The case resulted in a test, known as the Howey test, to determine whether an instrument qualifies as an "investment contract" for the purposes of the Securities Act:
The defendants, W. J. Howey Co. and Howey-in-the-Hills Service, Inc., were corporations organized under the laws of the state of Florida. W. J. Howey owned large tracts of citrus groves in Florida. Howey kept half of the groves for its own use and sold real estate contracts for the other half to finance its future developments. Howey would sell the land for a uniform price per acre (or per fraction of an acre for smaller parcels) and convey to the purchaser a warranty deed upon payment in full of the purchase price.
The purchaser of the land could then lease it back to the service company Howey-in-the-Hills, via a service contract, which would tend to the land, and harvest, pool, and market the produce. The service contract gave Howey-in-the-Hills "full and complete" possession of the land specified in the contract and left no right of entry or any right to the produce harvested. Purchasers of the land had the option of making other service arrangements, but W. J. Howey, in its advertising materials, stressed the superiority of Howey-in-the-Hills's service.
Howey marketed the land through a resort hotel it owned in the area and promised significant profits in the sales pitch it provided to those who expressed interest in the groves. Most purchasers of the land were not Florida residents or farmers. Rather, they were business and professional people inexperienced in agriculture and lacking the skill or equipment to tend to the land by themselves.