Legal & Tokenization
When a Token Might Be a Security: What to Ask
Whether a token is a security turns on facts, not labels. Here are the questions that usually decide it.
Follow the economic reality
Courts look at whether people invest money in a common enterprise expecting profits from others' efforts. Labels do not defeat that test.
Ask who is doing the work that creates the return, and whether buyers are relying on them.
Utility does not automatically exclude securities law
A token with a real use can still be a security if it is also sold as an investment. The two are not mutually exclusive.
Map what the token does and what buyers expect before assuming a utility framing solves the issue.
Get the analysis in writing
A memo from counsel is worth more than a conclusion on a call. It is what auditors, partners, and regulators will ask for later.
Bring the facts that matter: the token, the buyers, the promises, and the platform economics.
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