchaser of the token has a reasonable expectation of profits derived from the efforts of others, which the SEC divides into reliance on the efforts of others and reasonable expectation of profits. > purchaser of such a token has a reasonable expectation of profits derived from others. Wulf A. Kaal, Securities Versus Utility Tokens (2022). SSRN: https://ssrn.com/abstract=4021599 - [4021599-015](https://wulfkaal.github.io/claims/4021599-015) [condition/evidenced] -- None of the SEC's listed characteristics bearing on reliance on the efforts of others is individually determinative; the element becomes more likely to be met the stronger the presence of those characteristics. > None of these factors are necessarily determinative, but the stronger their presence the more likely the element is met.22 In determining whether there Wulf A. Kaal, Securities Versus Utility Tokens (2022). SSRN: https://ssrn.com/abstract=4021599 - [4021599-027](https://wulfkaal.github.io/claims/4021599-027) [mechanism/argued] -- The Howey test operates as the practical sorting device between the two categories: a token that passes the Howey test is deemed a security token, while a token that does not qualify under Howey is often classified as a utility token. > Utility tokens can also be distinguished from securities tokens through the Howey test. While a token that passes the Howey test is deemed a security token, a token that does not qualify under the Howey test is often classified as a utility token.45 The SEC provides Wulf A. Kaal, Securities Versus Utility Tokens (2022). SSRN: https://ssrn.com/abstract=4021599 **2025** - [5454054-023](https://wulfkaal.github.io/claims/5454054-023) [design/argued] -- LER can be engineered outside the Howey test by keeping reward units consumptive as discounts or credits, non-yielding, unmarketed for appreciation, and by disabling secondary trading. > LER could be engineered to fall outside of the Howey test. This is possible by avoiding a reasonable expectation of profits derived from the efforts of others. LER voucher loyalty reward units remain consumptive as discounts/credits, non-yielding, and not marketed for appreciation. Wulf A. Kaal, Liquid Equity Rewards (2025). SSRN: https://ssrn.com/abstract=5454054 - [5583610-019](https://wulfkaal.github.io/claims/5583610-019) [condition/argued] -- LER units are not securities because they fail the third and fourth Howey prongs: they carry no expectation of speculative profit and their accrual does not depend on the entrepreneurial efforts of others. > While LERs may satisfy the first two prongs, they fail to meet the critical third and fourth prongs, thus ensuring they are not securities under U.S. federal securities law Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5583610-020](https://wulfkaal.github.io/claims/5583610-020) [mechanism/argued] -- Non-transferability is what defeats the expectation of profits prong: because LER vouchers cannot be listed, traded, or resold, no capital appreciation is possible and their value comes from merchant redemption rather than issuer performance. > Expectation of Profits: LER as vouchers are non-transferable, have no inherent value, are not listed as fungible assets, and cannot be traded. As such, LER issuance precludes any expectation of profit through capital appreciation. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5583610-021](https://wulfkaal.github.io/claims/5583610-021) [mechanism/argued] -- The fourth Howey prong fails because LER accrual is automated by smart contract and driven by the shareholder's own decision to keep holding, leaving the issuer's role ministerial rather than entrepreneurial. > LER voucher rewards are driven by stockholders' efforts in maintaining stock ownership for a certain time period. LER accrual is automated via smart contracts and does not rely on LER's ecosystem, merchants, or issuers' managerial efforts. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 - [5583610-022](https://wulfkaal.github.io/claims/5583610-022) [condition/argued] -- The common enterprise prong is the unresolved part of the analysis: vertical commonality may well be present through the merchant network, and inconsistent district court precedent leaves LER's status under this prong uncertain. > However, there is some uncertainty on qualifying LER as a common enterprise given the inconsistent treatment and precedent in different district courts. Wulf A. Kaal, Liquid Equity Rewards in Corporate America (2025). SSRN: https://ssrn.com/abstract=5583610 ## Verify Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust. curl -s https://wulfkaal.github.io/entities/howey-test.md | sha256sum **Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.