Security Token vs Utility Token: The distinction is crucial
The issue of whether a token is a security token or a utility token is a crucial one. The U.S. Securities and Exchange Commission now has an opinion.
Where the token is a security token then securities regulations come into play and they can be onerous. Of course, most ICO issuers try to structure their tokens as utility tokens, but their interpretation might not be accurate.
Only recently (November 2018), the SEC announced that it had settled charges against two companies that sold digital tokens in initial coin offerings (ICOs). These are the SEC’s first cases imposing civil penalties solely for ICO securities offering registration violations. Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties.
Link to press release on the SEC website here…