Can a Token’s Classification (Utility Vs. Security) Change over Time?

Yes, a token's classification can change over time, a concept often referred to as "securities to utility" or "genesis to functional." A token may initially be offered as a security (e.g. during an ICO) because investors are relying on the efforts of the founding team to build the network. Once the network becomes fully decentralized and operational, and the token is primarily used for its stated utility, its classification may evolve away from a security under the Howey Test.

This transition is complex and depends heavily on the ongoing "economic reality" of the token's use.