Investment contract
Plain definition. An investment contract is one kind of security under U.S. federal law: someone puts money into a common enterprise expecting profits from other people’s efforts.
Technical definition. The SEC’s staff framework for digital assets explains that the term “security” includes an “investment contract.” Under the Supreme Court’s Howey case and later case law, an investment contract exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. This Howey test applies to any contract, scheme or transaction, even one that looks nothing like a typical security. It weighs the form and terms of the instrument and also the circumstances and manner of its offer, sale or resale, and as a matter of federal law it does not depend on a formal contract between the parties.
On this site
On this site, Investment contract comes up in What was the SEC vs Ripple lawsuit about?, Why were XRP sales to institutions treated differently?, Is XRP a security? and Does the Ripple ruling bind other courts or settle the status of other tokens?.
Source
[SEC.gov | Framework for “Investment Contract” Analysis of Digital Assets (Withdrawn) Superseded by Application of the F (sec.gov), read October 1, 2026.