SEC Permits Distribution of Blockchain Utility Token Without Registration

According to the request by the "vertically integrated" energy technology group ("group"), the token was designed solely for consumptive use within an energy-management platform. They explained that users would earn tokens by engaging in grid-supportive behaviors, such as shifting energy usage or making distributed energy resources available to the network. Tokens would be redeemed only inside the application for capped discounts on energy-related goods and services and redeemed tokens would be permanently removed from circulation. Although the token may be transferred on secondary markets, the group emphasized that the capped redemption value creates a natural ceiling that limits speculation, since buyers would have no rational incentive to pay more than the maximum available discount.

The group argued that the token would not be an investment contract under the Howey test because users do not acquire it with a reasonable expectation of profit derived from the efforts of others. They said the economic reality is consumptive: the token would function like a rebate or loyalty credit; its value is tied only to its in-app utility, not to enterprise performance; and a capped redemption mechanism creates a natural price ceiling that limits speculative demand. They said that marketing materials would focus exclusively on the token’s consumptive use within the platform to avoid investment-like expectations. The submission also cited prior SEC no-action positions involving utility-driven digital assets with constrained value and closed-loop redemption systems.

The Division stated that, given the specific facts and representations, it would not recommend enforcement if the token is offered and sold without registration under Securities Act Section 5 ("Prohibitions relating to interstate commerce and the mails") or Exchange Act Section 12(g) ("Registration requirements for securities"). The Division emphasized that its position is limited to the conditions described and does not represent a legal conclusion about whether the token is a security.