Utility Token
A utility token gives access to a product or service on a network - like paying for usage or governance - rather than a share of profits, so it is generally not a regulated security.
A utility token gives you access to a product, service, or function on a network. You might spend it to pay for usage, to vote on a protocol's decisions, or to unlock a feature. Its value is meant to come from demand for that use, not from a claim on anyone's profits - which is why a true utility token is generally not a regulated security.
The line between a utility token and a security token is where most legal trouble happens. If people buy a token mainly expecting its price to rise because of a team's future work, regulators may treat it as an investment contract under the Howey test, no matter what it is called. Several high-profile tokens marketed as "utility" have been found to be unregistered securities.
For real-world-asset work, the distinction matters because RWAs almost never fit the utility model. A token that pays you rent, interest, or sale proceeds is a claim on profits by definition, so it belongs on the security side of the line.
A clean example of genuine utility is a token used purely to pay network fees - gas on a blockchain, for instance. You hold it to do something, not to collect a return.
The practical test for an issuer: if removing the expectation of profit would kill demand for your token, it is probably a security, and should be structured as one.
Source: U.S. SEC (sec.gov), as of 2026.
Mentioned in
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- Is Your Token a Security? The Howey Test
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- Security Token vs Utility Token
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- The Howey Test, Explained
The Howey test explained: the 1946 Supreme Court rule the SEC uses to decide if an RWA token is a security, its four prongs, and how each one applies on-chain.
- Regulation 101: Why Tokenized Assets Are Securities
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Educational content, not financial or legal advice.