Utility vs Security Tokens
Plain English
Utility tokens provide access to services or features (like paying for gas or unlocking premium features). Security tokens represent ownership or investment contracts and are heavily regulated. The distinction affects how governments treat them legally.
Technical
Classification determining regulatory treatment: Utility tokens provide access to network functionality or services without representing investment contracts. Security tokens derive value from the efforts of others and may represent equity, debt, or profit-sharing rights. The Howey Test helps determine classification, with significant compliance implications for issuers and holders.