Can a Utility Token Evolve into a Security Token over Time?

Yes, a token's classification is not static and can change over time based on its evolving function and the network's decentralization. A token initially sold with pure utility intent might be deemed a security if, for example, the issuer continues to manage the network and investors begin to rely on those management efforts for profit.

The SEC uses a "life cycle" approach to assess this evolution. As a network matures and decentralizes, a token that was once a security might cease to meet the Howey Test criteria.