Blockchain Developer's Guide

Utility versus Security

In the United States, there is a distinction between a token that is a utility and one that is a security. A utility token could be described as something such as a carnival token, a comic book, or a baseball card. While the market value of the item may go up or down, the fundamental reason for purchasing it (and the way it is advertised) is not directly related to profit-seeking. Someone buys a carnival token to play a game, a comic book to read, and a baseball card to collect.

Many tokens try to position themselves as utilities in order to avoid invoking US securities law which greatly restricts sales and requires formal registration with the SEC along with requirements for other disclosures to investors.

In other ...