What Is the Difference between a ‘Utility Token’ and a ‘Security Token’ in the Context of ICOs?

A utility token is designed to grant access to a product or service within the project's ecosystem, not to function as an investment contract. A security token, conversely, represents an investment in a common enterprise with the expectation of profit derived from the efforts of others, often falling under securities regulations like the Howey Test.

The distinction is crucial because security tokens require registration with regulatory bodies like the SEC, which many ICOs attempt to avoid by classifying their token as a utility.