Does a Functional Network Guarantee a Token Is Not a Security?
No, a functional network does not guarantee a token is not a security. While the existence of a functional network and high consumptive use significantly weakens the "expectation of profits from the efforts of others" prong of the Howey Test, other factors still apply.
If the token's value is still heavily marketed as an investment opportunity, or if the token confers rights akin to equity (e.g. dividends or profit-sharing from the promoter's efforts), it may still be classified as a security. The SEC applies a "substance over form" analysis to the economic reality.
Glossar
High Consumptive Use
Volatility ⎊ High Consumptive Use within cryptocurrency derivatives signifies a demand for leveraged exposure exceeding available liquidity, particularly in perpetual swaps and options.
Guarantee
Assurance ⎊ Within cryptocurrency derivatives and options trading, assurance represents a formalized commitment regarding the performance or outcome of a contract, extending beyond a mere promise.
Functional Network
Definition ⎊ A functional network refers to a blockchain or decentralized system that has achieved operational stability and is actively processing transactions for its intended purpose.