A utility token is a crypto-asset whose purpose is to give its holder access to a product, service or function, such as paying for a service on a network, holding a membership or proving an identity. It is not a share in a company and gives no claim on profits. Two developments in law set the 2026 picture. In the US, the SEC and CFTC published a joint interpretation on 17 March 2026 (Federal Register, 23 March 2026). It treats "digital tools" (access, membership and credential tokens) as not being securities on their own. However, a token can still be sold as part of an investment contract if the seller's promises make buyers expect profits from the seller's work. In the EU, MiCA gives "utility token" a legal definition and has applied to such tokens since 30 December 2024.
What makes a token a "utility" token
A utility token is defined by what it does, not by how it is built technically. Most are standard tokens on an existing blockchain. On Ethereum, that usually means ERC-20, a token standard created in November 2015. Each ERC-20 token has to support the same small set of functions, including totalSupply, balanceOf, transfer, transferFrom, approve and allowance. Because those functions are standard, wallets and applications can handle any such token in the same way. Nothing in the standard tells you whether a token is a utility token, a governance token or a security. That depends on the rights attached to the token and on how it was sold.
Common utility functions include:
- Access: paying for, or unlocking, a service on a network or application.
- Membership and tickets: entry to an event, a community or a gated feature.
- Credentials and names: identity badges, or on-chain names such as Ethereum Name Service domains.
How US law treats utility tokens (2017 to 2026)
2017: the label does not decide
On 11 December 2017, then-SEC Chairman Jay Clayton wrote: "Merely calling a token a 'utility' token or structuring it to provide some utility does not prevent the token from being a security." That same day, the SEC announced that Munchee Inc., a California company, had stopped its MUN token sale after being contacted by SEC staff. Munchee agreed to an order finding that its token sale was an unregistered offering of securities. No tokens had been delivered, the money raised was returned, and no penalty was imposed.
2019: the staff framework (now withdrawn)
On 3 April 2019, SEC staff published a "Framework for 'Investment Contract' Analysis of Digital Assets". It applied the Howey test: an investment of money, in a common enterprise, with a reasonable expectation of profits from the efforts of others. The framework said a token was "less likely" to be an investment contract if the network was "fully developed and operational" and holders could use the token immediately for its intended purpose. That framework has now been withdrawn and replaced by the 2026 release.
2026: the joint SEC-CFTC interpretation
The release is titled "Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets" (SEC Release Nos. 33-11412; 34-105020). It sorts crypto-assets into five categories:
| Category | What it covers | Securities status under the release |
|---|---|---|
| Digital commodities | Assets tied to the programmatic operation of a functional crypto system | Not inherently securities |
| Digital collectibles | Art, music, trading cards, in-game items | Not inherently securities |
| Digital tools | "A crypto asset that performs a practical function, such as a membership, ticket, credential, title instrument, or identity badge" | Not inherently securities |
| Stablecoins | Assets designed to hold a stable value against a reference asset | Payment stablecoins from permitted issuers under the GENIUS Act are excluded; others depend on facts |
| Digital securities | Tokenised instruments that meet the statutory definition of a security | Securities |
The digital tools category is the nearest match to the everyday meaning of "utility token". The release gives Ethereum Name Service domain names as one example.
The release also explains how a token that is not itself a security can still be sold as one. A token becomes subject to an investment contract when the issuer offers it with promises of essential managerial efforts that buyers reasonably expect to produce profits. That contract "does not transform the non-security crypto asset itself into a security". It ends when the token separates from those promises. That happens when the issuer has fulfilled them, or when buyers can no longer reasonably expect the issuer to perform them, for example after a clear, public announcement that the project is being abandoned. Issuers remain liable for past violations, such as an unregistered offering.
In short, the 2026 release still applies the point Clayton made in 2017: a utility token sold on promises of profit can still be a securities transaction.
Does the "utility" label hold up for this token?
Answer four questions about a token to see how the US and EU rules described in this article are likely to read it.
Does the token carry a claim on profits, interest or company assets?
- Yes → Points towards a security
- No → next question
Is its main job a practical function, such as access to a service, a membership, a ticket, a credential or an identity badge?
- Yes → next question
- No, or it has other functions too → Probably not a utility token in the legal sense
Did the seller promise price growth, buybacks or the team's future work on the project?
Does the good or service the token gives access to exist and work today?
- Yes, it is in operation → Fits the lighter treatment
- No, it is still being built → Pre-launch sale: stricter rules apply
Under the 2026 SEC-CFTC release, claims on profits, interest or company assets point towards a security, not a digital tool. Calling it a utility token does not change that, as the SEC said in 2017.
MiCA defines a utility token as one only intended to provide access to a good or service from its issuer, so a token with other functions does not meet the definition. In the US it may fall into another category of the 2026 release, such as a digital commodity or a stablecoin.
Under the 2026 US release, a token offered with promises of essential managerial efforts that buyers expect to produce profits is subject to an investment contract. The token itself does not become a security, and the contract ends once those promises are fulfilled or can no longer be expected.
This matches the "digital tool" category of the 2026 US release, which is not inherently a security. In the EU, an offer of a utility token for a good or service that exists or is in operation is exempt from MiCA's Title II public-offer rules.
MiCA's Title II exemption for working products does not cover it, and the offer described in the white paper shall not exceed 12 months from the white paper's publication. Both the EU and the US treat a token that pays for building a product more strictly than one for a working product.
This is a rough reading of the US and EU rules in the article only: it does not cover other jurisdictions, cannot judge a specific token's facts, and is not legal or investment advice.
How EU law treats utility tokens (MiCA)
Regulation (EU) 2023/1114, known as MiCA, defines a utility token as "a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer" (Article 3(1)(9)). The word "only" is important: a token with other functions does not meet the definition.
The key provisions are:
- Exemption from the public-offer rules for working products. Title II, which sets the rules for public offers of crypto-assets, does not apply to an offer of "a utility token providing access to a good or service that exists or is in operation" (Article 4(3)(c)).
- A time limit for pre-launch sales. If the good or service does not yet exist or is not yet in operation, the offer described in the crypto-asset white paper "shall not exceed 12 months" from the date the white paper is published (Article 4(6)).
- Application dates. MiCA's rules for asset-referenced tokens and e-money tokens (Titles III and IV) have applied since 30 June 2024. The rest of the regulation, including the rules for other crypto-assets such as utility tokens, has applied since 30 December 2024 (Article 149).
The EU and the US use the same broad test: a token for a product that already works is treated more lightly than a token sold to pay for building that product.
Practical checks before relying on the "utility" label
These are general questions drawn from the rules above. They are not legal or investment advice.
- Does the product work now? Under both MiCA and the SEC's approach, a token for a working product is treated differently from one that pays for future development.
- What did the seller promise? Statements about price growth, buybacks or the team's future work are the kind of promises that can create an investment contract under the 2026 US release.
- What rights does the token carry? Access, membership and credentials fit the "digital tool" category. Claims on profits, interest or company assets point towards a security.
- Is there a white paper, and what does it say? Under MiCA, a pre-launch utility token offer is limited to 12 months from the white paper's publication.
Risks
- Classification can change. A token's legal treatment depends on facts and on the jurisdiction. The 2026 US release is an agency interpretation, not a statute, and other countries apply their own rules.
- Use does not guarantee value. Rights to access a service do not protect the token's market price. If the service is little used or shut down, the token can lose most or all of its value.
- The issuer still matters. Even if a token is not a security, it may depend on the issuer to keep the service running.
Limitations: this article summarises US and EU rules as published by 25 October 2026; it does not cover other jurisdictions and is not legal advice.
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