What does it mean to fail the Howey test?
It's not really a test that you pass or fail. The Howey test is just one of the tests used in securities law to determine whether an instrument being offered is a security or not. There are other tests that can also be used, such as the Reves test. Which should be applied depends, as the SEC says, on the facts and circumstances.
If an instrument meets the various elements of the Howey test, it will be treated as a security. I guess that might be said to be "failing" Howey.
It's not really a test that you pass or fail. The Howey test is just one of the tests used in securities law to determine whether an instrument being offered is a security or not. There are other tests that can also be used, such as the Reves test. Which should be applied depends, as the SEC says, on the facts and circumstances.
If an instrument meets the various elements of the Howey test, it will be treated as a security. I guess that might be said to be "failing" Howey.