The most important legal test in crypto was written in 1946 to settle a dispute about orange groves.

That single sentence explains most of the past decade of American crypto regulation: the confusion, the lawsuits, the exodus of projects to friendlier jurisdictions, and the legislative fight now playing out in the United States Senate. Every argument about whether a token is a security eventually arrives at the same four questions, and those questions come from a Supreme Court case decided before the transistor was invented.

The Howey test is the legal standard American courts and regulators use to decide whether an arrangement counts as an investment contract, one of the categories of security defined in federal…