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.

I'm not a tax advisor, but you might want to look into Section 1244 losses and if you might qualify.

https://crowdwise.org/taxes/three-ways-the-us-gives-tax-relief-for-investing-in-startups/

At the very least, your losses should qualify as capital losses, similar to if you bought a stock and it went to zero. 

For the complete answer we drafted to answer this, please read our complete blog post on Traditional SAFE vs. Crowdfunding SAFE.

A brief summary of some of the key differences include:

1. Crowdfunding SAFEs may have optional conversions: in some crowdfunding SAFEs (such as Republic’s Crowd Safe), shares convert at the next equity financing round at the discretion of the issuer (i.e the startup). While most traditional SAFEs are forced to convert at the next qualified financing round, many crowdfunding SAFEs give the company the option to either convert to equity or defer conversion until a later time.

While this may sound like a bad thing for investors at first, there are situations when investors can actually benefit from this delayed conversion (e.g. they may actually experience less dilution due to follow-on raises than other equity investors).

2. Crowdfunding SAFEs may convert to Shadow Series shares: in the Republic Crowd Safe, the SAFE may convert to shadow shares, which means the same class of shares (e.g. Common vs. Preferred) as other investors, but with limited voting and information rights.

3. Crowdfunding SAFEs Investing via an SPV: When you invest in a SAFE on Wefunder, you’ll often be investing in a Special Purpose Vehicle (SPV). While this is typical for angel investors on sites like AngelList, this means you’ll actually be investing in the SPV (e.g. “Company X, a Series of Wefunder SPV LLC”), and not be directly investing in the company itself.

Investing in an SPV may have potential tax implications (because the SPV is an LLC). Furthermore, investing in an SPV may have implications in terms of the potential future liquidity of that investment due to complications when listing SPV shares on a secondary market.

4. Many Crowdfunding SAFEs are still Pre-Money: while the standard Y-Combinator SAFE was changed to convert based upon post-money valuation in 2018, many of the SAFEs used on crowdfunding sites today are still using pre-money valuation for the conversion price.

5. Some Crowdfunding SAFEs may have repurchase rights: something that most VCs and angel SAFEs would never have is a “repurchase rights” or “redemptive clause”. These terms allow the company to buyback SAFE investors at the company’s discretion, which typically happens if a later-stage VC wants to “clean up” the cap table (i.e. get more control and ownership for themselves) or when the company is doing well and wants to buy out early investors. It's my personal opinion that investors should typically avoid SAFEs with these terms. These terms put the company’s best interests at odds with that of the investors’.

The good news is that I personally have not seen any SAFEs recently with these repurchase terms (although I have seen some Common Stock offerings on some platforms with repurchase rights, so be careful!). It seems that crowdfunding portals have realized that these repurchase rights often end poorly for investors and are used by issuers who might not have their crowdfunding investors’ best interests at heart.

The issuer must post on its website an annual report along with its financial statements certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer. 

If, however, an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided and the certification by the principal executive officer will not be required. 

The annual report also must include the disclosure required by paragraphs (a), (b), (c), (d), (e), (f), (m), (p), (q), (r), and (w) of Section 201 of the Reg CF Rules.

The report must be filed no later than 120 days after the end of the fiscal year covered by the report. 

The issuer must continue to comply with the ongoing reporting requirements until one of the following occurs:
(1) The issuer becomes a public reporting company;
(2) The issuer has filed, since its most recent sale of securities under the crowdfunding exemption, at least one annual report and has fewer than 300 holders of record;
(3) The issuer has filed, since its most recent sale of securities under the crowdfunding exemption, the required annual reports for at least the three most recent years and has total assets that do not exceed $10,000,000; (4) The issuer or another party repurchases all of the securities issued under the crowdfunding exemption, including any payment in full of debt securities or any complete redemption of redeemable securities; or (5) The issuer liquidates or dissolves its business in accordance with state law.

The issuer must file with the Commission and provide to investors and the relevant intermediary a Form C: Progress Update (Form C-U) to disclose its progress in meeting the target offering amount no later than five business days after each of the dates when the issuer reaches 50 percent and 100 percent of the target offering amount.  This requirement shall not apply to an issuer if the relevant intermediary makes publicly available on the intermediary’s platform frequent updates regarding the progress of the issuer in meeting the target offering amount.

The issuer must file an annual report on Form C: Annual Report (Form C-AR) no later than 120 days after the end of the fiscal year covered by the report. 

An issuer eligible to terminate its obligation to file annual reports must file with the Commission, within five business days from the date on which the issuer becomes eligible to terminate its reporting obligation, Form C: Termination of Reporting (Form C-TR).

A platform can set parameters for the type of company and offering it will accept. And then it can (indeed, must) deny access if it believes there is potential for fraud or if the issuer has not complied with the regs. Put those together and most platforms have the ability to filter out the types of companies and offerings they don't want to host.

Hi. We've been collecting data on Regulation Crowdfunding since the launch of the industry in May, 2016. As of last year, this data is being transmitted daily to Bloomberg for industry analysis and investment opportunities. Our dataset is the most comprehensive one out there and covers all current and closed platforms as well as all current and withdrawn offerings.

We work with hedge funds, institutions, venture capital and the like as they look to explore expanding into this alternative asset class. Our dataset includes $1B in RegCF transactions.

If you'd like to schedule a call to discuss your needs please reach out to: sherwood@theccagroup.com and reference this thread.