A security token represents an investment interest and is regulated as a security; a utility token provides access to a product or service and, if properly designed and sold, may fall outside securities law, and the classification is decided by the Howey test, not the label.
Regulators have found many tokens marketed as utility tokens to be securities because they were sold to investors expecting profit from the issuer’s work. The analysis looks at how the token was sold and marketed, not only what it does.
Why it matters: classification affects listing, fundraising, and liability, and it is the question a token opinion letter answers. See Howey test.
Howey analysis and written opinions for token projects and exchanges.
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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.
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