What Is the Legal Difference between a "Pre-Functional" Token and a "Consumptive Use" Token? ⎊ Path

What Is the Legal Difference between a “Pre-Functional” Token and a “Consumptive Use” Token?

A "pre-functional" token is one that is sold before the underlying network or product is fully operational, meaning the token currently has no real utility. This token is highly likely to be classified as a security under Howey because investors are relying entirely on the promoter's future efforts.

A "consumptive use" token, conversely, is one that is already being actively used to access a service or product on a functional network. This distinction is critical because the presence of consumptive use significantly weakens the "expectation of profits" prong of the Howey Test.

What Is the Primary Difference between a Utility Token and a Security Token?

What Is the Legal Basis for Arguing That a Token Delivered on a Functional Network Is Not a Security?

What Is the Difference between a Utility Token and a Security Token in Cryptocurrency?

What Role Does the Token’s “Consumptive Use” Play in Avoiding Howey Classification?

What Is the Difference between a Security Token and a Utility Token in a DCF Context?

What Role Does Token Utility and Network Adoption Play in Determining Intrinsic Value?

Which of the Four Howey Test Prongs Is Most Debated for Utility Tokens?

How Does the “Bancor Protocol” Relate to Utility Tokens?

Glossar

Legal Difference

Disparity ⎊ The legal difference highlights the fundamental conflict between traditional financial regulations and the decentralized, code-based nature of cryptocurrency protocols.

Consumptive Use

Depletion ⎊ Consumptive use, within cryptocurrency, options, and derivatives, signifies the erosion of available collateral or margin due to adverse price movements or the exercise of options contracts.