Security Token vs. Utility Token
A security token represents an investment contract subject to securities law; a utility token grants access to a product or service.
A utility token is designed to grant access to a specific product, service, or function within a platform or protocol — for example, paying transaction fees or unlocking a feature — without necessarily representing an investment or ownership stake in the issuing company.
A security token, by contrast, functions economically more like a traditional investment contract — its value is tied to the effort of a third party (a company or team), and holders typically expect profit from that effort. Whether a specific token counts as a "security" under the law is decided differently in different countries, using different legal tests (the US, for example, applies the multi-factor Howey Test); the same token can be treated differently in different jurisdictions, and this classification directly determines what rules an exchange or issuer must follow.