What Ongoing Oversight or Actions Could Cause a Functional Token to Revert to a Security Classification?
A functional token could revert to a security classification if the network's governing body or founding team takes actions that re-centralize control or re-establish an investor's expectation of profit derived from their efforts. Examples include the founding team resuming active, profit-generating management of the network, or making material changes to the token's economics that grant holders equity-like rights.
Any action that makes the token's success again reliant on a central, identifiable promoter could trigger a re-application of the Howey Test.
Glossar
Security Classification
Framework ⎊ Security classification, within cryptocurrency, options trading, and financial derivatives, establishes a tiered system for controlling access to sensitive information and systems, directly impacting operational risk and regulatory compliance.
Functional Token
Token ⎊ A functional token, within cryptocurrency derivatives and options trading, represents a programmable unit of value designed to encode specific rights, obligations, or utility within a decentralized financial (DeFi) ecosystem.
Oversight
Regulation ⎊ Oversight within cryptocurrency, options trading, and financial derivatives necessitates a robust regulatory framework to mitigate systemic risk and protect market participants.